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A Large Full-Service Broker/Dealer
(Prepared for 1996)
The needs analysis and plan for this large, full-service broker/dealer has been excerpted for space considerations. The excerpts represent less than one-third of the total firm plan. Included here are: * an outline of the development process (Section I) including selected appendices; * an index to the plans of each of the major business units (Section II) and a sample plan that illustrates how units in the Retail Group addressed the training needs of registered persons in the home office and in the field; and * an outline of the Firm Element management process (Section III). SECTION I: Development Process In order to ensure that our continuing education programs fully reflect both business and legal/ compliance needs, we conducted the two assessment processes separately and then combined the priorities in needs assessments and continuing education plans for each business unit. The business needs assessment was conducted under the direction of the Senior Vice President and Director of Continuing Education, and is outlined in the Continuing Education Timeline [Appendix I]. The Legal/Compliance needs assessment schedule is also reflected in the Timeline, and the details of the process, conducted under the direction of General Counsel, have been outlined in a separate memorandum [Appendix II]. The specific sequence of meetings, exchanges of materials, follow-up conversations, and drafting varied by business unit, but in general the development process for the needs assessments and continuing education plans can be summarized as follows: * Meetings of the firm-wide oversight committee. * Meetings with the heads of business units. * Branch managers' survey [Appendix V: survey and summary response]. * Meetings with each business unit [Appendix VI: summary materials, template #1]. * Identification of all registered persons covered by Firm Element [Appendix VII: business unit survey process]. * Second meetings with each business unit [Appendix VIII: template #2]. These meetings focused on new product development, marketing initiatives, business priorities, and relevant operational issues. * Follow-up discussions to incorporate Legal/Compliance needs assessment in each plan and provide program detail. * Completed draft needs assessments and continuing education plan given to each business unit for review [Appendix IX; template #3]. * Final needs assessments and plans compiled for review by Senior Management and Legal Department [see Section II]. SECTION I: Appendix I Section I contains a detailed description of the needs analysis development process. Appendix I, the project plan, is well done. There is good involvement with, and education of, senior management to ensure senior level buy-in and support. This demonstrates ongoing communications with management at many levels. It is critical, especially in a large firm, to monitor implementation of the plan by following up with participants to complete tasks. A central contact has been established for the Firm's registered persons by means of a special telephone number staffed by specially trained personnel. This is a noteworthy and commendable aspect of the plan. CONTINUING EDUCATION TIMELINE June 26, 1995 Update As of June 26 Project Locate responsibility for CEP Status Done 4/11 Director of Continuing Education Project Establish firm-wide oversight group Status Done 4/11 HR Committee Project Communicate with business heads Status Done 4/18 Senior Management Meeting 4/24 Conference Call 4/28 Branch Managers' Meeting Project Communicate with all registered persons Status Initial mailing 6/1 Special telephone number set up, training those answering 6/1, all calls being logged Project Conduct Needs Assessment Legal & Compliance Process Status Documentation of process and priorities 2/15 Team Meeting 3/15 SEC Meeting 4/7 Team Meeting 4/24 Team Meeting 4/27 Survey 5/3 Survey Follow-up 5/15 Team Meeting 6/13 Team Review of Final Draft 6/15 Document Ready for Senior Management Review Project Business Unit Process Status Written preliminary needs assessments and outlines of current continuing education plans gathered from all business units. Round 2 meetings completed, incorporating legal needs assessment into business needs assessment and detailing training plan. Round 3 drafts sent to all Business Units for final edit/approval, process completed 6/21 5/1 Capital Markets 4/27 Research 5/4 Transaction Services 5/2 International 5/5 Investment Banking 4/25 [Firm's Retail Group] 4/27 [Firm's Retail Group]: Equities 4/26 [Firm's Retail Group]: Insurance/Personal Trust 4/26 [Firm's Retail Group]: Stock Option Finance/Margin 5/1 [Firm's Retail Group]: Retirement Plans/Corp. Trust 5/1 [Firm's Retail Group]: Muni, TFI, DI, Managed Accts, Managed Futures 5/1 Division Coordinator Conference Call 4/28 Branch Managers' questionnaire distributed at BM Meeting 5/30 Draft Summary of Business Needs Analysis Process completed 6/19 All Business Unit reviews completed Project Identify those covered by Firm Element Status Project completed 5/17, discrepancies transmitted to Registration 5/18, ready for entry on data base with minor clean up-- e.g. Series 51/52 5/4 List produced by HR, piloted with 5 Business Units 5/8 Distributed to all Business Units with instructions 5/17 Identification completed 5/18 Transmission to Registration 5/29 update Sr. 51/52 Project HR Requirements Status Needs identified, implementation under discussion by HR Project Systems Requirements Status Needs identified, systems analysis completed, initial system development and training underway, delivery date late June 4/26 Meeting 5/1 Draft Needs Analysis 5/4 JAD/Staff 5/18 Agreement on Microsoft Access as interim "front end" for managing process, training for staff on 5/23, meeting 5/22 to spec details for Regulatory Element management, 5/29 for Firm Element management, daily meetings 5/29-6/3 6/12 Summary of system and costs 6/20 Demo and scrub 6/26 Regulatory Element operational/Firm Element completed no later than July 15 Project CEP Management Plan and Policies Status Plan and enforcement policy completed by 5/30 for senior management review 4/24 Meeting/Legal & Compliance Team 5/9 Legal & Compliance Team discussion 5/11 Outline of management process 5/15 Team discussion 5/30 Enforcement draft completed 6/1 90 and 120 day notifications drafted for review 6/6 Final Firm Element templates drafted 6/10 Notifications approved 6/19 Staffing plan for ongoing CEP approved 6/21 Management Plan final draft for Senior Management review 6/26 Management "kits" distributed to business heads including final needs assessments and training plans, management system outline, and instructions for transmitting tracking information and documentation SECTION I: Appendix II MEMORANDUM TO: Continuing Education Program File FROM: Senior Attorney Regulatory SUBJECT: Legal/Compliance Training Needs Assessment For Firm Element DATE: June 16, 1995 In accordance with the requirements for implementation of the Firm Element of the SEC mandated Continuing Education Program for Securities Industry Professionals,1 [Firm]'s Legal and Compliance Departments conducted an analysis of training needs. This memorandum will serve to document the chronology and methodology used for this needs assessment as well as the results which were obtained. 