Ameriprise 2012 Annual Report Download - page 36

foreign government agencies or regulatory bodies and U.S. and foreign securities exchanges. The costs of complying with
such laws and regulations can be significant, and the consequences for the failure to comply may include civil or criminal
charges, fines, censure, the suspension of individual employees, restrictions on or prohibitions from engaging in certain
lines of business as well as reputational damage.
In 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (‘‘Dodd-Frank Act’’) was enacted into law. The
Dodd-Frank Act called for sweeping changes in the supervision and regulation of the financial services industry designed to
provide for greater oversight of financial industry participants, reduce risk in banking practices and in securities and
derivatives trading, enhance public company corporate governance practices and executive compensation disclosures, and
provide greater protections to individual consumers and investors. Certain elements of the Dodd-Frank Act have since
taken effect, though the details of many provisions remain subject to additional studies and the adoption of final rules by
applicable regulatory agencies. Domestic and international legal and regulatory changes, including those resulting from the
Dodd-Frank Act, have impacted and may in the future impact the manner in which we are regulated and the manner in
which we operate and govern our businesses.
The discussion set forth below provides a general framework of the laws and regulations impacting our businesses. Certain
of our subsidiaries may be subject to one or more elements of this regulatory framework depending on the nature of their
business, the products and services they provide and the geographic locations in which they operate. To the extent the
discussion includes references to statutory and regulatory provisions, it is qualified in its entirety by reference to these
statutory and regulatory provisions.
Broker-Dealer and Securities Regulation
Certain of our subsidiaries are registered with the SEC as broker-dealers under the Securities Exchange Act of 1934
(‘‘Exchange Act’’) and with certain states, the District of Columbia and other U.S. territories. Our broker-dealer subsidiaries
are also members of self-regulatory organizations, including the Financial Industry Regulatory Authority (‘‘FINRA’’), and are
subject to the regulations of these organizations. The SEC and FINRA have stringent rules with respect to the net capital
requirements and the marketing and trading activities of broker-dealers. Our broker-dealer subsidiaries, as well as our
financial advisors and other personnel, must obtain all required state and FINRA licenses and registrations to engage in the
securities business and take certain steps to maintain such registrations in good standing. SEC regulations also impose
notice requirements and capital limitations on the payment of dividends by a broker-dealer to a parent.
Other agencies, exchanges and self-regulatory organizations of which certain of our broker-dealer subsidiaries are
members, and subject to applicable rules and regulations of, include the Commodities Futures Trading Commission
(‘‘CFTC’’), the National Futures Association (‘‘NFA’’) and various stock exchanges. AFSI is registered with the CFTC and is
thus subject to the requirements of the Commodity Exchange Act. AEIS is a member of the Boston Stock Exchange and is
a stockholder in the Chicago Stock Exchange. In addition, certain subsidiaries may also be registered as investment
advisers or insurance agencies and subject to the regulations described in the following sections.
Ameriprise Certificate Company, our face-amount certificate company, is regulated as an investment company under the
Investment Company Act. As a registered investment company, Ameriprise Certificate Company must observe certain
governance, disclosure, record-keeping, operational and marketing requirements. Investment companies are required by
the SEC to adopt and implement written policies and procedures designed to prevent violations of the federal securities
laws and to designate a chief compliance officer. Ameriprise Certificate Company pays dividends to the parent company
and is subject to capital requirements under applicable law and understandings with the SEC and the Minnesota
Department of Commerce (Banking Division).
Ameriprise India Insurance Brokers Services Private Limited (‘‘AIIBSPL’’), an Indian subsidiary, is licensed by India’s IRDA as
a direct insurance broker and is subject to regulation by the IRDA and the Indian Registrar of Companies. AIIBSPL is
subject to various ongoing internal control and compliance policies, capital requirements and statutory audit and reporting
obligations as a condition to maintaining its license. Further, AIIBSPL employees are required to receive training prior to
becoming licensed to provide insurance brokerage services.
Our financial advisors are subject to various regulations that impact how they operate their practices, including those
related to supervision, sales methods, trading practices, record-keeping and financial reporting. As a result of the
Dodd-Frank Act, our financial advisors may in the future become subject to a fiduciary standard of conduct in connection
with their broker-dealer activities that is no less stringent than what is currently applied to investment advisers under the
Investment Advisers Act of 1940 (‘‘Advisers Act’’). In addition, because our independent contractor advisor platform is
structured as a franchise system, we are also subject to Federal Trade Commission and state franchise requirements.
Compliance with these and other regulatory requirements adds to the cost and complexity of operating our business. We
maintain franchise standards and requirements for our franchisees regardless of location. We have made and expect to
continue to make significant investments in our compliance processes, enhancing policies, procedures and oversight to
monitor our compliance with the numerous legal and regulatory requirements applicable to our business.
19