Ameriprise 2011 Annual Report Download - page 47

In addition, the SEC and other federal and state regulators have increased their scrutiny of potential conflicts of interest. It
is possible that potential or perceived conflicts could give rise to litigation or enforcement actions. It is possible also that
the regulatory scrutiny of, and litigation in connection with, conflicts of interest will make our clients less willing to enter
into transactions in which such a conflict may occur, and will adversely affect our businesses.
Misconduct by our employees and affiliated advisors is difficult to detect and deter and could harm our
business, results of operations or financial condition.
Misconduct by our employees and affiliated advisors could result in violations of law, regulatory sanctions and/or serious
reputational or financial harm. Misconduct can occur in each of our businesses and could include: binding us to
transactions that exceed authorized limits; hiding unauthorized or unsuccessful activities resulting in unknown and
unmanaged risks or losses; improperly using, disclosing or otherwise compromising confidential information; recommending
transactions that are not suitable; engaging in fraudulent or otherwise improper activity; engaging in unauthorized or
excessive trading to the detriment of customers; or otherwise not complying with laws, regulations or our control
procedures.
We cannot always deter misconduct by our employees and affiliated advisors, and the precautions we take to prevent and
detect this activity may not be effective in all cases. Preventing and detecting misconduct among our franchisee advisors
who are not employees of our company present additional challenges. We cannot also assure that misconduct by our
employees and affiliated advisors will not lead to a material adverse effect on our business, results of operations or
financial condition.
Legal and regulatory actions are inherent in our businesses and could result in financial losses or harm our
businesses.
We are, and in the future may be, subject to legal and regulatory actions in the ordinary course of our operations, both
domestically and internationally. Various regulatory and governmental bodies have the authority to review our products and
business practices and those of our employees and independent financial advisors and to bring regulatory or other legal
actions against us if, in their view, our practices, or those of our employees or affiliated advisors, are improper. Pending
legal and regulatory actions include proceedings relating to aspects of our businesses and operations that are specific to
us and proceedings that are typical of the industries and businesses in which we operate. Some of these proceedings have
been brought on behalf of various alleged classes of complainants. In certain of these matters, the plaintiffs are seeking
large and/or indeterminate amounts, including punitive or exemplary damages. See Item 3 of this Annual Report on
Form 10-K — ‘‘Legal Proceedings.’’ In or as a result of turbulent times such as those we have experienced, the volume of
claims and amount of damages sought in litigation and regulatory proceedings generally increase. Substantial legal liability
in current or future legal or regulatory actions could have a material adverse financial effect or cause significant
reputational harm, which in turn could seriously harm our business prospects.
A downgrade or a potential downgrade in our financial strength or credit ratings could adversely affect our
financial condition and results of operations.
Financial strength ratings, which various ratings organizations publish as a measure of an insurance company’s ability to
meet contractholder and policyholder obligations, are important to maintain public confidence in our products, the ability to
market our products and our competitive position. A downgrade in our financial strength ratings, or the announced
potential for a downgrade, could have a significant adverse effect on our financial condition and results of operations in
many ways, including: reducing new sales of insurance products, annuities and investment products; adversely affecting
our relationships with our affiliated advisors and third-party distributors of our products; materially increasing the number or
amount of policy surrenders and withdrawals by contractholders and policyholders; requiring us to reduce prices for many
of our products and services to remain competitive; and adversely affecting our ability to obtain reinsurance or obtain
reasonable pricing on reinsurance.
A downgrade in our credit ratings could also adversely impact our future cost and speed of borrowing and have an adverse
effect on our financial condition, results of operations and liquidity.
In view of the difficulties experienced recently by many financial institutions, including our competitors in the insurance
industry, the ratings organizations have heightened the level of scrutiny that they apply to such institutions and have
requested additional information from the companies that they rate. They may increase the frequency and scope of their
credit reviews, adjust upward the capital and other requirements employed in the ratings organizations’ models for
maintenance of ratings levels, or downgrade ratings applied to particular classes of securities or types of institutions.
Ratings organizations may also become subject to tighter laws and regulations governing ratings, which may in turn impact
ratings assigned to financial institutions.
We cannot predict what actions rating organizations may take, or what actions we may take in response to the actions of
rating organizations, which could adversely affect our business. As with other companies in the financial services industry,
our ratings could be changed at any time and without any notice by the ratings organizations.
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