1 Exchange Act Release No. 35-341 (Feb. 8, 1995). I. Legal/Compliance Team Introductory Meeting On April 21, 1995, members of the Legal and Compliance Departments held a meeting concerning the development of [Firm]'s annual plan for training its covered registered personnel. This "Legal/Compliance Team" (the "Team"), discussed the procedures for conducting a formal and comprehensive assessment of training needs. We then determined that various areas in the Legal and Compliance Departments would be asked to respond to a needs analysis inquiry. The collective results of this Legal/Compliance needs analysis inquiry, together with the results of the parallel needs analysis conducted among the firm's Branch Managers and Business Units, would form the basis from which the first annual training plan would be developed. The Team also identified topics in which we felt training of [Firm]'s registered personnel was indicated. In devising this preliminary list, we considered current regulatory developments as well as significant issues arising from [Firm]'s most recent New York Stock Exchange examination, internal audits, and matters handled during the past year by the Regulatory/Special Review and Early Resolution Groups. The topics so identified were: suitability, mutual funds switching, better price execution, outside activities, block order allocation, risk disclosures, cold calling, political contributions, T +3, collateralized mortgage obligations, money laundering, the confidentiality of client information, state registration issues, sales contests, inside information, reportable events, the electronic bulletin board, and Chinese Wall. The Team did not attempt to rank these topics in any order of priority, pending the receipt of responses to the needs analysis inquiry. II. Coordination with Capital Markets Group On April 25, 1995, I met with [a General Counsel associate] of the Capital Markets/ Product Group to discuss the Firm Element and the Legal/Compliance needs assessment. He suggested that General Counsel associates in Investment Banking attorneys in the Capital Markets Group also participate in the needs analysis. [Associate] was designated as the Capital Markets representative on the "Team." III. Needs Analysis Inquiry Attached as Exhibit A is the needs analysis inquiry that I sent via high priority e- mail, return receipt requested, on April 26, 1995, to the recipients identified above. [Associate] and I prepared the inquiry based on the materials designed by the Securities Industry Association's Special Committee on Continuing Education.2 2 SIA, Continuing Education Alert (March, 1995). Materials included information on developing a training plan, sample needs analysis, and sample cover letters for needs analysis. IV. Results of Needs Analysis On May 9, 1995, ["Team"] met with [Director of Continuing Education] to discuss the status of the Legal/Compliance needs assessment and the development of the annual training plan. Thereafter, [this group] reviewed and discussed the responses to the Legal/Compliance needs analysis inquiry. Based on these responses, the topics identified by the Team at their April 21st meeting, and the information gathered by [Director of Continuing Education] from the Branch Managers and Business Units, training needs were prioritized as follows: 1. [Firm's Retail Group]: Needs Assessment Priorities a. Suitability Knowing Your Client: The importance of having accurate, updated information about the clients' objectives, financial situation, and risk tolerance, with special attention paid to the needs of older clients and what RRs need to know to avoid being implicated in money laundering schemes Knowing Your Product: Having a clear understanding of how a particular product works and the attendant risks (CMOs, High Yield Bonds, Insurance Products, Mutual Funds, Foreign Equities--(particularly with rollout of [Firm subsidiary]), understanding risk disclosure Knowing Your Business: Understanding the importance of diversification/asset allocation, the dangers of excessive trading/switching (mutual fund and mutual fund/variable annuity) and the rules governing the use of discretion b. T + 3 A current priority, 2nd and 3rd Quarter 1995 c. Additional Important Issues for Registered Representatives
d. Additional Issues for Supervisors (Branch Managers, Division Management)
2. Capital Markets, Investment Banking and Transaction Services: Needs Assessment Priorities a. Chinese Wall Policy and Procedures New [Firm] guidelines/department directives b. Suitability Understanding risks, risk management, risk disclosure, the proposed NASD guidelines with respect to institutional suitability c. T + 3 A current priority, 2nd and 3rd Quarter 1995 d. Additional Issues
The needs assessment priorities were later reviewed by [Associates]. On June 13, 1995, the Team met and ratified the training needs priorities as outlined above. Appendix II solicits broad input from various levels in the Firm. It also exemplifies a team concept that can be applied at any size firm. The emphasis on suitability is noteworthy. However, it is not clear how the priorities for the plan were determined. There should be some description of the methodology used to determine the training topics. SECTION I: Appendix V TO: All Branch Managers FROM: Director [Professional Development] SUBJECT: The New Continuing Education Requirements DATE: April 28, 1995 Over the next two months we will be outlining our plans for meeting the new SRO requirements, but I wanted to be sure you were able to answer your brokers' and staff members' initial questions. There are two parts to the mandate: the Regulatory Element and the Firm Element. Everyone in your branch who has been registered less than 10 years or who has been subject to a serious disciplinary action will be subject to the Regulatory Element and be required to take approximately 3 hours of computer- based training on the 2nd, 5th, and 10th anniversaries of their registration. This is training, not a test -- there is nothing to study in advance. You will be notified approximately 120 days before the anniversary dates, so that you can be sure your brokers and staff members have plenty of time to schedule an appointment at the nearest Sylvan Technology Center. The Firm Element is much more comprehensive. Every registered person in your branch is going to be eligible for additional professional education. Although extra reporting and documentation requirements will require careful management, the new mandate is right in line with the [Firm's Retail Group]'s strategy. You'll be hearing more about the Regulatory and Firm Elements in the weeks ahead, but if you want more detail now I've included a 13 page SIA summary. I've also included a brief questionnaire -- just to get your input. I know many of you have strong opinions about the best way to invest our continuing education dollars, whether those investments are being made by Professional Development, the product areas, the Divisions and Regions, or your branches. I want to make sure to incorporate your ideas in the Needs Assessment