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Item 1A. Risk Factors

2025-02-14 compared with 2024-02-16 · 182 added, 129 removed, 232 unchanged (57% of the section changed)

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There may be additional risks of which we are currently unaware, or which we currently consider immaterial.

Any of these risks could have a material adverse effect on our financial condition, results of operations, and value of our common stock.

Any of these risks could have a material adverse effect on our business, financial condition, results of operations, liquidity, reputation, and value of our common stock.

RISKS RELATING TO OUR BUSINESS AND THE FINANCIAL SERVICES INDUSTRY.

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• Investor Mobility.

Our investors generally may withdraw their funds at any time, without advance notice and with little to no significant penalty.

Our investors may generally withdraw their funds at any time, without advance notice and with little to no significant penalty.

Any redemptions and other withdrawals from, or shifting among, our investment portfolios could reduce our assets under management.

These could be caused by investors reducing their investments in our portfolios in general or in the market segments in which we focus;

investors taking profits from their investments;

and portfolio risk characteristics, which could cause investors to move assets to other investment managers .

taking profits from their investments;

portfolio risk characteristics, which could cause investors to move assets to other investment managers;

and investor and market sentiments.

• Capacity Constraints.

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• Interest Rate Changes.

Investor interest in and the valuation of our fixed income and multi-asset investment portfolios are affected by changes in interest rates.

Investor interest in and the valuation of our fixed income and multi-asset investment portfolios are affected by changes in, as well as uncertainty about interest rates.

• Geo-Political Exposure.

Our managed investment portfolios may have significant investments in markets that are subject to risk of loss from political or diplomatic developments, government policies, wars, conflicts or civil unrest (such as the Russian invasion of Ukraine, the threat that Russia’s military aggression may expand beyond Ukraine, and the recent conflicts in the Middle East), trade wars or tariffs, currency fluctuations, illiquidity and capital controls, and changes in legislation related to ownership limitations.

Our managed investment portfolios may have significant investments in markets that are subject to risk of loss from political or diplomatic developments, government policies, wars, conflicts or civil unrest (such as the Russian invasion of Ukraine, the threat that Russia’s military aggression may expand, and the recent conflicts in the Middle East, including the Israel-Hamas war, and potential escalation of such conflicts), trade wars or tariffs (including those imposed or threatened by the U.S.), currency fluctuations, illiquidity and capital controls, and changes in legislation related to ownership limitations.

A decrease in the value of our assets under management, or an adverse change in their composition, particularly in market segments where our assets are concentrated, could have a material adverse effect on our investment advisory fees and revenues.

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We provide investment advisory, distribution, and other administrative services to collective investment funds under various agreements.

Investment advisory services are provided to each T.

Rowe Price collective investment fund under individual investment management agreements, which can be terminated on short notice.

Investment advisory services are provided to each sponsored investment fund under individual investment management agreements, which can be terminated on short notice.

In addition, the Board of each T.

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Some competitors operate in a different regulatory environment than we do which may give them certain competitive advantages in the investment products and portfolio structures that they offer.

We compete with other providers of investment advisory services primarily based on the availability and objectives of the investment products offered, investment performance, fees and related expenses, and the scope and quality of investment advice and other client services.

Some institutions have proprietary products and distribution channels that make it more difficult for us to compete with them.

Some institutions have proprietary products, distribution channels or technology offerings that make it more difficult for us to compete with them.

In addition, in recent years, there has been continued consolidation in the asset management industry, which continues to alter our competitive landscape, has led to fee compression, and requires us to modify or adapt our product offerings to attract and retain customers.

Substantially all of our investment products are available without sales or redemption fees, which means that investors may be more willing to transfer assets to competing products.

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Business changes may require us to update our processes or technology and may increase risk to meeting our business objectives.

In addition, our existing information systems and technology platforms might not be able to accommodate our

business operations, and the cost of maintaining or upgrading such systems might increase from its current level.

In addition, our existing information systems and technology platforms might not be able to accommodate our business operations, and the cost of maintaining or upgrading such systems might increase from its current level.

If any of these scenarios were to arise, it could disrupt our operations, increase our expenses or result in financial exposure, regulatory inquiry, litigation or reputational damage.

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The quantitative models we use may contain errors, which could result in financial losses or adversely impact product performance and client relationships.

We use various quantitative models to support investment decisions and investment processes, including those related to portfolio management and portfolio risk analysis, as well as those related to client investment or savings advice or guidance.

Any errors in the underlying models or model assumptions could have unanticipated and adverse consequences on our business and reputation.

We use various quantitative models (including ones supported by AI and machine-learning algorithms) to support investment decisions and investment processes, including those related to portfolio management and portfolio risk analysis, as well as those related to client investment or savings advice or guidance.

Any errors in the underlying

models or model assumptions could have unanticipated and adverse consequences on our business and reputation.

Any damage to our reputation could harm our business and lead to a loss of revenues and net income or access to capital.

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Regulatory inquiries and rumors can tarnish or substantially damage our reputation, even if those inquiries are satisfactorily addressed.

Actual or perceived failure to adequately address the ESG expectations, or failure to manage conflicts of interests of our various stakeholders could lead to a tarnished reputation and loss of client assets or harm our access to capital.

Furthermore, ESG issues have been the subject of increased focus by regulators and stakeholders.

Any inability to meet applicable requirements or expectations may adversely impact our reputation.

Additionally, various stakeholders have divergent views on ESG matters, including in the countries in which we operate and invest, as well as states and localities where we serve public sector clients.

