NASAA Publishes Two Model Rules

In the latter half of November, the North American Securities Administrators Association published two model rules.  One model rule pertained to continuing education while the second pertained to an investment adviser’s policies and procedures.  These model rules are just that: model rules.  Each state determines whether the model rules will be adopted.

Looking through the material, we noticed several noteworthy items.

The model rule pertaining to continuing education requires six hours or more of annual continuing education.  Three hours of regulatory ethics and three hours of products and practices are required.  Since more states are passing the Annuity Suitability and Best Interest Standard promulgated by the National Association of Insurance Commissioners, it is interesting that the model rule specifically inserts product sales into its framework.

The model rule pertaining to compliance policies and procedures is aligned very closely with the requirements for investment advisers registered with the Securities and Exchange Commission.  The Code of Ethics material under this model rule is also aligned with the requirements for SEC-registered firms.

There is a specific requirement for cybersecurity.  Although the NASAA has already given plenty of guidance regarding cybersecurity, this model rules makes it a specific requirement.  Although cybersecurity policies and protocols will vary between firms, many, if not most, state-registered investment advisers don’t have a huge budget for information technology.  At least this model rules gives advisers a concrete footing from which to leap.

There is no surprise that business continuity planning is here given recent events.   Although states already have this requirement and even make a pre-registration requirement, this model rule takes it a step further and equates succession planning with business continuity planning.

The  NASAA kindly included an extensive grid to guide you in creating and implementing regulatory requirements.  If you don’t want to do this yourself, contact us to discuss how we will help.

NASAA Publishes Two Model Rules
Venturis Solutions, Paul Mallory 11 January, 2021
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