and Continuing Education Plan that must be completed by July 1, and would be very grateful for your advice. (Firm Element Exhibit: Survey for Branch Office Managers) CONTINUING EDUCATION After completing this form, please FAX it to the Professional Development Office 1. Based on your understanding of the [Firm's Retail Group]'s strategy and business priorities, what educational, ethical, and procedural issues do you feel need to be addressed in our first Continuing Education Plan? a. Are there gaps in your brokers' understanding of risks or suitability issues with respect to particular investments? b. Are there potential conflicts of interest that need to be clarified or best practices that need to be reviewed? c. What about your registered Sales Assistants or the other members of your Branch Management Team? d. What kind of continuing education would be most valuable to you? If you'd rather talk than fill out a form, please call the Professional Development Office. Thank you. Although it is not exhibited in this publication, the Firm surveyed registered representatives to obtain broader input. (Firm Element Exhibit: Survey for Branch Office Managers, continued) CONTINUING EDUCATION After completing this form, please FAX it to the Professional Development Office 2. What are you currently doing in your Branch to address these issues? Any "best ideas" that you've had can be a great help to the rest of us. 3. What kind of materials/guides/additional training would be most helpful to you as a Branch Manager? a. Would you use a regularly updated catalog and Managers' Guide to educational resources you can order for your branch -- videotapes, computer-based training, courses "in a box"? b. What suggestions do you have about the best ways of delivering continuing professional education? SUMMARY: Branch Managers' CEP Survey May 10, 1995 Understanding Strategy Staff members need to understand [Firm] strategy and priorities, Ops Managers need to know how to be more effective members of management team. BRANCH MANAGERS: Information Need regular flow of information about how innocent brokers can get into trouble, general compliance issues, case studies, war stories, company policies "that could cost me money", materials that they can use to train people in branch. BEST IDEAS: Making Compliance Part of Sales Meetings More than half of respondents said they incorporated a weekly compliance idea, NASD disciplinary actions, case studies, relevant articles, "how I use the Trade Monitor to protect you" in their sales meetings, supplemented by branch newsletters, regular memos, etc. Making Compliance Part of Everyday Life Clear office policies on business we will and won't do and clients we won't deal with, annual branch mission statement meeting including ethics, inviting all support personnel to sales meetings, product meetings, etc. This Firm did well to collect the input and ideas from its line supervisors and to share the best ideas with the rest of the Firm. This approach not only disseminates best practices such as incorporating compliance into weekly sales meetings, but also encourages participation from the field to foster continuing education. DESIRED MATERIALS, DELIVERY STRATEGIES: "Resource Center" with Branch Managers' Guide "Yes!", "great idea", one manager said "no", one other wanted testimonials from successful managers about what resources worked, rest very enthusiastic. Deliver CEP in Branch One manager felt brokers only learned offsite and wouldn't use videotapes, all the rest preferred in-branch training, several would like Division or Corporate or Legal/Compliance participation in branch meetings, video most popular, followed by case studies, then CBT and after-hours conference calls. ISSUES: Suitability Profiling client, understanding risk tolerance, matching objectives to investments and level of account activity, providing appropriate asset allocation and diversification, not recommending the same thing to every client. Understanding the Current Environment What do today's clients expect, what is top management's commitment to CEP and to doing ethical business, what is our strategy as a firm in the current regulatory environment? GAPS AND CONFLICTS OF INTEREST: Understanding Risk How to make the connection between client risk tolerance and particular investments, how to use asset allocation to manage risks, understanding the risks in particular products and strategies: fixed income mutual funds, options, CMOs, derivatives, annuities, leverage. Importance of New Account Forms Need to update regularly, be accurate, be sure objectives and portfolio match. Dangers of Overselling By brokers and wholesalers. BRANCH STAFF MEMBERS: Understanding Role "Eyes and ears of branch manager", need to know how to recognize red flags, what to do when they see them, know their own liabilities. Understanding Business Need product knowledge, to understand how different investments work, what is suitable, quality sales, and procedure training. This Firm next developed a set of templates to help business unit managers structure the process of drafting their separate plans. The first template was the Preliminary Needs Assessment (see below), followed by Template #2 and Template #3. At each stage the templates were supplemented by face-to-face meetings with the Director of Continuing Education. The Firm chose to conduct the legal and compliance needs assessment separately from the business units' needs assessment to ensure both perspectives were fully represented in the final plan. Thus it was an important part of the process (see Templates #2 and #3) to combine those assessments in the drafting of the final Document. SECTION I: Appendix VI Template # 1 Preliminary Needs Assessment 1. Based on your strategic/product focus for the next 12 - 18 months, what educational, ethical, and procedural issues do you feel need to be covered in your continuing education plan? 2. Who in your business unit and in other business units needs to receive education on these issues? 3. What programs do you currently have planned to address these issues? 4. What issues will require the development of additional continuing education? Template #2 Business Unit: Registered Persons in Unit Covered by Firm Element [This section was designed to identify the covered individuals within the department, for example, Retail Group Equities.] Registered Persons Covered by Firm Element and Involved in the [Equity] Business [This section was designed to capture information about covered individuals outside the department, for example, brokers who have educational needs with respect to the equity business.] Needs Assessment as of July 1, 1995 [For those business units that are producers as well as consumers of continuing education, two needs assessments were filled out, one for each constituency. This is the point at which we began to combine the Legal/Compliance needs assessment with the business unit's own assessment.] Training Plan 1995 - July, 1996 [On round two we drafted a detailed outline of each business unit's preliminary training plan--or plans if they provide as well as receive continuing education.] Template #3 Business Unit: Registered Persons in Unit Covered by Firm Element as of July 1, 