These differences increase the risk that any action or lack thereof by us concerning ESG will be perceived negatively by some stakeholders and could adversely impact our reputation and business.

For example, ESG issues have been the subject of increased focus by regulators, clients and other stakeholders.

Various clients and stakeholders have divergent views on ESG matters, with some aiming to increase their exposure to ESG investing and some choosing not to invest in products or strategies with an ESG investment objective, including in the countries in which we operate and invest, as well as states and localities where we serve public sector clients.

These differences pose challenges for us to manage divergent goals and preferences, and increase the risk that any action or lack thereof by us concerning ESG, or any actual or perceived failure to adequately address the ESG expectations will be viewed negatively by some stakeholders, which could adversely impact our reputation and business.

We also communicate certain initiatives and goals for our corporate and investing activities related to ESG matters.

We could be scrutinized or criticized for the scope or nature of any such initiatives or goals, and may not be able to accomplish them within our anticipated timeframe or at all.

Our global presence and investments on behalf of our clients around the world could also lead to heightened scrutiny and criticism in an increasingly fragmented geopolitical landscape.

Misconduct by our employees or third-party service providers could likewise adversely impact our reputation and lead to a loss of client assets.

While we maintain policies, procedures, and controls to reduce the likelihood of unauthorized activities, we are subject to the risk that our associates or third parties acting on our behalf may circumvent controls or act in a manner inconsistent with our policies and procedures.

Misconduct by our personnel or third-party service providers could likewise adversely impact our reputation and lead to a loss of client assets.

While we maintain policies, procedures, and controls to reduce the likelihood of unauthorized activities, we are subject to the risk that our personnel or third parties acting on our behalf may circumvent controls or act in a manner inconsistent with our policies and procedures.

Real or perceived conflicts between our clients’ interests and our own, as well as any fraudulent activity or other exposure of client assets or information, may impair our reputation and subject us to litigation or regulatory action.

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Regulators likewise may commence enforcement actions for violations of such requirements, which could lead to fines and penalties against us.

Any such events could cause our revenues and profitability to decline, and significant errors for which we are

responsible could have a material adverse impact on our reputation, results of operations, financial condition or liquidity.

Any such events could cause our revenues and profitability to decline, and significant errors for which we are responsible could have a material adverse impact on our reputation, results of operations, financial condition or liquidity.

Our alternatives products include investments in private credit, real estate, and equity investments in private companies, which may expose us to new or increased risks and liabilities and to reputational harm.

Our alternatives products include investments in private credit, real estate, and equity investments in private companies, which may expose our investment products, clients and us to new or increased risks and liabilities.

These may include:

• risks related to the potential illiquidity, valuation and disposition of such investments;

• risks related to emerging and less established companies that have, among other things, short operating histories, not yet achieved or sustained profitability, new technologies and products, nascent control functions, quickly evolving markets and limited financial resources;

• credit risks, including interest-rate movements and an issuer’s ability to make principal and interest payments on the debt it issues;

• risks related to investment in “distressed” securities, including abrupt and erratic market movements and above-average price volatility;

• risks associated with a lack of diversification, such that any adverse change in one or a small number of issuers could have a material adverse effect on an investment product or client’s investments;

• risks relating to the use of leverage, including as a result of changes in interest rates or an inability to timely obtain and effectively deploy leverage;

• failures on the part of third-party managers, service providers or sub-contractors appointed in connection with investments or projects to adequately perform their contractual duties or operate in accordance with applicable laws;

• exposure to stringent and complex foreign, federal, state and local laws, ordinances and regulations;

• changes to the supply and demand for properties and/or tenancies;

• risks related to the availability, cost, coverage and other limitations on insurance;

• the financial resources of tenants or loan counterparties;

and contingent liabilities on disposition of investments.

These (and similar) risks may expose our investment products, clients and us, to the extent of our investment in such investment products, to expenses and liabilities, including costs associated with delays or remediation and increased legal or regulatory costs, all of which could impact the returns earned by our investment products and clients.

These risks could also result in direct liability for us by exposing us to losses, regulatory sanctions or litigation, including claims for compensatory or punitive damages.

The occurrence of any such events may expose us to reputational harm, or cause our AUM, revenues and net income to decline.

Our expenses are subject to significant fluctuations that could materially decrease net income.

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mutual funds that are not otherwise paid by the funds, our operating results will be adversely affected.

While we are under no obligation to provide financial support to any sponsored investment products, any financial support provided would reduce capital available for other purposes and may have an adverse effect on revenues and net income.

While we are under no obligation to provide financial support to our investment products, any financial support provided would reduce capital available for other purposes and may have an adverse effect on revenues and net income.

Our hedging strategies utilized to mitigate risk may not be effective, which could impact our earnings.

We employ hedging strategies related to our supplemental savings plan in order to hedge the liability related to the plan.

We employ hedging strategies related to our supplemental savings plan and other incentive plans in order to hedge the liability related to the plans.

In the event that our hedging strategies are not effective, the resulting impact may adversely affect our results of operations, cash flows or financial condition.

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We cannot predict future changes in the tax regulations to which we are subject, and any such changes could have a material impact on our tax liability or result in increased costs of our tax compliance efforts.

investors to view certain investment products less favorably and reduce investor demand for products and services we offer, which could have an adverse effect on our assets under management and revenues.

For example, a financial transaction tax on stocks, bonds and a broad range of financial instruments has been proposed in the United States and the EU.

Additionally, changes in the status of tax deferred investment options, including retirement plans, tax-free municipal bonds, the capital gains and corporate dividend tax rates, and other individual and corporate tax rates could cause investors to view certain investment products less favorably and reduce investor demand for products and services we offer, which could have an adverse effect on our assets under management and revenues.

