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91-50 NASD Board Authorizes Industry Committee to Design Program to Assure Continuing Qualifications of Securities Industry Professionals

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EXECUTIVE SUMMARY

The NASD Board of Governors has decided to move forward with plans to develop an industry-wide program of continuing education and assessment for the securities personnel registered with the NASD. The Board authorized the NASD's Membership Committee to develop a program in which member firms have the option either to adopt a continuing education program for registered personnel that must include an assessment capability and be approved by the NASD, or require their registered personnel to undergo periodic assessment by the NASD of their knowledge in their areas of responsibility. A "grandfather" provision will be available to individuals with significant industry experience and no disciplinary histories.

BACKGROUND AND DISCUSSION

In June 1990, the NASD circulated to members in Notice to Members 90-38 a proposed concept for continuing assessment of registered representatives. The proposal resulted from widespread concerns in the industry and among state securities regulators that the proliferation of new securities products, as well as new laws and regulations, may be creating a need for a formal program to provide assurances that minimum knowledge levels are being maintained by securities industry professionals after their initial registration.

The North American Securities Administrators Association (NASAA) has advised the NASD that several state securities administrators are considering the institution of formal continuing education requirements for the securities industry. Both the NASD and NASAA are concerned that the institution of such requirements on a state-by-state basis could proliferate and that these requirements may differ widely among the states.

More than 100 member firms and securities industry organizations submitted comments and suggestions in response to Notice to Members 90-38.

After carefully considering the comments, the NASD concluded that the self-regulated securities industry should take the lead in increasing the standards of professionalism for its practitioners. Investors and the general public should feel confident that securities professionals have a thorough knowledge of the investment products they sell, the rules they must follow, and the increasingly complex financial markets in which they operate.

PLANNED ACTIONS

In an effort to develop an appropriate vehicle to demonstrate competency and professionalism of registered personnel, the NASD Board at its July 19, 1991 meeting authorized the NASD Membership Committee, composed of industry representatives, to begin developing details of a program that would give member firms two options. One would be to adopt a continuing education program for registered personnel that must include an assessment capability and be approved by the NASD. The other would be to require their registered personnel to undergo periodic assessment by the NASD of their knowledge in their areas of responsibility.

The Board authorized the Committee to design the program with a limited "grandfather" provision in order to exempt from these requirements persons with significant industry experience and no disciplinary histories.

Using those guiding concepts, the Board asked the Committee, which is chaired by Ronald E. Buesinger of A.G. Edwards & Sons, Inc., to report to it this year with specific proposals in the following areas:

  • the standards that the NASD will apply in reviewing and approving continuing education and assessment programs adopted by member firms;

  • the manner in which the NASD will monitor members' continuing education and assessment programs;

  • the role, if any, for the NASD in providing educational materials for continuing education programs conducted by and for members;

  • the terms of the "grandfather" provision;

  • the number of years in the assessment cycle, with possible variations for limited representatives;

  • the consequences for an individual who fails to complete successfully either the member's continuing education program or the NASD's assessment program; and

  • the specific actions to be taken with NASAA to ensure that the NASD program will be accepted by any state contemplating continuing education or assessment programs of its own.

Questions concerning this notice may be directed to Frank J. McAuliffe, Vice President, Qualifications and Membership, at (301) 590-6694.


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