The Municipal Securities Rulemaking Board's proposed changes to its rule governing continuing education for dealers tighten the time period for qualifying for the Regulatory Element component of CE to a year, requires written extension requests, extends required Firm Element training to all registered persons, and permits firms to utilize outside training sources.
The changes don't modify G-3 CE obligations for municipal advisors. The rationale for the changes is attributed to MSRB's desire to mirror the Financial Industry Regulatory Authority's CE requirements "for purposes of promoting regulatory consistency and fostering cooperation between regulators."
The adjustments to the existing rules are highly technical in nature and are still being evaluated by bond industry pros. "BDA is reviewing the MSRB filing, and we will comment as appropriate," said Michael Decker, senior vice president for public policy, Bond Dealers of America. "Based on a preliminary review, we will be focusing our attention on the increased requirements placed on firms and individuals and whether those requirements are superfluous."
MSRB believes changing the Regulatory Element requirements from two years to one will help keep brokers current on recent regulatory developments. The change is designed to align with FINRA's rule 1240(a).
The proposed change, which was filed for immediate effectiveness pending SEC approval, also requires any registered broker dealers who don't complete the requirement in the allotted time period to make a request in writing for an extension and provide supporting documentation.
The current rule sentences non-compliers to having their registration deemed inactive until the requirements have been completed. If the requirements are not satisfied in two years-time the registration would be terminated.
The changes address terminated individuals by allowing them to maintain their qualifications by participating in FINRA's programs– which are defined as "rigorous."
The effort to align with FINRA re-considers who is considered a "covered registered person," relative to the Firm Element component of CE programs. The current designation refers to "any person registered and qualified as a representative or principal with a dealer in accordance with MSRB Rule G-3 or as a general securities principal and who regularly engages in or supervises municipal securities activities."
The new rule would apply to "all registered persons." The word "covered" would be removed and the fine pencil definition changed to, "all registered persons; thereby deleting the specific requirement for dealers to only conduct annual municipal securities training for registered representatives who regularly engage in, and municipal securities principals who regularly supervise, municipal securities activities."
The proposed changes would eliminate some of the minimum standards for training programs and recognize that "each dealer must take into consideration the firm's size, organizational structure, scope of business activities, as well as regulatory developments and the performance of covered registered persons in the Regulatory Element."
MSRB does not have any rules on its books about using outside training. To match up with FINRA it is now proposing allowing off site training, including sessions at Annual Compliance Meetings to qualify for learning credits.
According to the proposal, the rule language becomes operative on Sept. 30, 2022, with the Regulatory and Firm Element requirements having a compliance date of Jan. 1, 2023.
Representatives and principals will have until Dec. 31, 2023, to comply with their annual obligation to complete the Regulatory Element.