Examinations and audits by tax authorities could result in additional tax payments for prior periods, which could impact our financial results.

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Increasing competition for these distribution and sales channels as well as regulatory changes and initiatives may cause our distribution costs to rise, could cause further cost increases in the future, or could otherwise negatively impact the distribution of our products.

Mergers, acquisitions, and other ownership or management changes could also adversely impact our relationships with these third-party intermediaries.

Mergers, acquisitions, and other

ownership or management changes could also adversely impact our relationships with these third-party intermediaries.

As a result of these changes, more of our revenues may be concentrated with fewer intermediaries, which may impact our dependence on these intermediaries.

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• causing disruptions in national or global economies that decrease investor confidence and make investment products generally less attractive;

• incapacitating or inflicting losses of lives among our employees;

• incapacitating or inflicting losses of lives among our personnel;

• interrupting our business operations or those of critical service providers or other providers;

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New York City, New York;

and in London, England.

In addition, we maintain offices with associates in many other global locations, including Sydney, Australia;

and London, England.

In addition, we maintain offices with our personnel in many other global locations, including Sydney, Australia;

Tokyo, Japan;

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We also rely to varying degrees on outside service providers for service delivery in addition to technology and disaster contingency support, and we cannot be assured that these service providers will be able to perform in an adequate and timely manner.

If we lose the availability of any associates, or, if we are unable to respond adequately to such an event in a timely manner, we may be unable to service our clients or timely resume our business operations, which could lead to financial losses, a tarnished reputation and loss of clients that could result in a decrease in assets under management, lower revenues, and materially reduced net income, particularly if our responses to such events are less adequate than those of our competitors.

Our business, financial condition, and results of operation may be adversely affected by the coronavirus or other global pandemics.

If we lose the availability of any personnel, or, if we are unable to respond adequately to such an event in a timely manner, we may be unable to service our clients or timely resume our business operations, which could lead to financial losses, a tarnished reputation and loss of clients that could result in a decrease in assets under management, lower revenues, and materially reduced net income, particularly if our responses to such events are less adequate than those of our competitors.

Our business, financial condition, and results of operation may be adversely affected by pandemics, epidemics or disease outbreaks.

Pandemics, epidemics or disease outbreaks, as well as measures enacted to prevent their spread, may create significant volatility, uncertainty and disruption to the global economy and may impact our business, financial condition and results of operations.

For example, the coronavirus pandemic has adversely affected global financial markets and impacted global supply chains.

For example, the coronavirus pandemic adversely affected global financial markets and impacted global supply chains.

Concerns and uncertainty regarding pandemics, epidemics or disease outbreaks could lead to increased volatility in global capital and credit markets, adversely affect our operations, key executives and other personnel, clients, investors, service providers and other vendors, suppliers, and other third parties, and negatively impact our assets under management, revenues, income, business and operations.

Since our revenue is based on the market value and composition of the assets under our management, the impact of such events on global financial markets and our clients’ investment decisions could adversely affect our revenue and operating results.

Furthermore, while we have in place robust and well-established plans for operational resiliency and business continuity that address the potential impact to our associates and our facilities, and a comprehensive suite of technologies which enable our associates to work remotely and conduct business, and to date while we have been successful in navigating these challenges, no assurance can be given that the steps we have taken will continue to be effective or appropriate.

Additionally, we must effectively ensure a safe working environment for associates working onsite in our offices, and adequately manage the post-pandemic transition from remote to onsite or a hybrid working environment.

In the event that our associates become incapacitated by the coronavirus, our business operations may be impacted, which could lead to reputational and financial harm.

Since our revenue is based on the market value and composition of the assets under our management, the impact of such

events on global financial markets and our clients’ investment decisions could adversely affect our revenue and operating results.

Furthermore, while we have in place robust and well-established plans for operational resiliency and business continuity that address the potential impact of pandemics, epidemics or disease outbreaks to our personnel and our facilities, and to date have been successful in navigating the challenges presented by the COVID-19 pandemic, no assurance can be given that the steps we have taken will continue to be effective or appropriate against future pandemics, epidemics or disease outbreaks.

In the event that our personnel become incapacitated by pandemics, epidemics or disease outbreaks, our business operations may be impacted, which could lead to reputational and financial harm.

Our investment income and asset levels may be negatively impacted by fluctuations in our investment portfolio.

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investors taking profits from their investments;

and portfolio risk

characteristics, which could cause investors to move assets to other investment managers.

and portfolio risk characteristics, which could cause investors to move assets to other investment managers.

Poor performance relative to other competing products tends to result in decreased sales and increased redemptions with corresponding decreases in our revenues, which may have a material adverse effect on us.

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Such non-performance could produce a financial loss for us or the portfolios we manage.

In addition, concerns regarding the soundness of other financial services institutions may generate public concerns regarding us or the financial services industry more broadly, which could harm our reputation and adversely affect our results of operations and financial condition, even if the underlying matters impacting other financial institutions are of limited or no direct applicability to us.

We may review and pursue strategic transactions in order to maintain or enhance our competitive position and these could pose risks.

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These initiatives typically involve a number of risks and present financial, managerial and operational challenges to our ongoing business operations.

In addition, acquisitions and related transactions involve risks, including unanticipated problems regarding integration of investor account and investment security recordkeeping, additional or new regulatory requirements, operating facilities and technologies, and new employees;

adverse effects on our earnings in the event acquired intangible assets or goodwill become impaired;

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We may not realize future returns from such investments or any collaborative activities that may develop in the future.

