compliance

If you’re an MFDA advisor, expect a published rule on continuing education (CE) requirements late this year or early 2018.

Read: IIROC continuing education rules are here

The self-regulatory organization (SRO) aims for CE requirements “to establish minimum standards for individuals to keep their industry knowledge current and maintain a high standard of professionalism.”

Before taking effect, the rule will first be published for comment, says the MFDA, so exactly when you will have to head to class is uncertain.

The proposed 24-month CE cycle would begin on Dec. 1 of an odd-numbered year. But that doesn’t mean you’re off the hook until Dec. 1, 2019, because the MFDA says CE requirements “may” be prorated if the initial cycle isn’t a full one. That means you’d have to complete a certain number of courses within the cycle’s remaining time.

If you don’t, dealer members (the firms) could be fined $2,500 if an approved person (the advisor) fails to comply, and $500 for failure to report. Approved persons would be prohibited from practising until CE requirements are met.

Read: How to make yourself invulnerable to liability

The basics

Advisors will likely be required to earn 32 credits: business conduct (10 credits), professional development (20) and MFDA compliance (two). Business conduct credits may be reduced to eight to offset the compliance credits, which the MFDA is considering offering for free.

The MFDA may also require CCOs, UDPs and branch managers to obtain business conduct credits (in addition to the required compliance credits) “to better align” with other industry CE programs.

As the proposal stands, new advisors (and returning approved persons) can complete credits on a pro-rata basis if their registration dates fall within months 13 to 22 of the cycle. If the registration date falls within the last two months of the cycle, CE requirements are dropped.

Reaction

Alan Hoffman, president of CE-credits.ca in Toronto, supports the proposal. A fix for the MFDA’s previous lack of CE is a “long time coming,” he says, considering many governing bodies in Canada require such credits.

“It is always in the client’s best interest to receive information that is current and relevant,” he says.

Jason Watt, co-owner of Business Career College in Edmonton, also supports the coming rule, saying the advisor-client relationship is equally important whether advisors are IIROC- or MFDA-licensed.

Watt notes the challenge for multi-licensed advisors to meet various CE requirements, however. Comments to the SRO include the suggestion that advisors adhering to another organization’s CE requirements should either be exempt from the MFDA’s or receive credit for requirements already completed. The SRO says it’s considering the latter option.

Watt also warns against courses that focus on product specifics, which can end up being promotional. This can be a problem with some insurance CE credits, he says.

A question of ethics

Typically, ethics must account for at least one (and at most three) of the business conduct credits per cycle.

CE and ethics are “tied to big-picture developments,” such as the compensation model and the level of professional responsibility, says Rod Burylo, business development manager for Western Canada at Croft Financial Group in Calgary.

All professions must establish trust between stakeholders, he says, and CE helps build that trust.

“The market is saying to the financial services industry, ‘I don’t trust you can deliver your proposed value proposition,” Burylo says of management fees. “CE credits should be about increasing abilities—so that clients are getting the value prop that’s promised, hopefully at the right price—and increasing integrity.”

Read: When the wrong thing is legal, what’s an investor to do?

Watt notes there wasn’t strong support for ethics credits in comments from the initial consultation, with most commenters saying ethics are already part of the business conduct content. (Business conduct comprises ethics, rules and policies, and relevant legislation.)

But he says “robust ethics requirements” are important, and are about more than trying to transform unethical advisors.

“That’s not who ethics training is for,” he says. “Ethics training is for the [ethical] person who wants to continue doing things in an ethical manner.”

Burylo agrees ethics are an important component. “Most of what’s going on in financial services is not a choice between right and wrong; it’s between competing rights,” he says.

There’s also an opportunity for advisors to promote their ethics training in marketing and communications materials, he says.

Hoffman says he receives positive feedback from ethics course participants. Advisors know the rules, but CE teaches them how to apply them, he says.

Read: Evidence for rigorous KYC

Content and accreditation

For CE to be meaningful, Hoffman says it must be interactive, getting advisors involved in lively discussion. Advisors at his presentations have more than 21 years of experience on average, so the courses must cover a breadth of topics and allow advisors to share their experiences.

The MFDA says it will provide further guidance on qualifying topics, and that courses, seminars, conferences and workshops may be eligible for accreditation. The MFDA 90-day training program may also be eligible.

The SRO will work with other accreditors to reduce the burden on educators to obtain accreditation for multiple programs. The current “patchwork” of associations and licences—which requires educators to be accredited by different associations and pay their annual fees—“unnecessarily hinders legitimate educators from wanting to, or financially being able to, participate in the system,” says Burylo.

“The course approval process should also have a feedback process,” suggests Watt, adding that FPSC provides helpful feedback for educators during the accreditation process.

The MFDA is also considering proposals to permit self-accreditation for CE materials and activities developed in-house by members.

Putting CE into practice

The MFDA says it will consider developing a tracking system for CE credits. Some of the comments from the consultation expressed concern about tracking credits across different CE programs, and about how a designated system would interfere with current processes.

Generally, “tracking CE credits is up to each individual advisor,” says Hoffman.

Summing up the desired overall outcome from CE, Hoffman says: “The best end result is not becoming a burden for an advisor, but becoming something that ensures their clients are taken care of.”

Michelle Schriver is assistant editor of Advisor's Edge. Email her at michelle.schriver@tc.tc.

Originally published in Advisor's Edge Report

See all comments Recent Comments

Greg Archibald

What about jurisdictions where CE credits are already required, like the BC Securities requirement that has been in place for years now? How will the MFDA cope with the apparent conflict in rules?

Tuesday, Dec 19, 2017 at 1:55 pm Reply

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