What changed in this filing

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Item 1A. Risk Factors

2023-02-17 compared with 2022-02-18 · 66 added, 67 removed, 194 unchanged (41% of the section changed)

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Our financial results depend on our Affiliates’ receipt of asset- and performance-based fees, which may vary substantially from year to year.

Our Affiliates’ ability to maintain current fee levels depends on a number of factors, including our Affiliates’ investment performance, as well as competition and trends in the asset management industry, including investor demand for passively-managed products, including exchange traded funds, that typically carry lower fee rates, or preferences for other developing strategies or trends.

Our Affiliates’ ability to maintain current fee levels depends on a number of factors, including our Affiliates’ investment performance, as well as competition and trends in the investment management industry, such as investor demand for passively-managed products, including exchange traded funds, that typically carry lower fee rates, or preferences for other developing strategies or trends.

Further, different types of assets under management can generate different ratios of asset-based fees to assets under management (“asset-based fee ratio”), based on factors such as the investment strategy and the type of client.

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The total level of our assets under management generally or with respect to particular products or Affiliates could be adversely affected by conditions outside of our control, including:

• a decline in the market value of our assets under management, due to declines or heightened volatility in the capital markets, fluctuations in foreign currency exchange rates and interest rates, inflation rates or the yield curve, and other market factors;

• changes in investor risk tolerance or investment preferences, which could result in investor allocations away from return-oriented strategies offered by our Affiliates;

• our Affiliates’ ability to attract and retain client assets and market products and services, which may be impacted by investment performance, client relationships, demand for product and service offerings, including ESG strategies or products addressing other developing trends, and the prices of securities generally;

• a decline in the market value of our assets under management, due to declines or heightened volatility in the capital markets, fluctuations in foreign currency exchange rates and interest rates, the current inflationary environment, changes in the yield curve, and other market factors;

• changes in investor risk tolerance or investment preferences, which could result in investor allocations away from strategies and products offered by our Affiliates;

• our Affiliates’ ability to attract and retain client assets and market products and services, which may be impacted by investment performance, client relationships, demand for product and service offerings, their continued development of products to meet the changing demands of investors, and the prices of securities generally;

• global economic conditions, which may be exacerbated by changes in the equity or debt markets;

• financial crises, political or diplomatic developments, public health crises, such as pandemics, trade wars, social or civil unrest, insurrection, war, terrorism, natural disasters, or risks associated with global climate change;

• financial crises, political or diplomatic developments in the U.S.

or globally, including rising trade tensions between the U.S.

and China, pandemics or other public health crises, such as a potential resurgence of COVID-19 or another similar highly infectious or contagious disease, trade wars, social or civil unrest, insurrection, war, including the

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ongoing conflict between Russia and Ukraine which has significantly impacted the global economy and financial markets, terrorism, natural disasters, or risks associated with global climate change;

• other factors that are difficult to predict.

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The success of our business depends on earning and maintaining the trust and confidence of our Affiliates and our stockholders, our ability to compete for future investment opportunities, and our and our Affiliates’ reputations among existing and potential clients.

Our and our Affiliates’ reputations are critical to our business and could be impacted by events that may be difficult or impossible to control, and costly or impossible to remediate.

For example, alleged or actual failures by us, our Affiliates or our respective employees to comply with applicable laws, rules or regulations, errors in our public reports, cyber-attack or data breach incidents, expectations and perceptions of our or our Affiliates’ ESG practices or human capital management, threatened or actual litigation against us, any of our Affiliates or our respective employees, or the public announcement and potential publicity surrounding any of these issues, even if inaccurate, satisfactorily addressed, or if no violation or wrongdoing actually occurred, could adversely impact our or our Affiliates’ reputations and their relationships with clients, our relationships with our Affiliates, and our ability to negotiate agreements with new independent investment firms, any of which could have an adverse effect on our financial condition and results of operations.

The asset management industry is highly competitive.

Our Affiliates compete with a broad range of domestic and foreign investment management firms, including public, private and client-owned investment advisers;

firms managing passively-managed products, including exchange traded funds, as well as other firms managing return-oriented strategies;

Our and our Affiliates’ reputations are critical to our business and could be impacted by events that may be difficult or impossible to control, and costly or impossible to remediate, including alleged or actual failures by us, our Affiliates or our respective employees to comply with applicable laws, rules or regulations, errors in our public reports, fund liquidity or valuation issues including with respect to illiquid assets within private markets funds of certain of our Affiliates, cyber-attack or data breach incidents, or any threatened or actual litigation against us, any of our Affiliates or our respective employees, or a perceived or actual conflict between us and any of our Affiliates or among our Affiliates.