On December 29, 2021, we completed our acquisition of OHA.

Important ongoing integration-related risks, including that the anticipated benefits of the transaction may not be fully realized, or may take longer to realize than expected, or that the integration may cost more or take longer than expected, could adversely impact our operating results.

Furthermore, a significant portion of OHA's revenue is derived from performance fees on investment advisory agreements and carried interest from general partner interests in affiliated private investment funds.

Generally, OHA is entitled to a performance fee and carried interest under these agreements only in cases where the related portfolio investment return exceeds agreed-upon relative or absolute investment return thresholds, and there can be no assurance that these thresholds will be met.

Climate change-related risks could adversely affect our business, products, operations and clients, which may cause our AUM, revenue and earnings to decline.

Our business and those of our clients could be impacted by climate change-related risks.

Climate change-related risks could adversely affect our business, products, operations and clients, which may cause our AUM, revenues and earnings to decline.

Our business and the assets we manage on behalf of clients could be impacted by climate change-related risks.

Climate change may present risk to our business through changes in the physical climate or from the process of transitioning to a lower-carbon economy.

Climate-related physical risks arise from the direct impacts of a changing climate in the short- and long-term.

Such risks may include an increase in the intensity and frequency of extreme weather events, changes in temperature and rising sea level, which may damage infrastructure and facilities, increase our energy costs, negatively impact our workforce, as well as disrupt connectivity or supply chains.

Climate-related physical risks arise from the direct impacts of a changing climate in the short-, medium- and long-term.

Such risks may include an increase in the intensity and frequency of extreme weather events, changes in temperature, rising sea levels and increase of wildfires, which may damage infrastructure and facilities, increase energy costs, negatively impact workforces, as well as disrupt connectivity or supply chains.

Within our investment portfolios, changes in weather patterns around the world can impact companies in which we invest on behalf of our clients.

Weather pattern changes may cause investment professionals to re-evaluate investments in affected companies.

Valuations may be impacted resulting in declines in asset values and potential loss of revenue.

Climate-related transition risks arise from exposure to the transition to a lower-carbon economy through policy, regulatory, technology and market changes.

For instance, new regulations or guidance relating to climate change, as well as the perspectives of stakeholders regarding climate change, may impact our business and reputation, which could increase costs on our business.

Climate-related physical and transition risks could impact us both directly and indirectly through adverse impacts to our clients and the global economy in general, including as a result of interruptions to infrastructure and our operations, declines in asset values and stranded assets, changes in client preferences, increased regulatory and compliance costs and significant business disruptions.

For instance, new regulations and changes in existing regulations may lead to increased compliance costs, enhanced reporting obligations, regulation of existing products and/or services, exposure to litigation, and aggressive or inconsistent levels of regulatory enforcement globally.

Additionally, climate change may influence client preferences by increasing the demand for investment products oriented toward climate change mitigation.

Conversely, a climate-related backlash could negatively impact demand for climate or transition related products.

Climate change may also impact our reputation if we are perceived to fall short of our own corporate commitments or stakeholder expectations.

Any of these risks may have a material adverse effect on our AUM, revenue and earnings.

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Our success depends on our highly skilled personnel, including our portfolio managers, investment analysts, sales and client relationship personnel, technology and operations professionals, and corporate officers, many of whom have specialized expertise and extensive experience in our industry.

Professionals with financial services experience across functional areas are in demand, and we face significant competition for highly qualified employees.

Generally, our associates can terminate their employment with us at any time, with most required to provide little to no notice.

Recently we have adopted more significant notification requirements for certain key positions.

As a result of these new requirements, some employees or candidates may be less willing to continue their employment with us or join our firm.

Professionals with financial services experience across functional areas are in demand, and we face significant competition for highly qualified personnel.

Changes in workplace environment, such as return to office arrangements and remote and hybrid work models, have presented challenges to attracting and retaining talent.

While our personnel can generally terminate their employment with us at any time, with most required to provide little to no notice, we have recently adopted more significant notification requirements for certain key positions, which may cause some personnel or candidates to be less willing to continue their employment with us or join our firm.

We cannot assure that we will be able to attract or retain key personnel.

Due to the global nature of our investment advisory business, our key personnel may have reasons to travel to regions susceptible to higher risk of civil unrest, organized crime or terrorism, and we may be unable to ensure the safety of personnel traveling to these regions.

In addition, due to the global nature of our investment advisory business, our key personnel may have reasons to travel to regions susceptible to higher risk of civil unrest, organized crime or terrorism, and we may be unable to ensure the safety of personnel traveling to these regions.

We have near- and long-term succession planning processes, including programs to develop our future leaders, which are intended to address future talent needs and minimize the impact of losing key talent.

However, in order to retain or replace our key personnel, we may be required to increase compensation, which would decrease net income.

The loss of key personnel could also damage our reputation and make it more difficult to attract and retain employees and investors, and in turn cause our assets under management to decrease, which could have a material adverse effect on our revenues and net income.

The loss of key personnel could also damage our reputation and make it more difficult to attract and retain personnel and investors, and in turn cause our assets under management to decrease, which could have a material adverse effect on our revenues and net income.

TECHNOLOGY RISKS.

We require significant quantities and types of technology to operate our business and would be adversely affected if we or our third party providers fail to maintain adequate and secure technology to conduct or expand our operations or if our technology became inoperative or obsolete.

