Ameriprise 2013 Annual Report Download - page 49

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, including the misappropriation of funds; 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, technological, cyber-security, or other security breaches resulting in improper disclosure of client or
employee personal information, 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.
Our operational systems and networks have been, and will continue to be, subject to evolving cybersecurity or
other technological risks, which could result in the disclosure of confidential client information, loss of our
proprietary information, damage to our reputation, additional costs to us, regulatory penalties and other adverse
impacts.
Our business is reliant upon internal and third party technology systems and networks to process, transmit and store
information, including sensitive client and proprietary information, and to conduct many of our business activities and
transactions with our clients, advisors, vendors and other third parties. Maintaining the integrity of these 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. For example, in 2013 we and other financial institutions experienced distributed denial of service attacks intended
to disrupt our clients’ online access. While we were able to detect and respond to these incidents without loss of client
assets or information, we have since implemented additional security capabilities and will continue to assess our ability to
monitor and respond to such threats. In addition to the foregoing, our experiences with cybersecurity and technology
threats have included phishing scams, introductions of malware, attempts at electronic break-ins, and unauthorized
32