Investment adviser representatives (IARs) who provide financial advice to clients now have to complete annual continuing education in a growing number of states. As of early 2024, 19 states plus Washington, D.C., and the U.S. Virgin Islands have put in place or plan to implement rules requiring IARs to perform 12 hours per year of continuing education focused on ethics, products and practices. The requirements ensure IARs stay up to date on changing regulations, standards and best practices related to giving investment advice. States are adopting the rules on their own timetables and with some variations, meaning IARs face a patchwork of different state regulations.
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IAR Continuing Education Background
Many financial industry professional certifications require holders to complete annual continuing education to maintain registration and licensing. Until recently, however, investment adviser representatives (IARs) have had no continuing education requirement. Then in 2020 the North American Securities Administrators Association (NASAA) approved a model rule for states wishing to implement IAR continuing education. The guideline calls for IARs to complete 12 credits per year, with each credit equaling 50 minutes of instruction.
The 12 annual credits must consist of:
- 6 credits related to products and practices covering topics like investments, strategies, standards and compliance
- 6 credits related to ethics and professional responsibilities such as fiduciary duties and obligations to clients
At least half of the ethics and professional responsibility coursework must relate to ethics. IARs trying to fulfill their CE minimums have to choose from NASAA-approved courses and providers.
The model rule gives IARs a one-year grace period to catch up if they fail to complete the necessary credits in a given year. But if an IAR misses two years in a row, their registration in states with IAR continuing education rules will be terminated and they’ll have to re-qualify and re-apply.
State-Specific CE Rules
States have gradually been embracing IAR continuing education, starting in 2022. Those with effective or announced IAR continuing education requirements as of early 2024 include:
- 2022 adopters: Maryland, Mississippi and Vermont
- 2023 adopters: Arkansas, Kentucky, Michigan, Oklahoma, Oregon, South Carolina, Wisconsin and Washington D.C.
- 2024 adopters: California, Colorado, Florida, Hawaii, Nevada, North Dakota, Tennessee
- 2025 adopter: U.S. Virgin Islands
While NASAA’s rule has generally been followed, there are some differences among states with effective rules so far. Some key details:
- Arkansas: 6 hours of products and practices, 6 hours of ethics including at least 3 hours specifically on ethics
- Kentucky: 12 total hours, although firms can apply for exemptions based on other designations
- Michigan: 12 hours required as in model rule for state-registered IARs only
- Oklahoma: Follows model rule with IARs able to self-report Financial Industry Regulatory Association (FINRA) continuing education (CE)
- Oregon: 12 hours required as in model rule, although firms can apply for exemptions
- South Carolina: Follows model rule exactly with no exemptions for other designations
- Wisconsin: Follows model rule, allowing some reciprocal credits from other states
- Washington D.C.: Follows model rule with no exemptions or reciprocity provisions
States such as California with rules going into effect in 2024 largely mirror the original NASAA model. But some states like North Dakota provide reciprocity for credits earned in other states with IAR continuing education requirements.
Details vary further in states like Tennessee, which breaks down its rules into three categories:
- Investment Adviser Representatives: 6 hours ethics, 6 hours products and practices
- Investment adviser qualifying administrators: 4 hours products and practices, 4 hours ethics
- Supervised persons: Firm-developed 4-hour annual compliance course
The differences mean IARs registered in multiple states face a patchwork of regulations. IARs now have to track their continuing education requirements depending on where they’re registered and licensed to provide advice.
Other IAR Requirements
Continuing education isn’t the only requirement to work as an IAR. All IARs must fulfill other conditions to register and maintain active status.
To initially register, an IAR has to obtain a college degree and pass the Series 65 or Series 66 licensing exams. Advisors with approved professional credentials such as certified financial planner (CFP) or chartered financial analyst (CFA) can waive the exam requirement.
All state-registered IARs must complete Form U4 reporting any disciplinary, criminal or financial events that could impact their registration. And they must pay registration fees, which vary by state. IARs associated with SEC-registered firms must also submit a Form ADV brochure providing details on their services, fees and disciplinary history that is given to clients.
Bottom Line
Investment adviser representatives operating in a growing number of states now face mandatory continuing education requirements designed to ensure they provide informed, ethical advice to clients. States implementing the rules are following a model guideline for the most part. However, not all states adhere perfectly to the standard rule. This mean IARs will need to track requirements carefully, especially if they are registered and advising clients in multiple states.
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