We depend on significant quantities of technology and, in many cases, highly specialized, proprietary or third-party licensed technology to support our business functions, including among others:

• securities analysis,

• securities trading,

• portfolio management,

• client service,

• accounting and internal financial reporting processes and controls,

• data security and integrity, and

• regulatory compliance and reporting.

All of our technology systems, including those provided or operated by third-party service providers, are vulnerable to disability or failures due to cyberattacks, natural disasters or extreme weather events (which may increase in frequency or intensity as a result of climate change), power failures, acts of war or terrorism, sabotage, coding errors, system outages, and other causes.

An outage, suspension or termination of vendor-provided services, software licenses or related support, upgrades, and maintenance could cause system delays or interruption.

Although we believe we have robust business and disaster recovery plans, if our technology systems, including those provided or operated by third-party service providers, were to fail and we were unable to recover in a timely way, we would be unable to fulfill critical business functions, which could lead to a loss of clients and could harm our reputation.

A technological breakdown or disruption in services could also interfere with our ability to comply with financial reporting and controls and other regulatory requirements, exposing us to regulatory action and liability to our clients.

In addition, our continued success depends on our ability to effectively integrate operations across many systems and/or countries, and to adopt new or adapt existing technologies to meet client, industry, and regulatory demands, including, for example, generative AI technology.

We might be required to make significant capital expenditures to maintain a competitive technology stack.

If we are unable to upgrade our technology stack in a timely fashion, we may lose clients and fail to maintain regulatory compliance, which could affect our results of operations and severely damage our reputation.

A cyberattack or a failure to implement effective information and cybersecurity policies, procedures and capabilities could disrupt operations and cause financial losses.

We are dependent on the effectiveness of the information and cybersecurity policies, procedures and capabilities we maintain to protect our systems and data.

An externally caused data security incident, such as a cyberattack, phishing scam, virus, ransomware attack, denial-of-service attack, or an attack launched from within our systems could compromise the integrity of confidential client or competitive information and materially interrupt our business operations.

In addition, our third-party service providers and other intermediaries, with which we conduct business, could also be subject to cyberattacks or other data security events, and we cannot ensure that such third parties have all appropriate controls in place to protect the integrity and confidentiality of our data that is in their custody or to allow them to continue their business operations, including their services to us, in a timely manner.

There have been increasing numbers of publicized cybersecurity incidents in recent years impacting financial services firms as well as firms in other industries, including incidents of increasing sophistication and scope, all of which have resulted in greater harm.

Our use of third-party service providers could heighten this risk.

Should the technology operations on which we rely be compromised, we may have to make significant investments to upgrade, repair or replace our technology infrastructure or third-party service providers and may not be able to make such investments on a timely basis.

Although we maintain insurance coverage, under terms that we believe are reasonable, prudent and adequate for the purpose of our business, it may be insufficient to protect us against all losses and costs stemming from breaches of security, cyberattacks and other types of unlawful activity, or any resulting disruptions from such events.

We could be subject to losses if we fail to properly safeguard and maintain confidential data or our intellectual property.

As part of our normal operations, we maintain and transmit personal and confidential data about our clients, personnel and other parties, as well as proprietary data and intellectual property relating to our business operations.

Our business operations rely on such data being available as and when needed, and not being subjected to loss or unauthorized access or alteration.

We maintain a system of internal controls designed to provide reasonable assurance that both inadvertent errors and fraudulent activity, including misappropriation of assets, fraudulent financial reporting, and unauthorized access to sensitive or confidential data, is either prevented or detected in a timely manner.

We also leverage cloud-based solutions for the transmission and storage of data.

Our systems, or those of the third-party service providers we use to maintain or transmit such data, could be accessed by unauthorized users or corrupted by computer viruses or other malicious software code.

Additionally, authorized persons could inadvertently or intentionally release or alter confidential or proprietary data.

Any of these types of events could, among other things:

• seriously damage our reputation,

• result in a loss of confidence in our business and products,

• allow competitors access to our proprietary business data,

• materially impair our business operations,

• subject us to liability for a failure to safeguard data of clients, personnel, and other parties,

• result in the termination of contracts by our existing clients,

• subject us to disclosure obligations, regulatory investigations, actions or fines, and potential litigation involving regulators, stockholders, or other members of the public, and

• require significant capital and operating expenditures to investigate and remediate the breach, and organizational costs to mitigate against future incidents.

Furthermore, if any person, including any of our personnel, negligently disregards or intentionally overrides or circumvents our established controls with respect to personal or confidential data, or otherwise mismanages or misappropriates that data, we could be subject to significant monetary damages, regulatory enforcement actions, fines and/or criminal prosecution in one or more jurisdictions.

The recent advancements in and increased use of artificial intelligence (AI) present risks and challenges that may adversely impact our business.

We or our third-party vendors, clients or counterparties have developed, and may continue to develop or incorporate AI technology in certain business processes, services or products.

The development and use of AI present a number of risks and challenges to our business.

The legal and regulatory environment relating to AI is uncertain and rapidly evolving, in the U.S., and internationally, and includes regulation targeted specifically at AI technology, as well as provisions in intellectual property, privacy, consumer protection, employment and other laws applicable to the use of AI.

For example, any failure to properly safeguard and maintain personal data in connection with our use of AI creates risk of us violating privacy laws and regulations in jurisdictions we operate in, and could subject us to disclosure obligations, regulatory investigations, actions or fines, and litigation.

These evolving laws and regulations could require changes in our implementation of AI technology, increase our compliance costs and the risk of non-compliance, and restrict or impede our ability to develop, adopt and deploy AI technologies efficiently and effectively.

