ORDER OF THE
DEPARTMENT OF FINANCIAL INSTITUTIONS – SECURITIES
The Wisconsin Department of Financial Institutions – Division of Securities by this order creates ch. DFI-Sec 11 of the Wisconsin Administrative Code, relating to continuing education requirements for investment adviser representatives. The scope statement for this rule was approved by the Administrator of the Division of Securities on February 1, 2021; approved by the Governor on February 19, 2021; and published in Administrative Register No. 783A1 on March 1, 2021. Comments from the Legislative Council Rules Clearinghouse were received on August 11, 2021. The proposed rule was approved by the Administrator of the Division of Securities on July 14, 2021, and by the Governor on October 7, 2021.
1. Statutes interpreted:
Subchapter IV of chapter 551 of the Wisconsin Statutes.
2. Statutory authority:
3. Explanation of agency authority:
The above statute authorizes DFI to promulgate administrative rules requiring continuing education for investment adviser representatives, or “IARs,” who are registered under Wis. Stat. § 551.404. See Wis. Stat. § 551.411(8) (“[A] rule adopted or order issued under this chapter may require continuing education for an individual registered under § 551.404.”).
4. Related statutes or rules:
The below-referenced administrative rules each relate to Chapter 551 of the Wisconsin Statutes, which is the uniform securities law in this state.
5. Plain language analysis:
The proposed order would create ch. DFI-Sec 11 of the Wisconsin Administrative Code governing continuing education for investment adviser representatives (IARs). The text of the proposed rules is consistent with the model rules for state-registered IARs adopted by the North American Securities Administrators Association (NASAA). For IARs who are registered or required to be registered in this state, the proposed rule would implement the following provisions and have the following effects:
1) IARs would be required to earn 12 credits of continuing education (CE) each year, including at least 3 hours on the topic of ethics. Other required topics are professional responsibility and products and practice content. These CE requirements will help ensure that professionals’ competencies remain up-to-date; inform them of relevant changes in industry practices, products, and governing law; reinforce ethics rules and expectations; and foster public confidence in registered professionals as a whole.
2) Some registered IARs who complete CE courses through the Financial Industry Regulatory Authority (FINRA), a self-regulatory organization, may earn up to 6 hours of CE credits that will apply to certain requirements created in this rule. Those IARs, as agents of FINRA member broker-dealers, are subject to FINRA CE requirements.
3) An IAR who fails to comply with the proposed rule’s CE requirements by the end of a reporting period may renew the IAR’s license at the close of that period under the registration status “CE Inactive.” The IAR must maintain CE Inactive registration status until the completion of all required CE credits. An IAR with CE Inactive registration status at the close of the next reporting period is not eligible for IAR registration or renewal of an IAR registration.
4) An IAR who was previously registered in this state and became unregistered must complete all required CE credits for all reporting periods occurring between the time that the IAR became unregistered and the time that the individual registered again.
5) An IAR who is registered as an IAR in the IAR’s home state is in compliance with this state’s CE requirements if the IAR meets the IAR’s home state requirements, which must be at least as stringent as those in Wisconsin.
6) An IAR who holds a professional designation that qualifies the IAR for a registration examination waiver under DFI rules is considered to have met the CE requirements under certain specified conditions.
7) An IAR who earns more than 12 credits in a reporting period may not carry those credits forward to a future year.
8) The proposed rule authorizes the Administrator of the Division of Securities to waive any requirements specified in the rule.
6. Summary of, and comparison with, existing or proposed federal regulation:
IARs are registered with the states in which they transact business. There is no existing or proposed federal regulation concerning continuing education for the registered representatives associated with either state-registered or federal investment advisers.
7. Comparison with rules in adjacent states:
Wisconsin, like every other state in the U.S., is a member of the North American Securities Administrators Association (NASAA), a national organization of state securities regulators. On November 30, 2020, the NASAA membership voted to adopt a model rule to require continuing education by investment adviser representatives. There are at least 12 states that are currently taking steps to adopt the model CE rule during the 2021 calendar year, with 2022 as the first year in which CE will be required. It is likely that virtually all other states will adopt the model rule thereafter. Substantively, the rules adopted by Wisconsin and adjacent states are likely to be identical, or nearly identical, since they are based on the NASAA model rule.
8. Summary of factual data and analytical methodologies:
The proposed changes are based on the NASAA model rules described above, as well as the experience of the Division of Securities staff in regulating IARs in this state. The nature of these changes did not demand or lend itself to analysis of field data.
9. Analysis and supporting documents used to determine effect on small business or in preparation of an economic impact analysis:
These proposed rule changes have no material effect on small businesses.
10. Effect on small business: