August 17, 1994
TO: DIRECT MARKETING COMMITTEE NO. 23-94
HUMAN RESOURCES AND TRAINING NO. 3-94
HUMAN RESOURCES AND TRAINING WORKING GROUP NO. 10-94
MARKETING POLICY COMMITTEE NO. 37-94
MEMBERS - ONE PER COMPLEX NO. 58-94
OPERATIONS COMMITTEE NO. 23-94
SALES FORCE MARKETING COMMITTEE NO. 31-94
SEC RULES COMMITTEE NO. 92-94
SHAREHOLDER COMMUNICATIONS COMMITTEE NO. 22-94
RE: NASD ISSUES CONTINUING EDUCATION PROPOSAL FOR COMMENT
__________________________________________________________
The National Association of Securities Dealers ("NASD") has
issued for comment a proposal to require NASD registrants (e.g.,
registered representatives, assistant representatives, principals,
etc.) to complete continuing education requirements commencing in
July, 1995. The NASD proposal is comprised of two components, a
Regulatory Element and a Firm Element. To maintain an existing
registration, all persons that have been registered with the NASD
for less than ten years must complete the Regulatory Element. The
Firm Element will only be required of registrants that have direct
contact with firm customers and the immediate supervisors of such
registrants. Each of these Elements is summarized below.
1. The Regulatory Element
The Regulatory Element is expected to consist of a computer-
based training session that will be designed to transmit
information broadly applicable to all registered persons. There
will be no grading of individual performance on the Regulatory
Element, though information feedback will be provided to
individuals and their firms regarding areas of strengths and
weaknesses as indicated by the program. Though the content of the
Regulatory Element is yet to be prescribed by the NASD, it is
expected to focus on compliance, regulatory, ethical, and sales-
practice standards.
The only persons exempt from the Regulatory Element would be
those that have been registered with the NASD for more than ten
years and that have not been the subject of a serious disciplinary
action. Persons subject to the Regulatory Element would be
expected to complete the computer-based training program 2, 5, and
10 years from the date of such person's original registration with
the NASD. A person would have 120 days from its 2, 5, and 10 year
anniversaries to comply with the requirement.
Failure to comply with the Regulatory Element timely would
result in the registrant's registration with the NASD being deemed
"inactive", which would preclude such person from engaging in any
activities requiring registration with the NASD.
The NASD proposes to fully implement the Regulatory Element
by July 1, 1995.
2. The Firm Element
The Firm Element would require each member of the NASD to
establish a training process for all registrants who conduct
business with retail, institution, or investment banking customers
of the firm and the immediate supervisors of such registrants.
After an analysis of its training needs, a firm would be required
to prepare a training program that (1) is appropriate based upon
its type(s) of business and (2) includes the following relating to
the securities, products, services, and strategies offered by the
firm: general investment features and associated risk factors,
suitability and sales practice considerations, and applicable
regulatory requirements. The NASD does not intend to pre-approve
training material and programs developed by firms.
There are no specific annual or cumulative training
requirements specified in the Firm Element. Each firm, however,
would, at a minimum, be required to annually evaluate and
prioritize its training needs and develop a written training plan.
Unlike the Regulatory Element, the Firm Element requirement is
ongoing, regardless of how long a person remains registered with
the NASD.
While nospecific sanctions are provided for failure to
complete the Firm Element, the NASD may require a firm,
individually or as part of a group, to provide specific training in
such areas as the NASD deems appropriate. Also, failure to comply
with the Firm Element may subject the firm and individuals to
disciplinary action by the NASD.
The Firm Element is expected to be implemented in two stages.
By July 1, 1995, firms would be required to complete their training
needs analyses and develop written training plans that would be
available for review by regulators. Such training plans would be
implemented as soon as practicable thereafter, but no later than
January 1, 1996.
* * * * *
A copy of the NASD Notice to Members announcing the proposal
is attached along with additional information released by the NASD
discussing the proposal. Comments on the proposal should be
submitted to the NASD no later than October 15, 1994. If there are
issues you would like the Institute to consider submitting to the
NASD, please contact me by phone at 202/326-5825 or by fax at
202/326-5828 no later than Friday September 23, 1994.
Tamara K. Cain
Assistant Counsel
Attachments