AI models, particularly generative AI models, may produce output or take action that is incorrect or outdated, that result in the release of personal, confidential or proprietary information, that reflect biases included in the data on which they are trained or introduced during the training or fine tuning process, that infringe on the intellectual property rights of others, or that is otherwise harmful.

In addition, the complexity of many AI models makes it challenging to understand why they are generating particular outputs.

This limited transparency increases the challenges associated with assessing the proper operation of AI technology, understanding and monitoring the capabilities of the AI technology developed by third parties, and, to that extent, are dependent in part on the manner in which those third parties develop and train their models, including risks arising from the inclusion of any unauthorized material in the training data for their models, and the effectiveness of the steps these third parties have taken to limit the risks associated with the output of their models, matters over which we may have limited visibility.

Any of these risks could expose us to liability or adverse legal or regulatory consequences and harm our reputation and the public perception of our business or the effectiveness of our security measures.

In addition to our use of AI technologies, we are exposed to risks arising from the use of AI technologies by bad actors to commit fraud and misappropriate funds and to facilitate cyberattacks.

Generative AI, if used to perpetrate fraud or launch cyberattacks, could result in losses, liquidity outflows, or other adverse effects at a particular financial institution or exchange.

If our use of AI becomes controversial, we may experience brand or reputational harm, competitive harm, or legal liability.

LEGAL AND REGULATORY RISKS.

Compliance within a complex regulatory environment imposes significant financial and strategic costs on our business, and non-compliance could result in fines and penalties.

Compliance within a complex regulatory and legal environment which continues to evolve imposes significant financial and strategic costs on our business, and non-compliance could result in fines and penalties.

There is uncertainty associated with the regulatory and compliance environments in which we operate.

Our business is subject to extensive and complex, overlapping and/or conflicting, and frequently changing rules, regulations, policies and legal interpretations, around the world.

Additionally, over the past several years the pace

and scope of new rules, regulations, policies and legal interpretations has increased both in the U.S.

and globally, which requires additional resources and expense in order for us to digest and institute process to comply.

If we are unable to maintain compliance with applicable laws and regulations, we could be subject to criminal and civil liability, the suspension of our employees, fines, penalties, sanctions, injunctive relief, exclusion from certain markets, or temporary or permanent loss of licenses or registrations necessary to conduct our business.

A regulatory proceeding, even if it does not result in a finding of wrongdoing or sanctions, could consume substantial amount of time, management attention and expense.

Additionally, over the past several years the pace and scope of new rules, regulations, policies and legal interpretations has increased both in the U.S.

and globally, which requires additional resources and expense in order for us to digest and institute processes to comply.

Furthermore, in recent years several governments have proposed or enacted policies, legislation, and executive actions relating to ESG and DEI initiatives for the private sector.

More recently, interested parties on both sides of the debate have sought to utilize the courts, social media and other means to change the practices of companies.

We communicate certain approaches regarding environmental, social, diversity, and other ESG-related matters in our regulatory filings or in other public disclosures.

We could be criticized for the accuracy or completeness of the disclosure and for the scope or nature of such initiatives or approaches, or for any changes to them over time.

If we are unable to maintain compliance with applicable laws and regulations, we could be subject to criminal and civil liability, the suspension of our personnel, fines, penalties, sanctions, injunctive relief, exclusion from certain markets, or temporary or permanent loss of licenses or registrations necessary to conduct our business.

A regulatory proceeding, even if it does not result in a finding of wrongdoing or sanctions, could consume a substantial amount of time, management attention, and expense.

Any regulatory investigation and any failure to maintain compliance with applicable laws and regulations could severely damage our reputation, adversely affect our ability to conduct business and decrease revenue and net income, and potentially result in complex and costly litigation.

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Actions taken by applicable regulatory or legislative bodies may impact our business activities and increase our costs.

In October 2023, the U.S.

Department of Labor proposed a new rule updating the definition of an investment advice fiduciary under ERISA (“Retirement Security Rule”), which would apply to retirement plans and accounts that comprise a majority of our accounts.

We are monitoring the rulemaki ng process and the potential impact the Retirement Security Rule may have on our business.

• The Commodity Futures Trading Commission ("CFTC") regulation may limit the ability of certain sponsored investment products to use futures, swaps, and other derivatives.

In September 2024, a new rule expanding the definition of, and requirements for, an investment advice fiduciary under ERISA (“Retirement Security Rule”) became effective, which applies to retirement plans and accounts that comprise a majority of our accounts.

We are assessing the impact of the Retirement Security Rule on our business.

• The Commodity Futures Trading Commission ("CFTC") regulations may limit the ability of certain investment products to use futures, swaps, and other derivatives.

We have registered certain subsidiaries with the CFTC, subjecting us to additional regulatory requirements and costs, but also providing us additional flexibility to utilize such products.

Nonetheless, there are still certain limitations on our investment products due to CFTC rules.

• There has been increased global regulatory focus on the manner in which interm ediaries are paid for distribution of mutual funds or other collective investments funds.

• There has been increased global regulatory focus on the manner in which intermediaries are paid for distribution of mutual funds or other collective investments funds.

Changes to long-standing market practices related to fees or enhanced disclosure requirements may negatively impact sales of mutual funds or other collective investments funds by intermediaries, especially if such requirements are not applied to other investment products.

• We remain subject to various state, federal and international laws and regulations (and associated judicial decisions) related to privacy, data collection and use, including the EU’s GDPR and the CCPA;

cybersecurity;

current and emerging technology, including generative AI technology;

current and emerging technology, including AI and automated decision-making;

storage, localization, retention and destruction of data;

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notification of regulators and/or impacted parties regarding adverse data-related events, including the SEC’s cybersecurity disclosure rules;

and other similar matters that can concern the data of our clients and employees.

amended Regulation S-P;

and other similar matters that can concern the data of our clients and/or personnel.

