[9805]
March 27, 1998
TO: COMPLIANCE ADVISORY COMMITTEE No. 10-98
CONTINUING EDUCATION AND TRAINING ADVISORY COMMITTEE No. 5-98
CONTINUING EDUCATION/TRAINING MEMBERS No. 4-98
OPERATIONS COMMITTEE No. 20-98
RE: SEC ADOPTS REVISIONS TO THE SECURITIES INDUSTRY CONTINUING
EDUCATION PROGRAM
______________________________________________________________________________
As we previously informed you, the National Association of Securities Dealers, Inc. (the
“NASD”) recently proposed amendments to NASD Membership and Registration Rule 1120--
Continuing Education Requirements, which requires its members to participate in the Securities
Industry Continuing Education Program (the “Program”). On March 3, 1998, the Securities and
Exchange Commission approved the rule revisions, which primarily affect persons acting in a
supervisory or principal capacity and persons that may have been grandfathered under the
existing rule. The revisions, which are summarized below, will become effective on July 1, 1998.
Background
Since 1995, members of the NASD (and the other five securities industry self-regulatory
organizations) have been required to participate in the Program. The Program includes a
Regulatory Element (which requires certain registrants to complete a computer-based training
program at various intervals after their registration anniversaries) and a Firm Element (which
requires member firms annually to assess the training needs of their covered persons; develop a
written training plan; deliver the training described in the plan; and document the delivery of the
training). The Program is administered by the Securities Industry/Regulatory Council on
Continuing Education.
Revisions to the Continuing Education Program
The changes that have been adopted to the rule effective July 1st include the following:
Grandfathering Provisions
` Those persons who have been registered for ten years or less as of July 1, 1998, will be
required to complete their Regulatory Element training within 120 days of the second
anniversary of their date of first registration, and every three years thereafter. (Accordingly, a
person that became registered in 1990 would be required to complete the Regulatory
Element in 1992, 1998, and every three years thereafter.) Unlike the existing Rule, there
will be no graduation from the Program.
` Those persons who have already graduated from the Regulatory Element of the Program as
of July 1, 1998 (i.e., those persons who have been registered with the NASD for ten or more
years), will continue to be grandfathered, provided they have not been the subject of a
significant disciplinary action during the past ten years. Similarly, only those registered
principals and sales supervisors who have been registered in a principal or supervisory
capacity for more than ten years will be grandfathered. Supervisors and principals who
have been registered in such a capacity for less than ten years lose their grandfathered
status, even if they have been registered in a representative capacity for more than ten
years.
Treatment of Supervisors and Principals
` A new Regulatory Element computer-based training session will be developed by the
Council for registered principals. The current session is “one-size fits-all,” meaning that
assistant representatives, registered representatives, and registered principals all receive the
same Regulatory Element training.
` The revised rule will also require firms to focus specifically on supervisory needs when
conducting their annual training needs analysis. If a member’s analysis determines that
there is a need for supervisory training for individuals with supervisory responsibilities, such
training must be included in the member’s Firm Element training plan.
Attached is NASD Notice to Members 98-35, which further describes the rule revisions.
Questions may be directed to John Linnehan, Director, Continuing Education, NASD
Regulation, Inc. at 301/208-2932.
Stephanie Brown
Assistant Vice President,
Training and Marketing
Attachment