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PODCAST

What to Expect: The CE Transformation & Maintaining Qualifications Program

January 11, 2022

In 2020, FINRA and the CE Council embarked on the biggest transformation of the continuing education program in 25 years. And in the months ahead, those major changes are going into effect.

On this episode, we hear from Patricia Monterosso of FINRA's Credentialing, Registration, Education and Disclosure team and Elizabeth Hansen, the 2021 CE Council Chair, about what firms and reps can expect and why these changes will have such a big impact.

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Resources mentioned in this episode:

CE Council Website

Key Topics: Continuing Education

Regulatory Notice 20-05

Regulatory Notice 21-41

Maintaining Qualifications Program

Financial Professional Gateway (FinPro)

Episode 54: Enhancing Industry Continuing Education

Small Firm Conference Call: CE Transformation

Listen and subscribe to our podcast on Apple PodcastsGoogle PodcastsSpotify or wherever you listen to your podcasts. Below is a transcript of the episode. Transcripts are generated using a combination of speech recognition software and human editors and may contain errors. Please check the corresponding audio before quoting in print. 

FULL TRANSCRIPT 

00:00 – 00:27

Kaitlyn Kiernan: In 2020, FINRA and the CE Council embarked on the biggest transformation of the continuing education program in 25 years. And in the months ahead, those major changes are going into effect. On this episode, we hear from a member of FINRA's Credentialing, Registration, Education and Disclosure team and from the 2021 CE Council Chair about what firms and reps can expect and about why these changes are expected to have such a big impact.

00:27 – 00:36

Intro Music

00:36 - 01:06

Kaitlyn Kiernan: Welcome to FINRA Unscripted, I'm your host, Kaitlyn Kiernan. I'm excited to welcome two new guests to the show today. From FINRA's Credentialing, Registration, Education and Disclosure team we have Patricia Monterosso, director of continuing education services, and from the Continuing Education Council or CE Council we have Elizabeth Hansen, the 2021 CE Council chair and senior vice president and chief compliance officer for Waddell & Reed Financial. Beth and Patricia, welcome to the show.

01:06 - 01:08

Patricia Monterosso: Thank you, Kaitlyn.

01:08 - 01:09

Beth Hansen: Thank you, Kaitlyn.

01:09 - 01:50

Kaitlyn Kiernan: So in March of 2020, in what was actually one of the very last podcasts we posted that was recorded live together in person, we spoke to FINRA's John Kalohn and the 2019 CE Council Chair Jeff Freiberger about efforts then underway to transform the continuing education program for broker-dealers.

Today we're back with an update on that transformation and here for a closer look at a new, noteworthy component of it - the Maintaining Qualifications Program. Before we dig into that, though, Patricia and Beth, can you start by introducing yourselves and telling us a little bit about your backgrounds. Patricia, maybe we can start with you?

01:50 - 02:32

Patricia Monterosso: So, I am director in the Testing and Continuing Education department at FINRA, and I work with the team that is responsible for developing and maintaining the training content for the securities industry continuing education program. This includes Regulatory Element content and other training content that firms may leverage for Firm Element or other training needs. I've been with FINRA for over 15 years, starting on the qualification exam development side. And prior to working at FINRA, I worked at several different broker-dealers in a registered capacity. So, I have an appreciation for the registered reps' experience with taking and passing qualification exams and completing continuing education requirements.

02:33 - 02:35

Kaitlyn Kiernan: Thanks, Patricia. And Beth, how about you?

02:35 - 03:13

Beth Hansen: I'm senior vice president and chief compliance officer for Waddell & Reed. I've been on the Securities Industry/Regulatory Council for Continuing Education for four years, currently being the 2021 chair of Council. And given my background with Waddell & Reed, and prior to that I was with Ameriprise Financial for 18 years, continuing education is extremely important to the industry and being on Council and having the ability to really drive change and enhancements has been very exciting and rewarding. So I thank you for having me here today.

