NASD Rule 1120

FINRA Membership and Registration Rule 1120 for Securities Industry Continuing Education Program.

On February 8, 1995, the Securities and Exchange Commission (SEC) approved FINRA Membership and Registration Rule 1120 that prescribes requirements for the Securities Industry Continuing Education Program. The Continuing Education Program has two elements – a Regulatory Element and a Firm Element. NASD Rule 1120 became effective July 1, 1995.

The Regulatory Element requires all registered individuals complete a computer-based training program within 120 days of their second anniversary of their registration approval date and every three years thereafter.

To schedule an appointment contact Pearson VUE’s National Registration Center at (866) 396-6273 (toll free) or go to http://www.pearsonvue.com/nasd for online scheduling.

The Firm Element requires broker-dealers to annually evaluate and prioritize their training needs, i.e., conduct a Needs Analysis and develop a written plan. In planning, developing and implementing the Firm Element training, each broker-dealer must take into consideration its size, structure, scope of business and regulatory concerns. Particular emphasis should be placed on changes to firm or industry demographics form the prior year. New products, new rules related to firm business and problems the firm has experienced, such as complaints, regulatory or legal actions, are other particularly important considerations.

The Firm Element requirements apply to all “covered persons”. Covered persons is defined as registered persons, including sales people, traders, sales assistants, investment company shareholder servicing agents, investment bankers and others who have direct contact with public customers in the conduct of securities sales, trading or investment banking business and their immediate supervisors for as long as they are considered covered persons. The term “customer” in the definition of covered persons includes retail, institutional and investment banking customers, but does not apply to other broker-dealers. There are no required numbers of hours for the Firm Element, but the firm may prescribe training measured in hours or credits to keep track of individual’s compliance with the Firm Element.

The Needs Analysis and Written Training Plan should address any pertinent recommendations from the Firm Element Advisory, which is published annually by the CE Council and should briefly describe other training plans for the upcoming year. The written training plan should briefly describe the training activities (i.e., subjects, methods of delivery and training) for the upcoming year that are reasonable in relation to the firm’s size and resources. The Needs Analysis and the Firm Written Training Plan must be completed and be available for regulatory inspection by the end of each calendar year or the end of the firm’s fiscal year. SEC Rule 17a-4 requires that the records be maintained for at least three years, the first two years in an easily accessible place.

Each firm must then administer its Firm Element continuing education program in accordance with its annual Needs Analysis and Firm Written Training Plan and must maintain records documenting the content of the program and the completion of the program by covered persons.

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