Further, stakeholder groups have increasingly expressed divergent views on a range of environmental, social, and governance (“ESG”) matters, and our or certain of our Affiliates’ related investments or business practices could be perceived negatively.

Any of the foregoing events, or the public announcement and potential publicity surrounding these issues, even if inaccurate, satisfactorily addressed, or if no violation or wrongdoing actually occurred, could adversely impact our Affiliates’ reputations and their relationships with clients, our relationships with our Affiliates, and our ability to negotiate agreements with new independent investment firms, any of which could have an adverse effect on our reputation, our financial condition and results of operations, or the market price of our common stock.

The investment management industry is highly competitive.

Our Affiliates compete with numerous investment management firms globally, including public, private and client-owned investment advisers;

firms managing passively-managed products, including exchange traded funds;

firms associated with securities broker-dealers, financial institutions, insurance companies, private equity firms, sovereign wealth funds;

and other entities.

These firms may have significantly greater financial, technological, and marketing resources, captive distribution and assets under management, and many of these firms offer an even broader array of products and services in particular investment strategies.

These firms may also compete by seeking to capitalize on a trend towards institutions consolidating the number of investment managers they work with.

Competition from these firms may reduce the fees that our Affiliates can obtain for investment management services, or could impair our Affiliates’ ability to attract and retain client assets.

We believe that our Affiliates’ ability to compete effectively with other firms depends upon our Affiliates’ strategies, including ESG strategies or products addressing other developing trends, investment performance, reputations, client relationships, fee structures, client-servicing capabilities, and the marketing and distribution of their investment strategies, among other factors.

We believe that our Affiliates’ ability to compete effectively with other firms depends upon the performance of our Affiliates’ investment strategies, the applicability of products to meet client objectives and preferences, and the continued development of strategies and products to meet the evolving needs and demands of investors, as well as our Affiliates’ reputations, client relationships, fee structures, client-servicing capabilities, and the marketing and distribution of their investment strategies, among other factors.

See “Competition” in Item 1.

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If our Affiliates’ clients terminate their investment management contracts or withdraw a substantial amount of assets, it is likely to harm our results of operations.

In addition, investment management contracts with mutual funds or other retail products are subject to annual approval by the fund’s board of directors.

In addition, investment management contracts with mutual funds or other similar products are subject to annual approval by the fund’s board of directors.

We may need to raise additional capital in the future, and existing or future resources may not be available to us in sufficient amounts or on acceptable terms.

While we believe that our existing cash resources and cash flow from operations will be sufficient to meet our working capital needs for normal operations for the foreseeable future, our continuing acquisitions of interests in independent investment firms and our other strategic initiatives may require additional capital.

Further, we have significant purchase obligations relating to Affiliate equity interests, and it is difficult to predict the frequency and magnitude of these purchases.

As of December 31, 2021, the current redemption value relating to Affiliate equity purchase obligations was presented within Redeemable non-controlling interests on our Consolidated Balance Sheets and was $673.9 million, which includes $25.0 million of consolidated Affiliate sponsored investment products primarily attributable to third-party investors.

Further, we have significant purchase obligations

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relating to Affiliate equity interests, and it is difficult to predict the frequency and magnitude of these purchases.

As of December 31, 2022, the current redemption value relating to Affiliate equity interests was $489.9 million, of which $465.4 million was presented within Redeemable non-controlling interests (including $20.1 million of consolidated Affiliate sponsored investment products primarily attributable to third-party investors), and $24.5 million was presented as Other liabilities.

See “Liquidity and Capital Resources-Affiliate Equity” in Item 7 and Notes 17 and 18 of the Consolidated Financial Statements.

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Market risk management activities may adversely affect our liquidity and results of operations.

From time to time, we and our Affiliates seek to offset exposure to changes in interest rates, foreign currency exchange rates, and markets by entering into derivative financial instruments.

Cash management transactions, capital markets financings, and certain investments or other transactions may create exposure for us or our Affiliates to changes in interest rates, foreign currency exchange rates, marketable securities, and markets, which we or our Affiliates may seek to offset by entering into derivative financial instruments.

See Note 7 of the Consolidated Financial Statements.