1995 [Information gathered on Template #2 augmented here as appropriate to reflect segmentation of this population where relevant and, in the case of the Retail Group, to indicate proportion of total revenues generated in this business.] Needs Assessment as of July 1, 1995 [Emphasis on greater specificity on this round, finished incorporation of Legal/Compliance needs assessment.] Continuing Education Plan as of July 1, 1995 [Again, greater specificity, some programs listed on Template #2 removed because focus didn't match needs assessment, some added. After discussion Template #3 was filled out in next-to-final form by CEP and sent back to each business unit for final review. As with Template #2, two forms were used for those business units that are providers as well as consumers of continuing education.] SECTION II: Needs Assessment and Continuing Education Plan The methods we chose for developing our first annual needs assessment and continuing education plan produced a set of plans as opposed to a single document. It would have been more efficient to focus on meeting our regulatory requirements through a firm-wide program, but we felt that inclusive process was required to do justice to the complexity of our businesses. As a result we have a plan that will be challenging to manage and track; we also have strengthened our joint commitment to the principles underlying the continuing education mandates. [The Firm's plan contained individual plans for each of the following business units]: CAPITAL MARKETS * Fixed Income/Commercial Mortgages * International * Institutional Equity * Municipal Securities Group * Research CAPITAL MARKETS, RESEARCH, AND INVESTMENT BANKING * Legal/Compliance INVESTMENT BANKING DIVISION [FIRM'S INVESTMENT ADVISORY DIVISION] [FIRM'S RETAIL GROUP]
TRANSACTION SERVICES Please note the following. For those business units, particularly in the [Firm's Retail Group], that have responsibility for the continuing education of registered persons in our branch offices, two assessments and sets of plans have been developed. The first set reflects the needs of the members of the business unit itself -- what professionals in Retirement Plans or Equities or Managed Accounts need to know, the second set reflects the needs of registered persons in the field and how the business unit plans to meet those needs. For example: under [Firm's Retail Group] there is an assessment and continuing education plan headed: [FIRM'S RETAIL GROUP]/ TAXABLE FIXED INCOME and another headed: [FIRM'S RETAIL GROUP]/TAXABLE FIXED INCOME The first set of documents focuses on the plans to meet the needs of traders and sales liaisons and managers in retail Taxable Fixed Income who are covered by the Firm Element. That's why Taxable Fixed Income is in larger type. The second set of documents focuses on the continuing education needs of registered persons in the [Firm's Retail Group], particularly registered representatives, with respect to TFI. Under Capital Markets, Research has two sets of documents to reflect its function as a provider as well as a consumer of continuing education. Investment Banking appears under the [Firm's Retail Group] as well as being a separate division because there is a specialized group within Investment Banking that focuses on registered representatives whose individual clients have corporate financing needs. This group provides ongoing education for the [Firm's Retail Group]. Presented next are the Firm Element plans for the Professional Development (i.e., Training Department) of the Firm's Retail Group. Professional Development has two plans that result from the Firm's development process. The plans are structured around templates and face-to-face meetings and address legal, compliance, and business needs. The Professional Development plans illustrate how the Training Department is both a user of continuing education (for the benefit of its own covered persons), and a provider of continuing education (to and for the benefit of other business units, i.e., the Firm's Retail Group). It is important to note that programs offered to business units through the Training Department are significantly supplemented by programs sponsored by the product areas, by administrative subdivisions in the branch system, and by the legal and compliance departments. Business Unit: [FIRM'S RETAIL GROUP]/PROFESSIONAL DEVELOPMENT Registered Persons in Unit Covered Under Firm Element as of July 1, 1995: 6 Needs Assessment as of July 1, 1995: Through familiarity with markets and products, including new products and technologies. Regular updating on regulatory and procedural changes. Knowledge of sales practice issues and best practices for detecting and preventing these issues. Opportunity to participate in professional workshops focused on ways of increasing the effectiveness of continuing professional education programs. It is the policy of Professional Development to actively encourage members to become registered. Continuing Education Plan for [the Firm's Retail Group]/Professional Development as of July 1, 1995: Department meetings and workshops: each year the Professional Development Department will sponsor at least two workshops focused on improving program effectiveness. These workshops may include outside speakers or may be offered by members of the PD staff. They will be documented in the CEP archives and participant data entered into the CEP database. Outside conferences: in addition covered persons will be eligible for reimbursement for at least one outside workshop which is relevant to their particular needs. Workshops may be sponsored by a professional organization, a consulting group, or a university. Reimbursement will be contingent upon the approval of the Management Committee. Participation in PD Programs: a significant portion of the ongoing professional education of covered persons takes place in programs offered to branch managers, brokers, operations managers, and sales assistants, insofar as these programs include segments offered by senior members of departments across the firm. Workshops on legal and compliance issues, on new products, on procedural changes and technological initiatives are "taken" by program managers on a regular basis. Auditing is encouraged with the explicit permission of the individual who is directing a particular program. Space, location, and program design constraints may make auditing inappropriate. Responsibility for program design: in the process of structuring programs, covered persons in PD have the opportunity (and responsibility) to review materials and discuss concerns and concepts with experts inside and outside of [Firm]. Like the flow of information across the screens and telephone lines of traders and liaisons and brokers in the field, this form of continuing education is difficult to document, but of key importance in the development of professionals in the department. Business Unit: [FIRM'S RETAIL GROUP] /PROFESSIONAL DEVELOPMENT Registered Persons in Unit Covered by Firm Element as of July 1, 1995: All registered branch personnel plus covered persons in home office locations. The primary responsibility of Professional Development is for field personnel, particularly those in [Firm's Retail Group] branch offices, however programs ranging form one-on-one coaching in presentation skills to more formal workshops may be offered by the department on an as-needed basis to members of the [Firm's Retail Group] located in [or near] the [home office]. In addressing the needs of field personnel, program development is structured around constituencies: 1) Branch Managers, 2) New Brokers (Trainees), 3) Advance Brokers, 4) Operations Managers, Branch Administrators, and Sales Assistants. Within these constituencies, target groups are identified for some programs; others are available to the entire population. 