Primerica 2010 Annual Report - Direct Selling News

with such laws and regulations, including, inrespect of tax withholding, social securitypayments and recordkeeping, or we may berequired to modify our business model, any ofwhich could have a material adverse effect onour business, financial condition and results ofoperations. In addition, there is the risk that wemay be subject to significant monetaryliabilities arising from fines or judgments as aresult of any such actual or allegednon-compliance with federal, state, orprovincial tax or employment laws or withrespect to any applicable employee benefitplan.Our or our sales representatives’violation of or non-compliance withlaws and regulations and the relatedclaims and proceedings could expose usto material liabilities.Extensive federal, state, provincial and locallaws regulate our products and ourrelationships with our clients, imposing certainrequirements that our sales representativesmust follow. The laws and regulationsapplicable to our business include thosepromulgated by FINRA, the SEC, the MSRB, theFTC and state insurance, lending and securitiesregulatory agencies in the United States. InCanada, the following Canadian regulatoryauthorities have responsibility for us: OSFI,FINTRAC, FCAC, MFDA, and provincial andterritorial insurance regulators and provincialand territorial securities regulators. At anygiven time, we may have pending state, federalor provincial examinations or inquiries of ourinvestment and savings products, insurance orloan businesses. In addition to imposingrequirements that representatives must followin their dealings with clients, these laws andrules generally require us to maintain a systemof supervision to attempt to ensure that oursales representatives comply with theserequirements. We have developed policies andprocedures to comply with these laws.However, despite these compliance andsupervisory efforts, the breadth of ouroperations and the broad regulatoryrequirements could result in oversight failuresand instances of non-compliance or misconducton the part of our sales representatives.From time to time, we are subject to privatelitigation as a result of alleged misconduct by oursales representatives. Examples include claimsthat a sales representative’s failure to discloseunderwriting-related information regarding theinsured on an insurance application resulted inthe denial of a life insurance policy claim, andwith respect to investment and savings productssales, errors or omissions that a representativemade in connection with an account.Non-compliance or misconduct by our salesrepresentatives could result in adverse findingsin either examinations or litigation and couldsubject us to sanctions, significant monetaryliabilities, restrictions on or the loss of theoperation of our business, claims against us orreputational harm, any of which could have amaterial adverse effect on our business, financialcondition and results of operations.Any failure to protect theconfidentiality of client informationcould adversely affect our reputationand have a material adverse effect onour business, financial condition andresults of operations.Pursuant to federal laws, various federalregulatory and law enforcement agencies haveestablished rules protecting the privacy andsecurity of personal information. In addition,most states and some provinces have enactedlaws, which vary significantly from jurisdictionto jurisdiction, to safeguard the privacy andsecurity of personal information. Many of oursales representatives and employees haveaccess to and routinely process personalinformation of clients through a variety ofmedia, including the Internet and softwareapplications. We rely on various internalprocesses and controls to protect theconfidentiality of client information that isaccessible to, or in the possession of, ourcompany, our employees and our salesrepresentatives. We have a significant numberof sales representatives and employees, and itis possible that a sales representative oremployee could, intentionally orunintentionally, disclose or misappropriateconfidential client information. If we fail tomaintain adequate internal controls, includingPrimerica 2010 Annual Report 39