03:14 - 03:35

Kaitlyn Kiernan: We are happy to have you both. So, as I mentioned back on episode 54, we heard about the CE transformation to begin with and that it was the biggest change to the continuing education program in 25 years. For listeners who missed that episode, Patricia - big picture what is FINRA and the CE Council looking to do?

03:36 - 04:38

Patricia Monterosso: So, episode 54 came shortly after publishing Reg Notice 20-05, where we discussed CE program changes that were under consideration, including potential changes to FINRA rules and systems and the development of new tools and resources as a result of recommendations that were made by the CE Council. So FINRA received a lot of great feedback from the industry in response to Reg Notice 20-05, and we took that back to Council and our SRO partners and other stakeholders. And that feedback helped to shape the final proposed rule filing that FINRA made with the SEC in June of 2021, which was subsequently approved by the Commission in September 2021. And then in November of 2021, FINRA published Reg Notice 21-41. So, in 21-41, we outlined a number of upcoming enhancements that will be related to the Regulatory Element, the Firm Element and the creation of Maintaining Qualifications Program.

04:39 - 04:43

Kaitlyn Kiernan: What are do you think the biggest takeaways from this new Reg Notice 21-41?

04:44 - 05:46

Patricia Monterosso: So, 21-41 announces operational details and effective dates of upcoming changes to FINRA rules 1210, that's the registration rule, and 1240, the continuing education rule, and the two effective dates for those upcoming changes - March 15, 2022, and January 1, 2023.

March 15, 2022 is the date that the Maintaining Qualifications Program will become effective. It's also the date in which no new participants will be permitted to join the FSAWP, or the Financial Services Affiliate Waiver Program.

And on January 1, 2023, a number of other changes will become effective, including the transition to an annual Regulatory Element requirement in which persons will receive training that is more tailored to the registrations they hold. The extension of the Firm Element requirement to all registered persons will also become effective on this date, as well as related registration rule changes.

05:46 - 05:59

Kaitlyn Kiernan: There's a lot of dates there, so we will definitely be linking to the Reg Notice in our show notes and encourage everyone to take a closer look at that. But Patricia, what makes these changes so important?

05:59 - 06:37

Patricia Monterosso: The Maintaining Qualifications Program, it provides an alternative path for reps who terminate their registrations, and this program supports the goal of attracting and retaining a broader and diverse group of professionals in the securities industry. With regards to the upcoming Regulatory Element and Firm Element enhancements, those changes support the goals of providing registered persons with more timely and relevant training on significant industry and regulatory developments, and those changes provide opportunities for more synergies between the Regulatory Element and Firm Element programs.

06:38 - 06:45

Kaitlyn Kiernan: Beth, from your point of view and the firm point of view, how will these changes impact you as a compliance professional?

06:46 - 09:46

Beth Hansen: From a compliance perspective, the changes are what I view as administrative. So as Patricia stated, with the Regulatory Element moving to an annual basis, then we have to administer and monitor and ensure that registered reps follow through on their obligations annually versus what historically it was every three years. But I'd like to focus on what this means as a registered person in the securities industry.

From a compliance side of things, it's more administrative, but from a personal professional perspective, the changes that we are making and the enhancements that we are doing is going to increase, I believe, registered reps knowledge of the very things that they do every day because we are focusing Regulatory Element on people's functions and registrations that they hold. So, it's going to be more relevant to them taking this training every year and keeping up to date on things that are important to them.

The Firm Element piece of this, I think, is important and the enhancements that we're making, because now we're able to bring in other training aspects like the annual compliance meeting or the Anti-Money Laundering training and have that be part of the overall Firm Element program, whereas historically those training pieces were considered separate and unique. And so now we're really taking a step back and looking holistically at continuing education training in its totality.