1) Branch Manager Needs Assessment and Continuing Education Plan as of July 1, 1995: Branch managers need regularly updated information on regulatory and procedural issues in order to fulfill their supervisory responsibilities, and on sales and marketing ideas in order to play an appropriate leadership role. The responsibility for timely flow of information on these matters is borne by the Divisions, and the product areas. Professional Development's mandate is to focus on skill development, not information. To this end programs are offered to assess potential managers, provide successful candidates with management development both in classroom and field environments, work with Division Management to identify individual manager's developmental needs and offer a regular curriculum of workshops to meet those needs, and work with Senior Management to shape national and divisional conferences for managers focused on firm strategy and major initiatives. Programs documented in the CEP archives and participant data entered into the CEP data base: The Assessment Process for Management Candidates: includes screening by branch managers and division management, formal assessment, detailed report to candidate and his branch and division management. Management Development for Successful Candidates: a year-long program which includes 4 weeks of classroom education plus structured, on-the-job experiences. New Manager Orientation: offered on an as-needed basis in [the home office], supplemented by in-branch training provided by the Divisions, this program is designed for experienced branch managers recruited from the competition who need immediate education on [Firm] policies and procedures. Division Evaluation/The Branch: at least annually Division Managers and Regional Directors are asked to evaluate the Branch Managers who report to them in terms of their readiness for additional responsibilities and their needs for development. This information is used by Senior Management to manage their "bench" and by Professional Development to design and recommend specific workshops. National Managers Meeting: held at least once a year, generally in the first quarter, designed in conjunction with Senior Management to educate branch managers on firm strategy and new initiatives, includes focus on meeting supervisory responsibilities. Divisional Managers Meetings: each Division has a different schedule of meetings for the managers, but Professional Development plays an ongoing role in providing workshops and, for at least one meeting a year, structuring a 2 day program that is specifically designed to provide continuing education. Workshops: in addition to workshops offered through the Divisions, in 1995 Professional Development is offering workshops on Selection & Retention and Leadership & Coaching. 2) New Broker Needs Assessment and Continuing Education Plan as of July 1, 1995: In 1994 a complete review was done of our program for new brokers (trainees), and as a result our selection process, in-branch and [Firm's proprietary] educational program have been thoroughly revised. The emphasis is on acquiring market and investment knowledge in the context of meeting client needs. To this end case studies are emphasized, videotapes have been developed to give new brokers a sense of products as solutions for particular needs, and the entire program has been organized around "The Key" which maps the process of identifying potential clients, profiling their needs, recommending appropriate solutions and, over time, by helping clients continually reevaluate their needs and providing ongoing education, to ensure that they develop suitable portfolios (as opposed to loose collections of different products), portfolios designed to meet their personal investment objectives. Programs documented in the CEP archives and participant data entered into the CEP database. Selection program: includes checklists for branch managers, required tests--SIA and Oxicon, compliance checks, and a training program on interviewing for branch managers which was initially offered in 4Q 1994, and is now available through Management Development for management candidates, the Selection & Retention workshops for experienced managers, and on videotape. Licensing preparation: we use [Vendor] and have moved to disk-based training plus workbooks. A pilot is currently underway to use computer based (no paper) training exclusively. In 1996 our ability to download software to branch servers will be augmented by the ability to upload user information. In addition to their Series 7, Series 63, and Series 65, new brokers at [Firm] are required to become insurance licensed, either before they come to [home office training], or immediately upon their return to the branch, depending on the requirements of their particular state. In-Branch: the entirely new in-branch program consists of 12 weeks of structured work in addition to the licensing training, and highlights the importance of suitability through case studies and videotapes. A comprehensive workbook as well as conference calls help trainees to organize their time and written assignments must be transmitted to Professional Development. A mastery test in the form of two detailed case studies must be completed and approved by the Initial Broker Training staff before a candidate is allowed to enroll in the [Firm's proprietary training program]. [Firm's proprietary training]: a three week program, again with emphasis on case studies, finding individual solutions to individual needs, and investment knowledge. Drawing on the experience of medical schools that in recent years have begun to use actors to play patients so that professors can evaluate the diagnostic and prescriptive skills of their students in a realistic environment, we use carefully trained actors to play the role of clients and help us evaluate how well our students have mastered profiling and investment advisory skills. 3) Advance Broker Needs Assessment and Continuing Education Plan as of July 1, 1995: The program for experienced RRs has been completely redesigned in 1995 with two primary goals in mind:
To these ends a set of new programs have been designed for initial delivery in 1995. These programs will be documented in the CEP archives and participant data will be entered in the CEP database. [Firm Training Program]: a 5 day elective program offered on a university campus to all President's and Chairman's Council members. The specific program will include workshops on asset allocation, portfolio management strategies, and knowledge of complex products. Presenters will be drawn from universities as well as the industry. Presentations will focus on meeting client best interests. The first [Firm Training Program ] is scheduled for November 1995, the second for January 1996, and together they will include approximately 450 brokers. [Firm Training Program]: a 3 day, elective program offered to Pacesetters, modeled along the lines of the [Firm Training Program], but assuming less expertise on the part of participants. Five of these Forums will be offered in September-October 1995 and will include approximately 1,200 brokers. New Skills: a 2 day workshop on working more effectively with clients including listening, profiling, and presentation skills. The program will be offered in at least 15 major markets before the end of 1995, and include 300 brokers. In addition the manager of this program will offer 1-2 hour sessions in major market branches to expand distribution to a broader group of brokers. Computer-Based Training (CBT): in addition to the CBT training offered in conjunction with new technology, Professional Development in collaboration with Retirement Plans has developed a CBT designed to help brokers develop diagnostic and prescriptive skills. The CBT has been downloaded to branch servers in June 1995, and usage is being tracked by Retirement Plans so that it can be entered into the CEP database. In 1996 it will be possible to upload user information directly. Workshops "in-a-box": the Equity Institute, described in the [FIRM'S RETAIL GROUP]/Equity Continuing Education Plan, is going to be redesigned in 1995 for broad distribution to brokers and other registered branch personnel in 1Q 1996. We are taking a 4 day workshop, and using the written materials already developed, augmenting them by videos and CBTs to provide sophisticated continuing education to several thousand brokers. This project is a collaboration between Professional Development and [another Firm business unit]. Resource Center: plans are underway to provide a comprehensive guide to all educational materials available at [Firm] from Professional Development as well as the various product areas. An initial survey of product materials has been nearly completed, and the guide should be available on-line no later than 4Q 1995. Certification programs and degrees: [Firm] offers tuition reimbursement for a number of professional certification programs offered to brokers, including the CFP and the IMCA designations, as well as degree programs offered by colleges and universities. Participant data will be entered into the CEP database. 4) Branch Staff Members Needs Assessment and Continuing Education Plan as of July 1, 1995: The needs of this group range from full knowledge of sales practice issues and the use of the Trade Monitor System to basic information about how markets and investment products work. All branch staff members need to have a clear understanding of [Firm] procedures, of regulatory guidelines and changes, and of best practices as they relate to serving the best interest of clients. Those best practices include branch management and service strategies that ensure clients have ready access to reliable information about the status of their accounts and that any problems are resolved quickly and satisfactorily. The following programs are being offered in 1995-1996 to meet this range of needs. Each program will be documented in the CEP archives and participant data entered into the CEP database. Insights: a week-long program in [Firm's home office] for new Operations Managers. Currently scheduled to be offered three times in 1995. Gives participants a clearer understanding of job roles and functions, as well as an orientation to home office operational resources. Situational Leadership: a 2 day workshop for experienced Operations Managers and Branch Administrators. Currently scheduled to be offered 4 times in 1995 at locations around the country. Enables participants to build on their own knowledge of processes to become more effective managers and trainers of co- workers. Leadership Through People Skills: a 3 day workshop for the most experienced Operations Managers and Branch Administrators, parallels one of the workshops developed for Branch Managers. Designed to help these experts play a significant leadership role as part of the branch management team with responsibilities for managing and training branch staff members. Mastering the Methods (MTM): a workbook based self-study course designed to help all branch staff members build their knowledge of the industry as well as particular [Firm] policies and procedures. CBTs are being developed in conjunction with Technology Training to update process training, and each module of this in-branch program is accompanied by a test that is taken and tracked on-line. At this time approximately 2,500 sales assistants (SAs) and Operations Staff Members have either completed or are enrolled in MTM. Service that Keeps the Client: a modularized workshop that allows Divisions to choose among topics and host the program that they feel best meets a particular group of SAs' needs. Approximately 265 SAs have taken one of these workshops to date in 1995 with at least 2 more to be scheduled. Sales Assistants Forum: this new program will be piloted in 3Q 1995. Modeled on the lines of [other Firm training programs], approximately 200 of our most experience SAs will be able to choose among electives designed to meet their particular needs. Some electives will be explicitly designed for registered sales assistants who play an active role in marketing; non-registered sales assistants will have an opportunity to attend a session on how they can get their Series 7--and why they might want to do so. Solutions videos: all Registered branch staff members will be required to view and discuss the Solutions videos developed 1Q 1995 to provide in-branch training to new brokers and staff members on Equities, Taxable Fixed Income, Municipals, Mutual Funds, Insurance, and Unit Trusts. The tapes emphasize suitability--product knowledge is presented in the context of "solutions" to specific client needs. Participation data will be entered in the CEP database. SECTION III: Management Process Section III clearly identifies individuals responsible for managing the Firm Element plan. With foresight, the Firm also recognizes that the complexity of the plan would require additional support. The Firm budgets definite resources to the project in the form of computer-tracking capability and two additional staff. The tracking software has the additional advantage of providing information for business unit managers to act upon. It is critical for a firm of any size to have the ability to track and report Firm Element compliance. SECTION III: MANAGEMENT PROCESS The responsibility for managing the Regulatory and the Firm Element of our continuing education plan has been assigned to the Director of Continuing Education. She will work in conjunction with General Counsel and the Director of Compliance to ensure that the Firm is in full compliance. She will also report directly to the Oversight Committee and be guided by them in managing the ongoing development and implementation process. A separate cost center has been set up to cover administration of the plan, and an initial budget of $240,000 to pay for start up costs July 1 - December 1, 1995, has been approved. That budget will cover the expense of setting up the computer management system and pay for two professionals. The Professional Development Department will continue to pay the Director's salary and will provide space and staff support for the project, at least through the end of 1995. The total costs of the programs outlined in Section II of this document, to be delivered July 1, 1995 - December 31, 1996, are difficult to assess. They include the budget of Professional Development, the investment in education made by the [Firm's Retail Group] through the business units--both product areas and field divisions, and the programs sponsored by Capital Markets, Research, Investment Banking, Transaction Services, and [Firm's Investment Advisory Division]. A significant investment has been made in tailoring the software management program that will enable us to track both the Regulatory and Firm Element. The development process for this system is outlined in the Continuing Education Timeline, [Section I, Appendix I], and structural detail can be found in Appendix I of this Section. The process for managing the Regulatory and Firm Elements is summarized in the following pages. It is our current intention to rely on this document as the basis for programs and procedures for the period July 1, 1995 - December 31, 1996, although amendments may be made as outlined on the following pages based on our internal review processes or in response to regulatory advice. In 3Q 1996 we will complete a second full needs assessment and planning process in conjunction with the normal business and budget reviews scheduled at that time. The plan produced as a result of this process will then guide our Continuing Education Program in 1997. In 3Q 1997 we will complete a third full needs assessment and planning process for 1998, and continue to conduct annual 3Q assessments and reviews every year thereafter. FIRM ELEMENT: Management Process Before July 1, 1995, all business unit managers will receive CEP materials designed to help them manage their responsibilities with respect to the Firm's Continuing Education Plan. These materials will include the final version of their own needs assessments and continuing education plans, Section III of the firm- wide plan outlining the management process, and transmittal forms to ensure that they and their designers understand how to transmit the requisite data and documentation to CEP. All participant data received from the business units for educational programs outlined in the needs assessments and continuing education plans in Section II will be entered into the CEP database. All documentation received from the business units for educational programs outlined in the needs assessments and continuing education plans in Section II will be kept in the CEP archives. Although it is the responsibility of the Firm to ensure that Firm Element training is developed and available to meet the identified needs of its covered employees, it is the affirmative responsibility of each such employee to take all appropriate and reasonable steps to participate in the training specified by their supervisors. In order to demonstrate compliance with the Firm Element, employees may be required to sign attendance records or otherwise document their participation in continuing education. An employee's failure to participate within the calendar year designated for such training may result in disciplinary action by the Firm up to and including termination [see Legal Department memorandum, Appendix III]. Each quarter all business unit managers will receive a report enabling them to see where they are with respect to their continuing education plans, including the names of covered persons in their units and the programs they have taken and the names of those who have not received any tracked continuing education in the quarter of the calendar year. These reports will also be summarized for Senior Management and Legal/Compliance review. Evidence of negative trends or patterns will be immediately addressed and corrective action initiated. That action may include adjusting the management process, reassessing a particular continuing education plan, or reassigning supervisory responsibilities. The Firm recognizes the important role of line management to ensure compliance with the Firm Element. The distribution of information outlining the Firm's procedures, training requirements, and a quarterly management report will enable line management to actively support the Firm's training programs. Periodic management reporting is an essential tool to ensure the commitments outlined in the training plan are met. The Firm has identified an oversight role for Senior Management and Legal/Compliance staff. These groups will monitor the management report and address potentially troublesome trends that could lead to non-compliance with training requirements. The management reporting tool combined with senior management oversight is a powerful combination to reinforce the importance of Firm Element training. Review Process Each quarter business unit heads as well as senior representatives Legal/Compliance will be asked to update their needs assessments and continuing education plans. Any material changes will be added to Section II of this document in the form of appendices to the business unit plans after review by Legal/Compliance and the oversight committee. In order to qualify as a part of the Firm's continuing education plan a program must be: * focused on serving the best interests of our clients; * designed to give participants a clear understanding of: * the characteristics and associated risk factors of the investment/strategy/service; * the suitability of the investment/strategy/service for particular clients; and * the regulatory requirements affecting the investment/strategy/service. Program materials should include coverage of the following, to the extent they can reasonably be identified: * descriptive information regarding general features; * basic techniques for pricing; * associated risk factors such as market risk, interest rate risk, currency risk; * features that may affect liquidity, taxability, callability, convertibility, and legality or certain classes of investors; * suitability of the investment/strategy/service for different types of investors, taking their investment objectives, constraints, financial status and level of sophistication into consideration; and * applicable regulatory requirements, including standards for communication with the public. Program documentation to be maintained in the CEP archives will include: * copies of all materials including agendas, outlines, videotapes, CBTs, workbooks, scripts, and tapes. Program delivery may be accomplished in a variety of ways including: * workshops, seminars, lectures; * supervised independent study; * computer-based training and on-line education audiotapes, videotapes, Firm Network broadcasts; and * meetings, video conferences, conference calls. Program participation information should be gathered: * records of individual participation should be kept whenever practical and sent to CEP for entry into the database; and * when