The scope of these risk management activities is selective and varies based on the level and volatility of interest rates, foreign currency exchange rates, and other changing market conditions.

The scope of these risk management activities is selective and varies based on the level and volatility of interest rates, foreign currency exchange rates, applicable marketable securities, and other changing market conditions.

We and our Affiliates do not seek to hedge exposure to all market risks, which means that exposure to certain market risks is not limited.

Further, the use of derivative financial instruments does not entirely eliminate the possibility of fluctuations in the value of the underlying position or prevent losses if the value of the position declines, and also can limit the opportunity for gain if the value of the position increases.

Further, the use of derivative financial instruments does not entirely eliminate the possibility of

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fluctuations in the value of the underlying position or prevent losses if the value of the position declines, and also can limit the opportunity for gain if the value of the position increases.

There can be no assurance that our or our Affiliates’ derivative financial instruments will meet their overall objective or that we or our Affiliates will be successful in entering into such instruments in the future.

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For example, if our or our Affiliates’ counterparties fail to honor their obligations in a timely manner, including any obligations to return posted collateral, our liquidity and results of operations could be adversely impacted.

The replacement of benchmark indices, including the London Interbank Offered Rate (“LIBOR”), introduces a number of risks for us, our Affiliates and their clients, and for the global asset management industry more broadly.

Financial benchmarks have been the subject of national, international, and other regulatory guidance and reforms.

As of the end of 2021, LIBOR has been discontinued for certain currency settings, including all sterling and euro settings, and is expected to be discontinued for U.S.

dollar settings by June 2023 and replaced with the Secured Overnight Financing Rate.

There remains uncertainty as to the timing of the remaining transition, the performance of replacement rates, and the performance of LIBOR during the transition period.

These changes and uncertainties, including potential changes in the valuation of financial instruments linked to benchmark indices, could impact Affiliate sponsored investment products, investments, derivatives or other instruments, and may result in pricing, operational and legal implementation risks.

Further, the changes could result in an increase in our or our Affiliates’ debt service costs.

These changes and uncertainties in benchmark indices may have an adverse effect on our financial condition and results of operations.

The ongoing COVID-19 pandemic, or an outbreak of another highly infectious or contagious disease, could adversely affect our business, financial condition and results of operations.

As of the date of this Form 10-K, the outbreak of COVID-19, which the World Health Organization declared a Public Health Emergency of International Concern in early 2020, is ongoing.

This pandemic has adversely impacted the global economy and contributed to significant volatility in equity and debt markets.

Over the course of the pandemic, many jurisdictions instituted quarantines, imposed limitations on travel, and restricted access to offices and public venues, some of which are ongoing or may reoccur, and many businesses implemented similar precautionary measures.

Such measures, as well as the general uncertainty surrounding the containment and impact of COVID-19, have created significant disruption in economic activity.

These developments, including the duration, spread, and severity of the pandemic, the effectiveness of vaccines, the terms and duration of restrictions or limitations on travel and access to offices and public venues, and the impact on the global economy and financial markets, as well as the extent of the impact on us and our Affiliates, remain difficult to predict and will depend on a number of factors, including actions taken by governmental authorities and other third parties that are not within our control.

If financial markets become depressed for a prolonged period as a result of COVID-19 or another pandemic or public health crisis, our assets under management, aggregate fees, and earnings could be adversely affected and our intangible assets could become impaired.

These developments could also increase our costs of capital or reduce the availability of credit, adversely change the interest rates or credit ratings applicable to us, or adversely impact our ability to make investments in independent investment firms and to pursue other strategic partnerships.

Additionally, although we maintain contingency plans for pandemics and we and our Affiliates have remained fully operational throughout the pandemic, the further spread of COVID-19, or an outbreak of another contagious disease, could also impact the availability of key personnel necessary to conduct our or our Affiliates’ businesses or the business and operations of third parties that perform critical services for our or our Affiliates’ businesses.

These factors and others relating to the COVID-19 pandemic, or of another highly infectious or contagious disease, could adversely affect our business, financial condition, and results of operations, or cause volatility in the market price of our common stock.

RISKS RELATED TO OUR STRATEGY AND OUR STRUCTURED PARTNERSHIPS WITH AFFILIATES

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In addition to direct competition on particular prospects, these firms can also negatively impact the volume and value of transactions more broadly.

Further, our long-term innovative partnership approach with our Affiliates is designed to provide succession planning and enhanced equity incentives for management equity owners, and the management of some target firms may prefer terms and structures offered by our competitors.

