Ameriprise 2012 Annual Report Download - page 48

For more information regarding DAC, see Part II, Item 7 of this Annual Report on Form 10-K under the heading
‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies —
Deferred Acquisition Costs and Deferred Sales Inducement Costs’’ and ‘‘Management’s Discussion and Analysis of
Financial Condition and Results of Operations — Recent Accounting Pronouncements.’’
Misconduct by our employees and advisors is difficult to detect and deter and could harm our business, results
of operations or financial condition.
Misconduct by our employees and 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 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 advisors will not lead to a material adverse effect on our business, results of operations or financial condition.
A failure to protect our reputation could adversely affect our businesses.
Our reputation is one of our most important assets. Our ability to attract and retain customers, investors, employees and
advisors is highly dependent upon external perceptions of our company. Damage to our reputation could cause significant
harm to our business and prospects and may arise from numerous sources, including litigation or regulatory actions, failing
to deliver minimum standards of service and quality, compliance failures, any perceived or actual weakness in our financial
strength or liquidity, unethical behavior and the misconduct of our employees, advisors and counterparties. Negative
perceptions or publicity regarding these matters could damage our reputation among existing and potential customers,
investors, employees and advisors. Adverse developments with respect to our industry may also, by association, negatively
impact our reputation or result in greater regulatory or legislative scrutiny or litigation against us.
Our reputation is also dependent on our continued identification of and mitigation against conflicts of interest. As we have
expanded the scope of our businesses and our client base, we increasingly have to identify and address potential conflicts
of interest, including those relating to our proprietary activities and those relating to our sales of non-proprietary products
from manufacturers that have agreed to provide us marketing, sales and account maintenance support. For example,
conflicts may arise between our position as a provider of financial planning services and as a manufacturer and/or
distributor or broker of asset accumulation, income or insurance products that one of our advisors may recommend to a
financial planning client. We have procedures and controls that are designed to identify, address and appropriately disclose
perceived conflicts of interest. However, identifying and appropriately addressing conflicts of interest is complex, and our
reputation could be damaged if we fail, or appear to fail, to address conflicts of interest appropriately.
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.
Breaches of security or interference with our technology infrastructure could harm our business.
Our business is reliant upon technology systems and networks, including systems and networks managed by third parties,
to process, transmit and store information and to conduct many of our business activities and transactions with our clients,
advisors, vendors and other third parties. We are also subject to certain federal and state regulations that require us to
establish and maintain policies and procedures designed to protect sensitive client information. Maintaining the integrity of
our systems and networks is critical to the success of our business operations, including the retention of our advisors and
clients, and to the protection of our proprietary information and our clients’ personal information. To date, we have not
experienced any material breaches of or interference with our systems and networks, however, we routinely encounter and
address such threats, including an increasing frequency of phishing scams, introductions of malware and unauthorized
payment requests. Any such breaches or interference by third parties or by our advisors or employees that may in the
future occur could have a material adverse impact on our business, financial condition or results of operations.
We have implemented and maintain security measures designed to protect against breaches of security and other
interference with our systems and networks resulting from attacks by third parties, including hackers, and from employee
or advisor error or malfeasance. We also require third-party vendors, who in the provision of services to us are provided
with or process information pertaining to our business or our clients, to meet certain information security standards.
Changes in our client base, the mix of assets under management or administration and business model or technology
platform changes, such as an evolution to accommodate mobile computing, may also require corresponding changes in
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