Continuing Education Fraud

CPT is a nightmare to many licensed persons in HK. I am often told that some supervisors would ask their subordinates to attend CPT courses (especially in-house ones) on their behalf. What would happen if such "fraud" was uncovered?

FINRA recently fined and suspended 16 current and former registered representatives of State Farm VP Management Corp. for misconduct involving FINRA's Continuing Education requirements for registered representatives. State Farm is engaged in the business of selling mutual funds and variable products.

Nine of the sanctioned representatives were supervisors who directed or allowed subordinates to take State Farm's "Firm Element" proficiency test for them. One was a supervisor who directed a subordinate to take the test for other registered representatives. Six of the sanctioned representatives completed the Firm Element test for their superiors. State Farm reported the misconduct to FINRA after uncovering test-taking irregularities in one of its regions and conducting a preliminary investigation. State Farm then expanded its internal investigation nationwide and provided FINRA with its findings.

Since 1995, FINRA has administered a two-part mandatory Continuing Education Program which consist of a Regulatory Element and a Firm Element. The Regulatory Element requires all registered persons to take computer-based training, devoted to industry rules and regulations, on the second anniversary of their initial securities registration and every three years thereafter. The Firm Element requires firms to administer appropriate training to their registered persons who have direct contact with customers, and to the registered persons' immediate supervisors, on an ongoing basis. The training must cover topics specifically related to their business, such as new products, sales practices, risk disclosure, and new regulatory requirements and concerns.

The 2005 Firm Element designed by State Farm was an internal, computer-based system. Covered representatives were required to complete a two-hour training session and then pass a proficiency test with a minimum score of 80%. In order to access the Firm Element training session and proficiency test, the participant was required to sign on to the system using a user ID and password. The subordinate representatives who took the test for their superiors signed on as the superiors for whom they were taking the test, using the superiors' user IDs and passwords.

I am just curious if once a day a licensed person in HK would be sanctioned by SFC for "cheating" CPT hours!