The success of our investments depends on our and our Affiliates’ ability to grow their businesses and carry out their management succession plans.

In addition, our investments involve a number of risks, including the existence of unknown liabilities that may arise after making an investment, some of which may depend upon factors that are not under our control.

We may not be successful in making investments in new firms or maintaining existing investments, and any firms that we do invest in may not have favorable results or performance following our investment, which could have an adverse effect on our financial condition and results of operations.

Further, our innovative partnership approach with our Affiliates is designed to enhance our Affiliates’ ability to achieve their long-term strategic objectives, while preserving their unique entrepreneurial cultures, investment independence, and operational autonomy in managing their businesses, and the management of some target firms may prefer terms and structures offered by our competitors.

We may not be successful in making investments in new firms or maintaining existing investments, and any firms that we do invest in may not have favorable results or performance following our initial investment or any subsequent investment, which could have an adverse effect on our financial condition and results of operations.

Our investments involve a number of risks, including the existence of unknown liabilities that may arise after making an investment, some of which may depend upon factors that are not under our control.

Further, the consummation of our announced investments is generally subject to a number of closing conditions, contingencies and approvals, including, but not limited to, obtaining certain consents of the independent investment firm’s clients and applicable regulatory approvals.

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This type of partnership interest allows us to benefit from any increase in revenue or any decrease in the agreed-upon expenses, but also exposes us to any decrease in revenue or any increase in such expenses.

The degree of our exposure to expenses from these structured partnership interests varies by Affiliate and includes Affiliates in which we fully share in the expenses of the business.

The degree of our exposure to agreed-upon expenses from these structured partnership interests varies by Affiliate and includes several Affiliates in which we fully share in the expenses of the business.

In these types of structures, we may have limited or no ability to control the level of expenses at the Affiliate, and our distributions generally do not have priority.

Further, the impact of Affiliate expenses on our earnings and our stock price could increase if the portion of our earnings derived from such Affiliates increases.

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As a result of these factors, unanticipated changes in revenue, operating expenses, or other commitments at any of our Affiliates could leave the Affiliate with a shortfall in remaining funds for distribution to us or Affiliate management, or for funding their operations.

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In some cases, this could result in the full divestment of our interest to Affiliate management or to a third-party, or in our acquisition of all of the equity interests of the Affiliate.

In addition, certain of our Affiliates accounted for under the equity method have customary rights in certain circumstances to restructure or sell a majority interest in their firm

to a third-party and to cause us to participate in such restructuring or sale.

Any such changes could have an adverse impact on our financial condition and results of operations.

In addition, certain of our Affiliates accounted for under the equity method have customary rights in certain circumstances to restructure or sell their interests in their firm to a third-party, which could be through a direct majority or minority sale transaction, a private or public offering, or otherwise, and to cause us to participate in such restructuring or sale, which could be on terms that we view as less favorable than an alternative transaction or to retaining our interest.

Any such transactions or changes, or disputes in relation to such transactions or changes which do not resolve in our favor, could have an adverse impact on our financial condition and results of operations.

We and our Affiliates rely on certain key personnel and cannot guarantee their continued service.

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Equity markets and our common stock have been volatile.

The market price of our common stock has experienced and may continue to experience volatility, and the broader equity markets have experienced and may continue to experience significant price and volume fluctuations as a result of the COVID-19 pandemic or other factors.

In addition, announcements of our financial and operating results or other material information, including changes in net client cash flows and assets under management, changes in our financial guidance or our failure to meet such guidance, our new investments activity, changes in general conditions in the economy or the financial markets, perceptions regarding our ESG profile, and other developments affecting us, our Affiliates or our competitors, as well as geopolitical, social, regulatory, capital markets, economic, and business factors unrelated to us, could cause the market price of our common stock to fluctuate substantially.

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In addition, announcements of our financial and operating results or other material information, including changes in net client cash flows and assets under management, changes in our financial guidance or our failure to meet such guidance, our new investments activity, changes in general conditions in the economy or the financial markets, perceptions regarding our ESG profile, and other developments affecting us, our Affiliates or our competitors, as well as geopolitical, social, regulatory, capital markets, economic, pandemics, and other factors unrelated to us, could cause the market price of our common stock to fluctuate substantially.

The sale or issuance of substantial amounts of our common stock, or the expectation that such sales or issuances will occur, could adversely impact the price of our common stock.

