Clearinghouse Rule _________
PROPOSED ORDER OF THE
DEPARTMENT OF FINANCIAL INSTITUTIONS - SECURITIES
CREATING RULES
The Wisconsin Department of Financial Institutions - Securities proposes an order to create DFI-Sec 11 of the Wisconsin Administrative Code.
The scope statement for this rule was approved by the Governor on February 19, 2021; published in Administrative Register No. 783A1 on March 1, 2021. ______________________________________________________________________________
ANALYSIS
1. Statutes interpreted:
Chapter 551 of the Wisconsin Statutes. 2. Statutory authority:
Section 551.411(8) of the Wisconsin Statutes authorizes DFI to promulgate administrative rules requiring continuing education for investment adviser representatives, or “IARs” 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.”). . 3. Explanation of agency authority:
See response to #2 above.
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 revisions would create DFI-Sec ch. 11 of the Wisconsin Administrative Code governing continuing education for investment adviser representatives (IARs), 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 of which must be on the topic of ethics. Other required topics are professional responsibility and products and practice content.2)
This continuing education 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.3)
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.4)
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 as “CE Inactive” at the close of that period but may not work as an IAR in that status. The IAR must maintain CE inactive status until the completion of all required CE credits. An investment adviser who is CE inactive at the close of the next reporting period is not eligible for IAR registration or renewal of an IAR registration.5)
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.6)
An IAR registered or required to be registered in this state 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.7)
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.8)
An IAR who earns more than 12 credits in a reporting period may not carry those credits forward to a future year.9)
The proposed rule authorizes the division of securities administrator to waive any requirements specified in the rule.6. Summary of, and comparison with, existing or proposed federal regulation:
Investment adviser representatives are registered with the states in which they transact business. They are not regulated at the federal level so 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 North American Securities Administrators Association (NASAA) Model Rules under the Uniform Securities Acts of 1956 and 2002, 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:
None.