And then lastly, the maintaining qualification piece, in my view, is a game changer for this industry because from a firm perspective, the door is open and the pool will be wider of folks who leave the industry, and if they maintain their continuing education to maintain their qualification, it just gives firms of broader leverage of talent when they're looking for new talent to come in. Whereas historically there was only the two-year window, but now we're moving to a five-year window. So, I think it gives firms a broader opportunity to bring talent in. But for individuals who leave the industry for whatever reason, it allows them to have a longer time period to either figure out what they want to do in the industry, at a new firm, or whatever reason that they left the firm, it gives them that longer period of time to reenter. And again, for whatever reason they left. So, I truly think that the maintaining qualification piece of this is a huge game changer for our industry, and I'm very excited for this component of the CE transformation.

09:47 - 10:05

Kaitlyn Kiernan: I do want to get more into that Maintaining Qualifications Program, because that does sound like a really exciting change, and Patricia, that's the first thing that you said that becomes effective coming up really soon now on March 15. Patricia, can you just tell me a little bit more about how this program is going to work?

10:05 - 10:57

Patricia Monterosso: Yeah, so the Maintaining Qualifications Program or, as we call it, MQP for short is a new program that will provide eligible individuals the ability to maintain their qualifications for a period of up to five years after terminating their registrations by participating in annual continuing education. And as Beth mentioned today, an individual leaves a firm and terminates their registration, and that individual has been out of the industry for more than two years, they would have to requalify by retaking and passing our qualification exam or obtaining a waiver of the qualification requirement. This program does have certain eligibility requirements, but it does offer individuals that opportunity, if they choose, to maintain their qualification by completing annual CE.

10:58 - 11:10

Kaitlyn Kiernan: So, if you're further along in your career, that could save you a lot of new testing so that you don't have to retake the SIE, the Series 7, the Series 24 just to be able to get back going at work again.

11:11 - 11:29

Patricia Monterosso: That's right. Taking this annual continuing education, they have an opportunity to keep up with what's going on in the industry since they last left and keep up on any regulatory developments or just even maintaining securities products knowledge and other professional conduct type activities and knowledge they need to know.

11:30 - 12:48

Beth Hansen: I'd like to add a couple of things. When I think about maintaining qualifications and the importance of this component of the continuing ed transformation with the industry. We've seen a lot of shifting of people out of the industry during COVID, for whatever reasons, whether firms are downsizing, or people are just taking a step back, reevaluate things. And then also we're seeing, and I think we're going to continue to see, a lot of mergers and acquisitions of firms that potentially could place registered reps in a position of leaving the industry.

And having this ability to expand the timeline from two years to five years, it's just going to give people a couple of things. One, the ability to search and really think about what their next move is in the industry. It gives them the sense of almost security and breathing room because I've got some time here, I'm not crunched in a two-year time frame. And so, I just think that where the industry is moving, that this piece was critical for us to present and critical for the SEC to approve. Just given how our industry functions and what it's moving towards.

12:49 - 13:17

Kaitlyn Kiernan: The timing on this is very interesting because record number of people left not just the financial industry, just jobs generally, over the past two years, a lot of parents have had to take a step back. The timing of this implementation is coming up on March 15 of 2022, and that is pretty much exactly two years after this pandemic started, or at least really heated up in the US. So, is that timing intentional?

13:19 - 13:51

Patricia Monterosso: Yes, I would say that that was thoughtfully considered. The impact of individuals who had lost their jobs due to the pandemic was a major factor of consideration. As you pointed out, Kaitlyn, March 2020 was around the time a global pandemic was declared, which did result in a significant number of changes for firms and individuals and their personal circumstances. And so we identified March 15 as the effective date of the program so that individuals who had lost their jobs as a result of the pandemic would have the opportunity to join the program.

13:52 - 13:57

Kaitlyn Kiernan: So, with this program coming up soon, who is eligible to enroll?

13:57 - 15:36

Patricia Monterosso: Individuals have to meet certain eligibility conditions, which are outlined in Reg Notice 21-41 and also on the Maintaining Qualifications Program page on FINRA.org. Individuals who've terminated or will terminate their registrations between March 15, 2020, and March 15, 2022, as well as individuals who are currently participating in the FSAWP will have until March 15, 2022, to enroll in this program. Individuals who terminate their registrations on March 15, 2022, and thereafter, they'll have up to two years from the termination of their registration category to enroll in the MQP.