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In connection with our financing activities, we have issued junior convertible trust preferred securities and entered into an equity distribution program, either of which may result in the issuance of our common stock upon the occurrence of certain events.

We also have exercisable options outstanding and unvested restricted stock that have been awarded under our share-based incentive plans.

We also have outstanding option and restricted stock awards that have been granted under our share-based incentive plans.

Additionally, we have the right to settle certain Affiliate equity purchase obligations with shares of our common stock.

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Further, certain of our Affiliates operate regulated businesses in jurisdictions outside of the U.S.

that, in some cases, require regulatory notifications and other filings if a single stockholder acquires an ownership position in the Company exceeding certain specified thresholds, regardless of whether a change in control has occurred for purposes of the Advisers Act or the Investment Company Act.

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Advisers Act or the Investment Company Act.

Such an ownership position could also trigger approvals under FINRA, for Affiliates operating a broker-dealer in the U.S.

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Our and our Affiliates’ businesses are subject to complex and extensive regulation by regulatory and self-regulatory authorities and exchanges in various jurisdictions around the world, which, for our Affiliates and our U.S.

retail distribution subsidiary, include those applicable to investment advisers, as detailed in “Government Regulation” in Item 1.

wealth distribution subsidiary, include those applicable to investment advisers, as detailed in “Government Regulation” in Item 1.

Applicable laws, rules and regulations impose requirements, restrictions, and limitations on our and our Affiliates’ businesses, and can result in significant compliance costs.

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Recently implemented and proposed regulations globally have called for more stringent oversight of the financial services industry in which we and our Affiliates operate.

In the U.S., the new presidential administration has shifted enforcement

priorities under existing regulations, and has been pursuing additional rulemaking, impacting public companies and the financial services industry, including private and public funds, in areas relating to ESG matters and disclosures, data security, and additional asset management disclosure and compliance requirements.

These regulatory developments could adversely affect our and our Affiliates’ businesses, increase compliance costs, require that we or our Affiliates curtail operations or investment offerings, or impact our and our Affiliates’ access to capital and the market for our common stock.

In the U.S., the current presidential administration has shifted enforcement priorities under existing regulations, and has been pursuing additional rulemaking, impacting public companies and the financial services industry, including private and public funds, in areas relating to ESG matters and disclosures, data security risk management and disclosures, share buybacks, and additional asset management disclosure and compliance requirements.

For example, the SEC has proposed new rules for private fund advisers that if enacted, would prohibit seeking reimbursement, indemnification, exculpation, or limitation of liability for breach of fiduciary duty, willful malfeasance, bad faith, negligence, or recklessness in providing services to the fund.

These regulatory developments could adversely affect our and our Affiliates’ businesses, increase compliance costs, require that we or our Affiliates change or curtail operations or investment offerings, or impact our and our Affiliates’ access to capital and the market for our common stock.

Further, in recent years, regulators in the U.S., the UK, and other jurisdictions have expanded rules and devoted greater resources and attention to the enforcement of anti-bribery and anti-money laundering laws, and while we and our Affiliates have developed and implemented policies and procedures designed to comply with these rules, such policies and procedures may not be effective in all instances to prevent violations.

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For example, our and our Affiliates’ businesses may be impacted by the terms of trade agreements negotiated by the UK in connection with its exit from the European Union (the “EU”), which could result in fluctuations in exchange rates, disruptions in the capital markets, changes in investor risk tolerance or investment preferences, potential regulatory shifts resulting from the UK’s status as a third-country with the EU, increased compliance and administrative costs, or other impacts.

These potential impacts are driven in part by ongoing uncertainty that has accompanied the process around the UK’s exit from the EU, including the extent to which the EU will permit reciprocal access to UK firms in the sphere of financial services under so-called “equivalence” arrangements.

Further, regulations in the EU pertaining to integrating ESG topics may materially impact the asset management industry in member states that adopt such legislation.

For example, the EU’s new Sustainable Finance Disclosure Regulation (“SFDR”) requires MiFID firms and AIFMs to take ESG factors into account in their organizational, risk and governance arrangements and are designed to, among other things, establish EU labels for green financial products, clarify managers’ duties regarding sustainability in their investment decisions, and increase disclosure requirements relating to ESG matters including those relating to “greenwashing” (i.e., the holding out of a product as having green or sustainable characteristics where this is not, in fact, the case).

