TD Ameritrade 2018 Annual Report

17 Risk Factors Relating to the Regulatory and Legislative Environment Legislation has and may continue to result in changes to rules and regulations applicable to our business, which may negatively impact our business and financial results. The Dodd-FrankAct, enacted in 2010, requires many federal agencies to adopt new rules and regulations applicable to the financial services industry and also calls for many studies regarding various industry practices. In particular, the Dodd-Frank Act gives the SEC discretion to adopt rules regarding standards of conduct for broker-dealers providing investment advice to retail customers. The U.S. Department of Labor ("DOL") enacted regulations changing the definition of who is an investment advice fiduciary under the Employee Retirement Income Security Act of 1974 (ERISA) and how such advice can be provided to account holders in retirement accounts such as 401(k) plans and Individual Retirement Arrangements (IRAs). The DOL regulations deemed many of the investment, rollover and asset management recommendations from us to our clients regarding their retirement accounts fiduciary "investment advice" under ERISA. The U.S. Court of Appeals for the Fifth Circuit has vacated the DOL's conflict-of-interest rule in its entirety, and the DOL has announced a conditional enforcement policy pending the issuance of further guidance and may take further actions in light of the Fifth Circuit's decision. In addition, New York and several other states have proposed or are expected to propose a heightened standard of care for financial professionals in their respective states and/or relating to the sale of retirement savings and investment products. One of the most significant impacts on our business from the DOL regulations and related prohibited transaction exemptions is the impact on our fee and compensation practices, which are likely to continue to some degree even though the DOL regulations have been vacated. These regulations also continue to subject us to an increased risk of class actions and other litigation and regulatory risks. In addition, the SECor the states' promulgation or enactment, respectively, of an enhanced standard of care could similarly have adverse impacts on our business. Additional rulemaking or legislative action on the part of federal or local governments and governmental agencies could negatively impact our business and financial results. While we have not yet been required to make other material changes to our business or operations as a result of the Dodd-Frank Act or other rulemaking or legislative action, it is not certain what the scope of future rulemaking or interpretive guidance from the SEC, FINRA, CFTC, NFA, DOL, banking regulators and other regulatory agencies may be, how the courts and regulators might interpret these rules and what impact this will have on our compliance costs, business, operations and profitability. Our profitability could also be affected by new or modified laws that impact the business and financial communities generally, including changes to the laws governing banking, the securities market, fiduciary duties, conflicts of interest, taxation, electronic commerce, client privacy and security of client data. As existing laws are modified and new laws are implemented, we may incur significant additional costs and have to expend a significant amount of time to develop and integrate appropriate systems and procedures to ensure initial and continuing compliance with such laws. These additional costs could have a material adverse effect on our profitability. Failure to comply with net capital requirements could adversely affect our business. The SEC, FINRA, CFTC, NFA and various other regulatory agencies have stringent rules with respect to the maintenance of specific levels of net capital by securities broker-dealers, FCMs and FDMs. Net capital is a measure of a broker-dealer's, an FCM's or an FDM's readily available liquid assets, reduced by its total liabilities other than approved subordinated debt. Our broker-dealer and FCM/FDM subsidiaries are required to comply with net capital requirements. If we fail to maintain the required net capital, the SEC or the CFTC could suspend or revoke our registration, and FINRAor the NFAcould expel us frommembership, which could ultimately lead to our liquidation, or they could impose censures, fines or other sanctions. If the net capital rules are changed or expanded, or if there is an unusually large charge against net capital, then our operations that require capital could be limited, and we may not be able to pay dividends or make stock repurchases. A large operating loss or charge against net capital could have a material adverse effect on our ability to maintain or expand our business. Extensive regulation and regulatory uncertainties could harm our business. The securities industry is subject to extensive regulation by federal, state, international government and self- regulatory agencies, and financial services companies are subject to regulations covering all aspects of the securities business. Regulations are intended to ensure the integrity of financial markets, appropriate capitalization of broker-