Requirements in these areas continue to expand and evolve throughout the globe, most commonly in ways that increase the complexity and costs of compliance.

For example, in addition to the EU's GDPR data protection rules, we also are or may become subject to or affected by additional country, federal and state laws, regulations and guidance impacting consumer privacy, such as the California Consumer Privacy Act.

Future changes to laws

and regulations in these areas could impose significant limitations on our operations, require changes to our business, or restrict our collection, use or storage of data or related technologies, which may increase our compliance expenses and make our business more costly or less efficient to conduct.

• Regulators have imposed certain clearing, margin, trade reporting, electronic trading and recordkeeping requirements on market participants aimed at market stabilization and risk reduction, such as the Dodd-Frank Wall Street Reform and Consumer Protection Act in the U.S.

For example, the SEC proposed new rules in 2023 that would require broker-dealers and investment advisers, when engaging or communicating with investors using predictive data analytics, to evaluate such technologies for conflicts of interest and, where identified, eliminate or neutralize the conflict of interest.

If adopted as proposed, these rules could encompass a wide range of forward-looking uses of technology applications and impose significant operational burdens and costs.

Future changes to laws and regulations in these areas

could impose significant limitations on our operations, require changes to our business, or restrict our collection, use or storage of data or related technologies, which may increase our compliance expenses and make our business more costly or less efficient to conduct.

and the European Market Infrastructure Regulation in the EU.

T hese requirements have introduced operational complexity and additional costs to derivatives portfolios.

• The revised Markets in Financial Instruments Directive ("MiFID II Directive") and Regulation ("MiFIR") (together “MiFID II”) applies across the EU and member states of the European Economic Area beginning on January 3, 2018.

Implementation of MiFID II has significantly impacted both the structure and operation of EU financial markets.

Some of the main changes introduced under MiFID II include applying enhanced disclosure requirements, enhancing conduct of business and governance requirements, broadening the scope of pre and post trade transparency, increasing transaction reporting requirements, transforming the relationship between client commissions and research, and further regulation of trading venues.

Compliance with MiFID II has increased operational complexity and increased our costs.

For example, we began to pay for third-party investment research used by our UK-based investment manager, T.

Rowe Price International Ltd, in 2018, and we pay for all the research needs of our investment professionals globally.

These requirements have introduced operational complexity and additional costs to derivatives portfolios.

• New laws or regulations involving ESG integration and disclosure may materially impact the asset management industry.

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The availability of such disclosures may impact the investment decisions of European investors.

Furthermore, federal regulators, as well as state legislatures and regulators in the U.S.

have proposed or adopted laws and regulations to pursue similar initiatives, such as the SEC’s proposed climate disclosure rules .

In addition, the EU’s Corporate Sustainability Reporting Directive imposes enhanced sustainability reporting requirements for certain EU companies and non-EU companies, with phased reporting requirements beginning in 2025 for certain companies.

In the U.S., states have proposed or adopted laws and regulations to pursue similar initiatives, such as California’s Climate Accountability Package, federal regulations on ESG disclosures, such as the SEC's proposed climate disclosure rules that have been stayed, are expected to halt under the new administration in the U.S.

Conversely, some U.S.

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As jurisdictions globally continue to develop legal frameworks on ESG and sustainability regulations, our industry and business may face increasingly fragmented regulatory frameworks, which may result in complex and potentially conflicting compliance obligations and legal and regulatory uncertainty.

We cannot predict the nature of future changes to the legal and regulatory requirements applicable to our business, nor the extent of the impacts that will result from current or future proposals.

• Recently, several significant administrative law cases were decided by the U.S.

Supreme Court, most notably Loper Bright Enterprises v.

Raimondo, which overruled Chevron U.S.A., Inc.

Natural Resources Defense Council, Inc.

In Loper Bright, the Supreme Court held that the U.S.

Administrative Procedure Act required courts to exercise their independent judgment when deciding whether an agency had acted within its statutory authority, and that courts may not defer to an agency interpretation solely because a statute is ambiguous, overruling the long-held Chevron decision that had required that courts defer to reasonable agency interpretations of statutes and agency action.

These decisions may result in additional legal challenges to regulations and guidance issued by federal regulatory agencies that we or the companies we invest in have relied on and intend to rely on in the future.

Any such challenges, if successful, could have a material impact on our business because we may make decisions based on legal guidance that may be overruled.

In addition to potential changes to regulations and agency guidance as a result of legal challenges, these decisions may result in increased regulatory uncertainty and delays in and other impacts to the agency rulemaking process, any of which could adversely impact our business and operations.

We cannot predict the nature of future changes to the legal and regulatory requirements ap plicable to our business, nor the extent of the impacts that will result from current or future proposals.

However, any such changes are likely to increase the costs of compliance and the complexity of our operations, as well as result in changes to our product or service offerings.

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There also has been an increase in litigation and in regulatory investigations in the financial services industry in recent years, including client claims, class action suits, and government actions claiming substantial monetary damages and penalties.

We carry insurance in amounts and under terms that we believe are appropriate, however, we cannot be assured that our insurance will cover every liability and loss to which we may be exposed, or that our insurance policies will continue to be available at acceptable terms and fees.

continue to be available at acceptable terms and fees.

Certain insurance coverage may not be available or may be prohibitively expensive in future periods.

