Persons registered with a broker-dealer historically have had two years from their Form U5 filing date to re-register with another firm before their prior qualifications (examinations) would lapse. This two-year window often led to “parking” of registrations or other moves by industry personnel designed to avoid retaking industry exams.
FINRA has sought to relieve these outcomes somewhat by amending Rules 1210 and 1240 governing registration and continuing education (“CE”) requirements. Among other changes, new FINRA Rule 1240(c) implements the Maintaining Qualifications Program (“MQP”), which provides eligible individuals who terminate any of their representative or principal registrations the option of maintaining their qualifications for up to five years, instead of the current two-year window, by completing the annual CE discussed below. Prior to the rule change, FINRA’s CE program did not provide individuals the ability to maintain their qualifications following the termination of their registrations simply by completing CE. Instead, individuals were required to requalify by retaking examinations if they had not reregistered with another firm within two years after their U5 date.
An individual whose registration is terminated on or after March 15, 2022 will have up to two years to elect to participate in the MQP (the election can be made through the Financial Professional Gateway). Individuals whose registrations were terminated within two years prior to March 15, 2022 must make their election between January 31, 2022 and March 15, 2022. FINRA began notifying individuals who were previously registered between March 15, 2020 and March 15, 2022 of their potential eligibility to participate in the MQP. If an individual’s registration has been terminated but the firm has not yet submitted a Form U5, the individual may notify FINRA of the intent to participate in the MQP no later than March 15, 2022.
Beginning March 15, 2022, individuals who elect to participate in the MQP must complete their annual CE through the new MQP and generally must do so by December 31, 2022.
The new MQP establishes several conditions for eligibility and participation:
- Individuals must have been registered in the terminated registration category for which they elect to maintain their qualification under the MQP for at least one year immediately prior to the termination of that category and must not have been subject to a statutory disqualification (“SD”) during that one-year registration period;
- Individuals must make their election to participate in the MQP at the time of their Form U5 submission, or no later than two years from the termination of the registration category;
- Individuals must not have been subject to an SD between the date of their Form U5 submission and the date on which they make their election to participate in the MQP;
- Individuals must not have been “CE inactive” for two consecutive years at the time they make their election to participate in the MQP;
- MQP participants must complete all prescribed CE content annually by December 31st;
- MQP participants will have a maximum of five years following the termination of a registration category in which to reregister without needing to requalify by examination or obtain an examination waiver;
- MQP participants who become subject to an SD while they are participating in the MQP may not continue in the MQP; and
- MQP participants who become CE inactive for two consecutive years while they are participating in the MQP may not continue in the MQP.
Firms should be aware that the rule change also amends FINRA Rule 1240(a) to transition the CE schedule to an annual basis, requiring registered persons to complete the Regulatory Element of the CE program annually by December 31st. Previously, FINRA Rule 1240(a) required a registered person to complete the applicable Regulatory Element within 120 days after the person’s second registration anniversary date and, thereafter, within 120 days after every third registration anniversary date. This change should streamline the ability of firms to track and manage the completion of CE by their registered persons.
FINRA also amended Rule 1240(b) to allow for recognition of the successful completion of existing firm training programs relating to the AML compliance program and the annual compliance meeting toward satisfying an individual’s annual Firm Element.
FINRA Regulatory Notice 21-41 includes additional background and details on the changes. FINRA members should promptly and carefully consider these changes in relation to 2021 year-end CE programs and other training. Firms should also account for these changes in relation to their processes for terminating registered persons, conducting CE, and other training for 2022 and beyond.
 FINRA has also applied this two-year lookback to individuals participating in the Financial Services Affiliate Waiver Program (“FSAWP”) under FINRA Rule 1210.09.
 FINRA’s CE program requires registered persons to complete continuing education consisting of both a Regulatory Element and a Firm Element. The Regulatory Element, which is administered by FINRA, focuses on regulatory requirements and industry standards, while the Firm Element is provided by each firm and focuses on, among other things, securities products, services and strategies the firm offers, firm policies, and industry trends.Author(s)
Nicholas J. Losurdo
Peter W. LaVigne