To enroll in the MQP, individuals will have to meet certain eligibility requirements. There are some pretty specific requirements that individuals should check out in Regulatory Notice 21-41 and also on the Maintaining Qualifications Program page on FINRA.org. January 31, 2022, is when eligible individuals will have the ability to enroll in the program and in order to enroll in the program, one must have an active FinPro account.

So, if you don't already have a FinPro account and you're interested in joining the MQP, you should begin that process of creating your FinPro account sooner rather than later. It's through FinPro that an individual would be able to see if they're eligible to join and what qualifications are able to maintain as part of the program.

15:37 - 15:49

Kaitlyn Kiernan: We will link to FinPro and the MQP page for people to learn more. And FinPro I'm assuming is also where people would actually take the CE requirement during the five-year window?

15:49 - 15:56

Patricia Monterosso: That's right, that is where one would access any CE content that they would be taking as part of the program.

15:57 - 16:27

Kaitlyn Kiernan: And this date is coming up fast and it is a strict deadline, I understand. So, listeners, even if you are still working with the firm and this is not a program for you, if you know anyone who has left the industry within the past two years, we definitely encourage you to share this information with them. We definitely want as many people as possible to be aware that this is an option for them. What has been some of the feedback so far that CE Council or FINRA have heard?

16:27 - 18:47

Beth Hansen: So, when we were building out what CE transformation was going to look like, we were gaining intel from our industry peers as we were moving along to truly understand what would be some of the obstacles, what would be some of the benefits, et cetera. And I will tell you, for the most part, the feedback that we have received from the industry has been extremely positive.

When you think about moving from a Regulatory Element from three years to every year, we thought we would get feedback around "really, we have to take this every single year?" But the opposite actually happened. People totally understood why we moved to an annual Regulatory Element requirement because the main purpose is to ensure that people are up to date with knowledge and having it every three years, we felt that the material could get stale, that it wasn't really relevant to the person's licenses and job, and so moving it to an annual basis, the industry has been extremely supportive of.

They have been extremely supportive of encompassing other types of training as part of the Firm Element as opposed to having them separate because again, this enables firms to really look across the board holistically at all of their training needs in order to be able to build out an effective Firm Element program.

And then lastly, and we just covered quite a bit extensively on the maintaining qualifications. The feedback off the charts from a positive perspective, just because for everything that we just talked about and again, I truly believe it's a game changer for our industry. So, we were relatively surprised at the positive feedback that we got, and we know that as we move forward, we're going to continue to get questions from the industry. And so, we're doing our best to build out tools and resources for the industry to help firms with these changes because we know that there's going to be ongoing questions, but so far, so good. The feedback has been extremely positive.

18:49 - 18:50

Kaitlyn Kiernan: That's great to hear.

18:50 - 19:47

Patricia Monterosso: To add to what Beth said, we've gotten a lot of positive feedback. I will say that we have also gotten some concerns about the operational component of managing three times the number of folks who would be required to take their annual Regulatory Element in a given year. And with that, FINRA is taking in that feedback so that we are appropriately improving upon and updating our systems to help support those folks who are taking on that administrative role of managing the annual Regulatory Element requirement.

So again, very positive feedback as far as timely training for reps. But we also recognize that with that, there are more folks that need to complete their training by the end of the year. And it's reminding that many more folks and really ensuring that they get their training completed by the deadline. So, with systems and reporting, we're looking to help firms with managing that process.

19:48 - 20:07

Beth Hansen: Yeah, it's the operational piece that I mentioned earlier from a compliance perspective, because most firms, they operationalize all of this within their compliance department. Some firms don't, but most do. And so that in and of itself is probably the number one concern. How do we operationalize the annual versus every three year?