individual participation cannot be documented, program description, objectives, target audience, and materials should be identified on the CEP transmittal form and sent to CEP to be kept in archives. Program evaluation should be solicited: * participant evaluations should be included in summary form with the other documentation sent to CEP for the archives and will be used in the annual CEP review process. Program information must be documented: * a transmittal form has been developed as a guide for documenting each continuing education program [Appendix IV: transmittal forms]. The information on the form will be entered into the computerized tracking system and provide and index for materials held in the archives. These program standards will apply to both the ongoing review process and to the major annual review undertaken in 3Q each year. In addition, the annual process will include a thorough Legal/Compliance needs assessment based on information from audit reports, litigation and arbitration, data from the Regulatory Element, client complaints, and regulatory initiatives, and an equally thorough business needs assessment based on strategic analysis of the markets with a clear focus on the best interests of our clients. Section III, Management Process, is well-documented and comprehensive. It has also been effectively communicated to the field by the memo (below) sent to all registered persons from the General Counsel's Office. The memo reminds each employee of his or her individual responsibility to participate in the training specified in the Firm Element, and that failure to participate may result in disciplinary action by the Firm "up to and including termination." Also there is a provision and a process for senior management and legal and compliance personnel to update the training plan on a quarterly basis. This approach allows the training plan great flexibility to meet the training needs of covered persons. TO: All registered/covered persons FROM: [Deputy General Counsels] SUBJECT: Securities Industry Continuing Education Program (CEP) DATE: June 28, 1995 The following policy and procedures will apply to all registered/covered persons who are in non-compliance with either the Regulatory Element and/or the Firm Element of the CEP. In addition, individuals who are not in compliance may be subject to disciplinary action by any of six self-regulatory organizations ("SROs") and/or by any State securities regulators. Regulatory Element Under the Regulatory Element of the CEP, as of July 1, 1995, all registered persons, with the exception of those who have been registered for more than 10 years and have not been the subject of a specified disciplinary action (1) during the most recent ten years, are required to participate in a computer-based training session on the occurrence of the second, fifth, and tenth anniversaries of their initial registration date ("anniversary date"). (2) The training session must be completed within 120 days after the anniversary date ("deadline date"). The Central Registration Depository system will track individuals subject to the Regulatory Element requirement and notify the Firm in advance of those employees who, after July 1, 1995, are approaching their second, fifth, or tenth anniversary date. The Firm, in turn, will send a notification for training to those employees at least 120 days before the deadline date. The notice will include a listing of NASD Proctor Center sites where registered persons can schedule an appointment to take the computer training session. The Firm will send a second and final notice thirty days before the deadline date to any employee who has not yet completed the Regulatory Element. Individuals who have completed the computer training session will be given a receipt at the NASD Proctor Center evidencing such completion. Employees should save these receipts to eliminate the possibility of any future misunderstanding concerning their completion of the Regulatory Element. Failure to complete the Regulatory Element during the prescribed time period will result in a person's registration becoming inactive on the 121st day. A person whose registration becomes inactive cannot conduct a securities business, perform any of the functions of a registered person, or receive compensation for activities that require registration until he or she meets the requirements of the Regulatory Element. An employee's failure to adhere to the restrictions of inactive registrations will result in their immediate termination by the Firm. If the Firm determines that an employee has failed to take affirmative steps to satisfy the Regulatory Element, that employee may be suspended or terminated. Evidence of affirmative steps by an employee include the taking of specific and timely actions to schedule the requisite computer training and by making himself/herself readily available for such training. Firm Element Covered persons subject to the continuing education requirement under the Firm Element of the CEP are all registered persons who have direct contact with customers in the conduct of the Firm's securities sales, trading, or investment banking business, and the immediate supervisors of such persons. Beginning no later than January 1, 1996, all covered persons will be periodically required to participate in continuing education. Required training may include seminars, workshops, conferences, written materials, videotapes, computer-based training, conference calls, or mentoring programs. The Firm will review its continuing education needs and revise its training plan annually. Employees will be advised by their supervisors concerning their specific training requirements. Although it is the responsibility of the Firm to ensure that Firm Element training is developed and available to meet the identified needs of its covered employees, it is the affirmative responsibility of each such employee to take all appropriate and reasonable steps to participate in the training specified by their supervisors. In order to demonstrate compliance with the Firm Element, employees may be required to sign attendance records or otherwise document their participation in continuing education. An employee's failure to participate in Firm Element training within the calendar year designated for such training may result in disciplinary action by the Firm up to and including termination. 1 The specified disciplinary actions are (1) a statutory disqualification pursuant to the Securities Exchange Act of 1934, or (2) a suspension of the imposition of a fine of $5,000 or more for violation of any provision of any securities law or regulation, or any agreement with, or rule or standard of conduct of, any securities governmental agency, securities self-regulatory organization, or as imposed by any such regulatory or self-regulatory organization in connection with a disciplinary proceeding, or (3) an order to re-enter the Regulatory Element as a sanction in a disciplinary action by action by any securities governmental agency or securities self-regulatory organization. 2 Persons who have incurred a covered disciplinary action will have an anniversary date that coincides with the effective date of the final decision in the disciplinary action. |