Further, regulations in the EU pertaining to integrating ESG topics may materially impact the investment management industry in member states that adopt such legislation.

For example, the EU’s Sustainable Finance Disclosure Regulation (“SFDR”)

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requires MiFID firms and AIFMs to take ESG factors into account in their organizational, risk and governance arrangements and are designed to, among other things, establish EU labels for green financial products, clarify managers’ duties regarding sustainability in their investment decisions, and increase disclosure requirements relating to ESG matters including those relating to “greenwashing” (i.e., the holding out of a product as having green or sustainable characteristics where this is not, in fact, the case).

Similar regulatory measures may be introduced in other jurisdictions in which we or our Affiliates currently have investments or plan to invest in the future, including in the U.S.

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Our and our Affiliates’ effective tax rates could be affected by a change in the mix of earnings with differing statutory tax rates, changes to our or their existing businesses, and changes in relevant tax, accounting or other laws, regulations, administrative practices, and interpretations.

In the U.S., several tax reform bills and legislative proposals have been introduced under the current presidential administration that would raise the corporate tax rate and implement other reforms.

If these or other similar proposals are ultimately enacted into legislation, they could materially impact our tax provision, deferred tax assets, tax liabilities and effective tax rate.

In the U.S., the Inflation Reduction Act of 2022, which was signed into law in August 2022, contained a number of changes to federal tax laws including a new corporate minimum tax as well as a new excise tax on stock repurchases, neither of which we expect to have a significant impact on our net income and cash flows, but which could impact future decisions on how to return value to stockholders in the most efficient manner.

If further tax reform proposals are introduced in the U.S., they could materially impact our tax provision, deferred tax assets, tax liabilities and effective tax rate.

Further, a portion of our earnings is from outside of the U.S., and the foreign government agencies in jurisdictions in which we and our Affiliates do business continue to focus on the taxation of multinational companies, and could implement changes to their tax laws.

For example, changes in the tax laws of foreign jurisdictions could arise as a result of the base erosion and profit shifting (“BEPS”) project undertaken by the Organization for Economic Co-operation and Development (“OECD”), which includes recommendations

that may be adopted in various jurisdictions in which we and our Affiliates do business.

Any changes to federal, state or foreign tax laws, regulations, accounting standards or administrative practices, or the release of additional guidance, interpretations or other information, could impact our estimated effective tax rate and overall tax expense, as well as our earnings estimates, and could result in adjustments to our treatment of deferred taxes, including the realization or value thereof, or in unanticipated additional tax liabilities, any of which could have an adverse effect on our business, financial condition, and results of operations.

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however, tax authorities may disagree with certain positions we have taken or may take, and may assess additional taxes and/or penalties and interest.

In the U.S., the Inflation Reduction Act included significant budget increases for tax audit and enforcement, and similar trends have developed in foreign jurisdictions.

There can be no assurance that we will accurately predict the outcomes of any examinations and the actual outcomes could have an adverse impact on our financial condition and results of operations.

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forms) of which we, or entities controlled by us, are the managing member or general partner (or equivalent).

Consequently, to the extent that any of these Affiliates incur liabilities or expenses that exceed their ability to pay for them, we may be directly or indirectly liable for their payment.

Consequently, to the extent that any of

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these Affiliates incur liabilities or expenses that exceed their ability to pay for them, we may be directly or indirectly liable for their payment.

Similarly, an Affiliate’s payment of distributions to us may be subject to claims by potential creditors, and an Affiliate may default on distributions that are payable to us.

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Further, we also conduct distribution, sales, and marketing activities through our U.S.

retail distribution subsidiary and our global distribution subsidiaries, to extend the reach of our Affiliates’ own business development efforts, and any liability arising in connection with these activities, whether as a result of our own actions or the actions of our participating Affiliates, could result in direct liability to us.

wealth distribution subsidiary and our global distribution subsidiaries, to extend the reach of our Affiliates’ own business development efforts, and any liability arising in connection with these activities, whether as a result of our own actions or the actions of our participating Affiliates, could result in direct liability to us.

Accordingly, we and our Affiliates may face various claims, litigation, or complaints from time to time, and we cannot predict the eventual outcome of such matters, some of which may be resolved in a manner unfavorable to us or our Affiliates, or whether any such matters could become material to a particular Affiliate or us in any reporting period.

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Additionally, although we and our Affiliates have systems and practices in place to monitor third-party service providers, such third parties are subject to similar risks.

are inconsistent with our or their controls, policies, and procedures, and which may be harder to monitor in remote work environments.

