INTL FCStone 2005 Annual Report Download - page 19

Regulatory changes
The securities industry is subject to extensive regulation under both federal and state laws. In addition, the
SEC, the NASD, other self-regulatory organizations, commonly referred to as SROs, and state securities
commissions require strict compliance with their respective rules and regulations. These regulatory bodies are
responsible for safeguarding the integrity of the securities markets and protecting the interests of participants in
those markets. As a securities broker/dealer, the Company is subject to regulation concerning certain aspects of
its business, including:
• trade practices
• capital structure
• record retention
• the conduct of the Company’s directors, officers and employees
Failure to comply with any of these laws, rules or regulations could result in adverse consequences. The
Company and certain of its officers and employees, have, in the past, been subject to claims arising from acts in
contravention of these laws, rules and regulations. These claims have resulted in the payment of fines and
settlements. The Company and its officers and other employees may, in the future, be subject to similar claims.
An adverse ruling against the Company or its officers and other employees could result in the Company’s or its
officers and other employees being required to pay a substantial fine or settlement and could result in suspension
or expulsion. This could have a material adverse effect on the Company’s business, financial condition and
operating results.
The regulatory environment in which the Company operates is subject to change. New or revised legislation
or regulations imposed by the SEC, other United States or foreign governmental regulatory authorities, SROs or
the NASD could have a material adverse effect on the Company’s business, financial condition and operating
results. Changes in the interpretation or enforcement of existing laws and rules by these governmental
authorities, SROs and the NASD could also have a material adverse effect on the Company’s business, financial
condition and operating results.
Additional regulation, changes in existing laws and rules, or changes in interpretations or enforcement of
existing laws and rules often directly affect securities firms. The Company cannot predict what effect any such
changes might have. The Company’s business, financial condition and operating results may be materially
affected by both regulations that are directly applicable to the Company and regulations of general application.
The Company’s level of trading and market-making activities can be affected not only by such legislation or
regulations of general applicability, but also by industry-specific legislation or regulations.
Liability for violations of federal and state securities laws
Many aspects of the Company’s business involve substantial risks of liability. A market-maker is exposed to
substantial liability under federal and state securities laws, other federal and state laws and court decisions, as
well as rules and regulations promulgated by the SEC and the NASD. The Company is also subject to the risks of
litigation and claims that may be without merit. As the Company would defend actively any such litigation,
significant legal expenses could be incurred. An adverse resolution of any future lawsuits or claims against the
Company could have a material adverse effect on its business, financial condition and operating results.
Environmental risk factor
The Company’s base metals trading business, active since October 2005, may be subject to potential claims
under certain federal, state and foreign environmental laws. It involves the purchase and sale of base metals such
as lead and other potentially hazardous materials. As part of this business, the Company engages third parties
located both in the United States and other countries to acquire, store, transport and recycle used automotive and
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