NASAA adopts a new model rule for investment adviser representatives

On Apr. 17, 2023, the North American Securities Administrators Association (NASAA) adopted a new model rule that allows investment adviser representatives (IARs) to maintain their exam qualifications for up to five years while not being employed by or associated with an investment adviser or federal covered investment adviser.

Here are the key points about the NASAA Investment Adviser Representative Examination Validity Extension Program Model Rule:

• The model rule is a companion to a similar model rule for broker-dealer agents adopted by NASAA in September 2022.
• IARs who terminate their registration can maintain the validity of their Series 65 or 66 exam qualifications for up to five years, provided they meet certain requirements.
• The development of the model rule was led by NASAA’s Investment Adviser Representative Continuing Education Committee, and Committee Chair Linda Cena praised the rule’s adoption for providing greater career flexibility for IARs.

According to the new rule, to be eligible, individuals must meet the following requirements:

1. The individual previously took and passed the examination for which they seek to maintain validity under this rule;
2. The individual was registered as an investment adviser representative for at least one year immediately preceding the termination of the investment adviser representative registration;
3. The individual was not subject to a statutory disqualification as defined in Section 3(a)(39) of the Exchange Act while registered as an investment adviser representative or at any period after termination of the registration;
4. The person elects to participate in the Exam Validity Extension Program (“EVEP”) under this paragraph within two years from the effective date of the termination of the investment adviser representative registration;
5. The individual does not have a deficiency under the investment adviser representative continuing education program at the time the investment adviser representative registration becomes ineffective;
6. The person completes annually on or before December 31 of each calendar year in which the person participates in the IAR EVEP:
   • six (6) Credits of IAR CE Ethics and Professional Responsibility Content offered by an Authorized Provider, including at least three (3) hours covering the topic of ethics, and
   • six (6) Credits of IAR CE Products and Practice Content offered by an Authorized Provider;
7. An individual who elects to participate in EVEP is required to complete credits required by subsection (6) of this rule for each calendar year that elapses after the individual’s investment adviser representative registration became ineffective regardless of when the individual elects to participate in EVEP; and
8. An individual who complies with the FINRA Maintaining Qualification Program under FINRA Rule 1240(c) shall be considered in compliance with Section (6)(b) of this rule.

The adoption of this model rule is an important step towards standardizing regulations for investment advisers and broker-dealer agents and offers greater career flexibility for IARs. It also emphasizes the importance of continuing education and maintaining professional qualifications in the securities industry. NASAA members who elect to implement these new regulatory standards will be able to offer their IARs the opportunity to maintain their exam qualifications for up to five years, even if they are not currently employed by or associated with an investment adviser or federal covered investment adviser.

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 Link out to the rule and link to our IAR CE blogs somewhere in this as well!