We and our Affiliates, as well as our respective service providers, are also subject to the risk that employees or contractors, or other third parties, may deliberately seek to circumvent established controls to commit fraud or act in ways that are inconsistent with our or their controls, policies, and procedures, and which may be harder to monitor in remote work environments.

The financial and reputational impact of control failures can be significant.

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Further, we and our Affiliates rely on third parties for certain aspects of our respective businesses, including financial intermediaries, providers of technology infrastructure, and other service providers such as broker-dealers, custodians, administrators and other agents, as well as accounting, legal, and other professional advisors, and these parties are susceptible to similar risks.

Although we and our Affiliates take protective measures and endeavor to modify them as circumstances warrant, computer systems, software, networks, and mobile devices may be vulnerable to cyber-attacks, data privacy or security breaches, ransomware, social engineering, unauthorized access, theft, misuse, computer viruses, or other malicious code and other events that could have a security impact.

Further, although we and our Affiliates have systems and practices in place to monitor the third parties on whom we and our Affiliates rely, such third parties may have similar vulnerabilities and may lack the necessary infrastructure or resources, or may otherwise fail, to adequately protect against or respond to any cyber-attacks, data breaches, or other incidents.

Although we and our Affiliates take protective measures and endeavor to modify them as circumstances warrant, computer systems, software, internal and cloud-based networks, and mobile devices may be vulnerable to cyber-attacks, data privacy or security breaches, phishing schemes and related fraud attempts, ransomware, social engineering, unauthorized access, theft, misuse, computer viruses, or other malicious code and other events that could have a security impact.

Further, although we and our Affiliates have systems and practices in place to monitor the third parties on whom we and our Affiliates rely, such third parties, including those providing cloud-based network services, may have similar vulnerabilities and may lack the necessary

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infrastructure or resources, or may otherwise fail, to adequately protect against or respond to any cyber-attacks, data breaches, or other incidents.

If any such events occur, it could jeopardize confidential, proprietary, or other sensitive information of ours, our Affiliates and our respective clients, employees or counterparties that may be stored in, or transmitted through, internal or third-party computer systems, networks, and mobile devices, or could otherwise cause interruptions or malfunctions in our and our Affiliates’ operations or those of our respective clients or counterparties, or in the operations of third parties on whom we and our Affiliates rely.

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Further, human errors may occur from time to time at our third-party service providers’ staff or among our or our Affiliates’ employees, which can lead to or exacerbate security vulnerabilities or attacks.

The increasing frequency and sophistication of these cyber threats, along with the recent shift to work-from-home environments and the increased use of personal mobile and computing technologies and third-party web conferencing services, have increased exposures to these security-related risks.

The increasing frequency and sophistication of these cyber threats, including in foreign jurisdictions in which we and our Affiliates operate, along with the continued reliance on work-from-home environments, personal mobile and computing technologies, and third-party web conferencing services, have increased exposures to these security-related risks.

As a result, we or our Affiliates could experience disruption, significant losses, increased costs, reputational harm, regulatory actions, or legal liability, any of which could have an adverse effect on our financial condition and results of operations.

We or our Affiliates may be required to spend significant additional resources to modify protective measures or to investigate and remediate vulnerabilities or other exposures, and may be subject to litigation, regulatory investigations, and potential fines, and financial losses that are either not insured against fully or not fully covered through any insurance that we or our Affiliates maintain.

Additionally, given our business model of providing our Affiliates with operational autonomy in managing their businesses, we do not control, and may have limited involvement in, the design, oversight, and maintenance of their technology systems and networks, as well as in the identification of or response to any cyber-attacks, data breaches, or other incidents.

Further, government and regulatory oversight of data privacy in particular has been growing in recent years, including through the EU’s General Data Protection Regulation and the California Consumer Privacy Act, resulting in heightened data security and handling requirements, increased fines, and expanded incident response and reporting obligations.

Recent well-publicized security breaches at other companies have exemplified security-related vulnerabilities, and may lead to further government and regulatory scrutiny and heightened security requirements.

More recently, the SEC proposed new rules related to cybersecurity risk management for public companies and registered investment advisers, which may result in increased disclosure obligations and liabilities related to our and our Affiliates’ technology systems and networks.

and in other jurisdictions in which we and our Affiliates operate.

Unresolved Staff Comments

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors