Nebraska Securities Bureau Requiring Approval of Professional Designations

June 22, 2007

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In today’s edition of the Omaha World-Herald, Jack Herstein, deputy director of the Securities Bureau of the Nebraska Department of Banking and Finance, noted that the Securities Bureau has approved eight (8) professional designations for use by registered investment advisers in Nebraska.

Those professional designations already approved for use by registered investment advisers in Nebraska include the following: Certified Financial Planner (CFP); Chartered Financial Consultant (ChFC); Personal Financial Specialist (PFS); Chartered Financial Analyst (CFA); Chartered Investment Counselor (CIC); Chartered Life Underwriter (CLU); Life Underwriter Training Council Fellow (LUTCF); and Financial Services Specialist (FSS).

In the Omaha World-Herald article, Herstein noted that the Securities Bureau is currently reviewing a dozen other professional designations that have requested approval, but there are over fifty (50) other professional designations that have not yet applied for approval with Nebraska. Herstein also explained that once this professional designation review process is completed, a person (presumably an investment adviser representative or registered representative of a broker-dealer in Nebraska) could be fined or suspended for using professional designations that haven’t been approved by the Nebraska Securities Bureau.

In light of these comments and the Nebraska Securities Bureau’s recent regulatory investigations of the marketing of equity-indexed annuities to seniors and scrutiny of the professional designations used by insurance-only agents, investment adviser representatives registered in Nebraska need to be careful and utilize only approved professional designations.

For investment adviser representatives registered outside of Nebraska, it should be recognized that other state securities regulators are taking note of the Nebraska Securities Bureau’s efforts to regulate the use of professional designations. In particular, the Massachusetts Securities Division is utilizing an approach similar to Nebraska.

Even if an investment adviser representative is registered in a state that hasn’t adopted a rule or otherwise taken a public position regarding the use of professional designations, RIA Compliance Consultants recommends that such investment adviser representatives exercise extreme caution and only utilize a professional designation that has substantial educational requirements, experience standards, a code of ethics, and a continuing education requirement. It should be understood that a state securities regulator may attempt to argue that the use of certain professional designations, which are lacking of the above requirements, are misleading under the general anti-fraud provisions of the state securities act despite the lack of any specific rule regarding designations.

Posted by Bryan Hill
Labels: Advertising, Equity-Indexed Annuities