CNS AR24 Digital - Book - Page 30
could be affected by regulatory requirements through new rules around technological advancements that could increase the
cost of compliance when employing these technological changes.
We may use artificial intelligence in our business, operations or investment processes for a variety of reasons, including
with the objectives of increasing efficiency, generating alpha and supporting innovation as we meet clients9 evolving needs
and to enable us to compete more effectively, and these technologies may become more important in our operations over
time. Our use of these technologies may result in new or expanded risks and liabilities, including due to increasing
governmental or regulatory scrutiny, litigation, compliance issues, ethical concerns, confidentiality or security risks, such as
the unauthorized disclosure of confidential or sensitive data, and reputational harm, as well as other factors that could
adversely affect our business and financial condition. In addition, our personnel, third-party intermediaries, service providers
and key vendors could improperly utilize artificial intelligence technologies while carrying out their responsibilities, which
could result in a disruption in the use of their systems or services. The use of artificial intelligence may lead to unintended
consequences, including generating content that is factually inaccurate, misleading or otherwise flawed, which could harm
our reputation and business and expose us to risks related to such inaccuracies or flaws. Additionally, broad regulatory
obligations applicable to artificial intelligence and machine-learning are uncertain and developing, which heightens the
potential risk that such technologies may pose to us. In order to reduce these new and expanded risks and liabilities, we could
choose to limit some of our activities related to such technologies, which could harm our funds9 financial performance or
increase fund expenses.
Our clients may withdraw or reduce the amount of assets we manage or otherwise change the terms of our
relationship, which could have an adverse impact on our revenue.
Our institutional clients, and firms with which we have strategic alliances, may terminate their relationship with us,
reduce the amount of assets we manage, shift their assets to other types of accounts with different fee structures or renegotiate
the fees we charge them for any number of reasons and with little advance notice, including investment performance,
redemptions by beneficial owners of funds we manage or subadvise, actual or perceived competition between the accounts
we subadvise and our proprietary investment products, changes in the key members of an investment team, changes in
investment strategies, changes in prevailing interest rates and financial market performance. Certain investors in the funds we
manage hold their shares indirectly through platforms sponsored by financial institutions that have the authority to make
investment and asset allocation decisions on behalf of such investors. Decisions by investors to redeem assets may require
selling investments at a disadvantageous time or price, which could negatively affect the amount of our assets under
management or our ability to continue to pursue certain investment strategies. In a declining or illiquid market or in
conditions of poor relative or absolute performance, the pace of redemptions and withdrawals and the loss of institutional and
individual separate account clients could accelerate. The occurrence of any of these events could have a material adverse
effect on our revenue.
Regulations restricting the use of commission credits to pay for research have increased, and may continue to
increase, our operating expenses.
On behalf of our clients, we make decisions to buy and sell securities, select broker-dealers to execute trades and
negotiate brokerage commission rates. In connection with these transactions and subject to best execution, we receive
commission credits to pay for eligible research and services from broker-dealers and other eligible service providers. As a
result of regulations in the European Union (EU) and U.K., we may continue to eliminate the use of commission credits to
pay for research and eligible services for accounts where we have certain obligations within the scope of MiFID II (together
with substantially similar national rules of the U.K. and implementing rules and regulations). Our operating expenses then
include payment for research and eligible services for these accounts. Depending on the evolution of market practices and
regulatory developments, we may look to use commission credits to pay for research in the future or elect to pay for research
and expenses globally, subject to applicable SEC regulations, which would impact our operating expenses.
Limitations on our ability to utilize leverage in the closed-end funds we sponsor could reduce our assets under
management and revenue.
Certain of the closed-end funds sponsored by us utilize leverage in the form of bank financing, which in the aggregate
amounted to approximately $3.3 billion as of December 31, 2024. To the extent any closed-end fund sponsored by us elects
or is required by regulation or the terms of its bank financing to reduce leverage, such fund may need to liquidate its
investments. Reducing leverage or liquidating investments during adverse market conditions would reduce the Company9s
assets under management and revenue.
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