20:08 - 20:15

Kaitlyn Kiernan: I'm sure that might be a pain point this year, but as firms go about this, it'll get a little easier every year.

20:15 - 20:16

Beth Hansen: It should, it should.

20:17 - 20:22

Kaitlyn Kiernan: And what's next for the CE transformation? Are there still more changes to come?

20:23 - 22:39

Beth Hansen: We don't anticipate right now any more changes to come forward from what we have just published in the Notice 21-41 and what the SEC approved. However, with that said, that is the whole mission of the Securities Industry/Regulatory Council on Continuing Ed to continuously review and enhance the continuing education for the securities industry.

Now what I will say, and I mentioned this a little bit before, but Council right now is assessing what do we need to build out for the industry to help them with these changes. We have a website that is dedicated to Council and has a lot of information on there that the industry can utilize to help them. But we're also building out what we call a playbook that really is focused on the enhancements, the additions, the changes that are coming forward and building out tools that firms can use.

So, for example, one of the things that we talked about for maintaining qualifications is some type of document or communication that firms can use when people are leaving their firm so that they can include it in their exit package or whatever materials that they give their employees that are exiting. It's just that additional piece that will help firms communicate to their registered folks who are leaving that, "Hey, there is this program out there that you really should consider and take a look at if you want to stay in the securities industry" because again, it gives you that broader length of time to reassociate yourself with a member firm.

So, Council right now is working hard on building out tools and resources to meet the Maintaining Qualifications Program, since this is right around the corner in March. But subsequent to that, building out additional things that we believe will help firms with the other changes, particularly the Regulatory Element, as well as the enhancements that we've made to the Firm Element.

22:39 - 22:42

Kaitlyn Kiernan: We will link to some of those in our show notes as well.

22:43 - 23:13

Beth Hansen: I would also add that at FINRA, we're always looking to improve upon our systems to better assist firm administrators. But on the content development side we're also always looking to improve the overall learning experience for the registered rep. So, this includes considering different learning formats and ways of representing the learning. So, we will continue to look for opportunities to capitalize on new technologies and advances in learning theory. So that's one thing that we're going to try to do.

23:14 - 23:23

Kaitlyn Kiernan: How is Council soliciting feedback? Beth, you mentioned that the Council is always evaluating the CE program for changes.

23:24 - 23:49

Beth Hansen: Well, right now we formed an industry focus group to assess all of the resources and tools that we're creating in order to make sure that it's the right stuff, the right things that we need to do for the industry. I do know and Patricia, you're going to need to help me out, that we have an email address that the industry can send their questions to.

23:50 - 23:55

Patricia Monterosso: That's right, it's a [email protected]

23:55 - 24:39

Beth Hansen: Yeah. So, we encourage the industry if they have questions with regards to what these changes are to ask away. We are creating or have created Q&A in order to help. But obviously those are evergreen because as we get more questions and comments from the industry, those are the types of materials that we will continuously update to make sure that we are addressing all of the questions. But I'm really excited about the focus group that we've created to really help us through this journey to make sure that we're doing the things that we need to do to help the industry and who better to provide that feedback than the industry. So, I'm really excited about that piece of it.

24:40 - 25:26

Kaitlyn Kiernan: Thank you so much for joining me today, Beth and Patricia, to talk through all these updates. It's always exciting to have a follow up on an old episode. And listeners, please share this episode or the new website on the Maintaining Qualifications Program with anyone you know who has left the industry since March of 2020. We want to get the word out and allow as many people as possible to opt in before the upcoming deadline.

And if you don't already, be sure to subscribe to FINRA Unscripted wherever you listen to podcasts. You can take a look at our show notes for a link to a survey where you could tell us more about what you think about the show.

Today's episode was produced by me, Kaitlyn Kiernan, coordinated by Stephanie Van den Berg and engineered by John Williams. A special thanks to Mareike Finck and Kat Markelonis. Until next time.

25:26 – 25:32

Outro Music

25:32 - 25:55

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25:55 – 26:04

Music Fades Out

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