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Any significant change in the required net capital, an operating loss, or an extraordinary charge against net capital could adversely affect the ability of our subsidiaries to expand or maintain their operations if we were unable to make additional investments in them, which could impact our earnings.

TECHNOLOGY RISKS.

We require significant quantities and types of technology to operate our business and would be adversely affected if we or our third party providers fail to maintain adequate technology to conduct or expand our operations or if our technology became inoperative or obsolete.

We depend on significant quantities of technology and, in many cases, highly specialized, proprietary or third-party licensed technology to support our business functions, including among others:

• securities analysis,

• securities trading,

• portfolio management,

• client service,

• accounting and internal financial reporting processes and controls,

• data security and integrity, and

• regulatory compliance and reporting.

A suspension or termination of vendor-provided software licenses or related support, upgrades, and maintenance could cause system delays or interruption.

We might be required to make significant capital expenditures to maintain a competitive technology stack.

A cyberattack or a failure to implement effective information and cybersecurity policies, procedures and capabilities could disrupt operations and cause financial losses.

We are dependent on the effectiveness of the information and cybersecurity policies, procedures and capabilities we maintain to protect our systems and data.

An externally caused data security incident, such as a cyberattack, a phishing scam, virus, ransomware attack, denial-of-service attack, or an attack launched from within our systems could compromise the integrity of confidential client or competitive information and materially interrupt our business operations.

In addition, our third-party service providers and other intermediaries, with which we conduct busi ness, could also be subject to cyberattacks or other data security events, and we cannot ensure that such third parties have all appropriate controls in place to protect the integrity and confidentiality of our data that is in their custody or to allow them to continue their business operations, including their services to us, in a timely manner.

There have been increasing numbers of publicized cybersecurity incidents in recent years impacting financial services firms as well as firms in other industries.

Our use of third-party service providers and cloud technologies

could heighten this risk.

We could be subject to losses if we fail to properly safeguard and maintain confidential data.

As part of our normal operations, we maintain and transmit confidential data about our clients, associates and other parties, as well as proprietary data relating to our business operations.

Our business operations rely on such data being available as and when needed and not being subjected to loss or unauthorized access or alteration.

We also leverage cloud-based solutions for the transmission and storage of data.

Additionally, authorized persons could inadvertently or intentionally release or alter confidential or proprietary data.

Any of these types of events could, among other things:

• seriously damage our reputation,

• result in a loss of confidence in our business and products,

• allow competitors access to our proprietary business data,

• materially impair our business operations,

• subject us to liability for a failure to safeguard data of clients, associates, and other parties,

• result in the termination of contracts by our existing clients,

• subject us to disclosure obligations, regulatory investigations, actions or fines, and potential litigation involving regulators, stockholders, or other members of the public, and

• require significant capital and operating expenditures to investigate and remediate the breach, and organizational costs to mitigate against future incidents.

Furthermore, if any person, including any of our associates, negligently disregards or intentionally overrides or circumvents our established controls with respect to confidential data, or otherwise mismanages or misappropriates that data, we could be subject to significant monetary damages, regulatory enforcement actions, fines and/or criminal prosecution in one or more jurisdictions.

We may be impacted adversely by claims or litigation, including claims or litigation relating to our fiduciary responsibilities.

Our businesses involve the risk that clients or others may sue us, claiming that we or third parties for whom they say we are responsible have failed to perform under a contract or otherwise failed to carry out a duty perceived to be owed to them.

Our trust and investment management businesses are particularly subject to this risk.

Claims made or actions brought against us, whether founded or unfounded, may result in lawsuits, injunctions, settlements, damages, fines, or penalties, which could have a material adverse effect on our financial condition or results of operations or require changes to our business.

Even if we defend ourselves successfully, the cost of litigation is often substantial, and public reports regarding claims made against us may cause damage to our reputation among existing and prospective clients or negatively impact the confidence of counterparties, rating agencies and stockholders, consequently affecting our earnings negatively.

We may be adversely affected by increased governmental and regulatory scrutiny or negative publicity.

Political and public sentiment regarding financial institutions has in the past resulted, and may in the future result, in a significant amount of adverse press coverage, as well as adverse statements or charges by regulators or other government officials.

Press coverage and other public statements that assert some form of wrongdoing (including, in some cases, press coverage and public statements that do not directly involve us) often result in some type of investigation by regulators, legislators and law enforcement officials or in lawsuits.

Responding to these investigations and lawsuits, regardless of the ultimate outcome of the proceeding, is time-consuming and expensive and can divert the time and effort of our senior management from our business.

Penalties and fines sought by regulatory authorities have increased substantially and certain regulators have been more likely in recent years to commence enforcement actions or to support legislation targeted at the financial services industry.

Governmental authorities may also be more likely to pursue criminal or other actions, including seeking admissions of wrongdoing or guilty pleas, in connection with the resolution of an inquiry or investigation to the extent a company is viewed as having previously engaged in criminal, regulatory or other misconduct.

Adverse publicity, governmental scrutiny and legal and enforcement proceedings can also have a negative impact on our reputation and on the morale and performance of our personnel, which could adversely affect our businesses and results of operations.

The financial services industry generally and asset management in particular have been subject to negative publicity.

Our reputation and businesses may be adversely affected by negative publicity or information regarding our businesses and personnel, whether or not accurate or true, that may be posted on social media or other internet forums or published by news organizations.

As noted above, we are subject to numerous laws and regulations governing privacy and the protection of personal or other data in the U.S., EU and other jurisdictions we operate in .

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What changed 10-K

Item 1A. Risk Factors