BGC Group (BGC) risk factors, FY2024 10-K

Risks Related to Global Economic and Market Conditions

1. 01Our business, financial condition, results of operations and prospects have been and may continue to be affected both positively and negatively by conditions in the global economy and financial markets generally
2. 02Our revenues and profitability have historically declined and are likely to decline significantly during past and future periods of low trading volume in the financial markets in which we offer our products and services
3. 03Actions taken by central banks in major global economies, including with regards to interest rates, may have a material negative impact on our businesses
4. 04Downgrades of sovereign credit ratings, sovereign debt crises, or a decrease in the integrity of capital markets may have material adverse effects on the financial markets and general economic conditions, as well as our businesses, financial condition, cash flows, results of operations and prospects

Risks Related to New Opportunities/Possible Transactions and Hires

1. 05While we have limited offerings linked to cryptocurrencies, such offerings or any future expansion of such business could expose us to technology, regulatory and financial risks
2. 06The technology underlying cryptocurrencies and other similar digital assets is evolving at a rapid pace and may be vulnerable to cyberattacks or have other inherent weaknesses that are not yet apparent. There is a high degree of fraud, theft, cyberattacks and other forms of risk in the cryptocurrency space

Risks Related to Liquidity, Funding and Indebtedness

1. 07We have debt, which could adversely affect our ability to raise additional capital and obtain or maintain favorable credit ratings, limit our ability to react to changes in the economy or our business, expose us to interest rate risk, and prevent us from meeting our obligations under our indebtedness
2. 08Some of our borrowings have variable interest rates. As a result, increases in market interest rates have had and may continue to have a material adverse effect on our interest expense
3. 09Our Revolving Credit Agreement contains restrictions that may limit our flexibility in operating our business
4. 10Credit ratings downgrades could adversely affect our cost of capital and the availability of debt financing
5. 11Our acquisitions may require significant cash resources and may lead to a significant increase in the level of our indebtedness
6. 12We may incur substantially more debt or take other actions which would intensify the risks discussed herein

Risks Related to Our Senior Notes

1. 13We may not have the funds necessary to repurchase the BGC Group 4.375% Senior Notes, the BGC Group 8.000% Senior Notes, the BGC Group 6.600% Senior Notes, or the outstanding BGC Partners Notes upon a change of control triggering event as required by the indentures governing these notes
2. 14The requirement to offer to repurchase the BGC Group 4.375% Senior Notes, the BGC Group 8.000% Senior Notes, the BGC Group 6.600% Senior Notes, or the BGC Partners senior notes upon a “change of control triggering event” may delay or prevent an otherwise beneficial takeover attempt of us

Risks Related to the Geographic Locations of Our Business

1. 15Our business is geographically concentrated and could be significantly affected by any adverse change in the regions in which we operate
2. 16The U.K. exit from the EU could materially adversely impact our customers, counterparties, business, financial condition, results of operations and prospects

Risks Related to Our Intellectual Property

1. 17We may not be able to protect our intellectual property rights or may be prevented from using intellectual property necessary for our business

Risks Related to Our IT Systems and Cybersecurity

1. 18Defects or disruptions in our technology or services could diminish demand for our products and services and subject us to liability
2. 19Malicious cyber-attacks and other adverse events that affected our operational systems or infrastructure, or those of third parties, could disrupt our business, result in the disclosure of confidential information, damage our reputation and cause losses or regulatory penalties
3. 20We and our competitors may use artificial intelligence in our businesses, and challenges with properly managing its use could result in competitive harm, regulatory action, legal liability and brand or reputational harm

Risks Relating to Our Key Personnel and Employee Turnover

1. 21Leadership changes and the resulting transition following Howard Lutnick’s confirmation as the U.S. Secretary of Commerce could have an adverse effect on our business
2. 22The loss of key employees or the failure to hire and retain highly skilled and other key personnel could negatively affect our business
3. 23The ability of key employees to devote adequate time and attention to us are a key part of the success of our business, and failure to continue to employ and have the benefit of these persons may adversely affect our business and prospects
4. 24We may be unable to enforce post-employment restrictive covenants applicable to our employees

Risks Related to Internal Controls

1. 25If we fail to implement and maintain an effective internal control environment, our operations, reputation and stock price could suffer, we may need to restate our financial statements, and we may be delayed in or prevented from accessing the capital markets

Risks Related to Seasonality

1. 26The financial markets in which we operate are generally affected by seasonality, which could have a material adverse effect on our results of operations in a given period

Risks Related to Regulatory and Legal Compliance

1. 27We are subject to regulatory capital requirements on our regulated business, and a significant operating loss or any extraordinary charge against capital could materially adversely affect our ability to expand or, depending upon the magnitude of the loss or charge, even to maintain the current level of our business
2. 28Even after the award of permanent registration status to our SEFs, we will incur significant additional costs operating certain of our swap execution facilities, our revenues may be lower than in the past and our financial condition and results of operations may be materially adversely affected by future events
3. 29While we continue to have a compliance framework in place to comply with both CFTC and SEC rules and regulations, it is possible that the existing regulatory framework may be amended, which amendments could have a positive or negative impact on our business, financial condition, results of operations and prospects
4. 30Our energy, commodities and shipping activities, including those related to environmental and emission, power, oil, and natural gas products, subject us to extensive regulation, potential catastrophic events and other risks that may result in our incurring significant costs and liabilities
5. 31In the U.S., the SEC has proposed rules to expand Regulation ATS to cover ATS trading government securities. In addition, the proposed rules extend Regulation SCI to ATS trading government securities
6. 32Changes in our tax rates, unavailability of certain tax credits or reliefs, exposure to additional tax liabilities or assessments or challenges to our tax positions or interpretations could adversely affect our results of operations and financial condition

Risks Related to Competition

1. 33In addition, recruitment and retention of qualified professionals could result in substantial additional costs, including costs and management time associated with litigation, arbitration or other claims related to employee hires and/or departures
2. 34Consolidation and concentration of market share in the banking, brokerage, exchange and financial services industries could materially adversely affect our business, financial condition, results of operations and prospects because we may not be able to compete successfully

Risks Related to Our International Operations

1. 35We are subject to various risks inherent in doing business in the international financial markets, in addition to those unique to the regulated brokerage industry
2. 36Credit ratings downgrades or defaults by us, Cantor or another large financial institution could adversely affect us or financial markets generally
3. 37Our activities are subject to credit and performance risks, which could result in us incurring significant losses that could materially adversely affect us
4. 38In emerging market countries, we primarily conduct our business on an agency and matched principal basis, where the risk of counterparty default, inconvertibility events and sovereign default is greater than in more developed countries
5. 39The rates business is and has historically been our largest product category, and we could be significantly affected by any downturn in the rates product market
6. 40Due to our current customer concentration, a loss of one or more of our significant customers could materially harm our business, financial condition, results of operations and prospects
7. 41Our revenues and profitability could be reduced or otherwise materially adversely affected by pricing plans relating to commissions and fees on our trading platform
8. 42Reduced spreads in pricing, levels of trading activity and trading through market makers and/or specialists could materially adversely affect our business, financial condition, results of operations and prospects
9. 43We may have equity investments or profit sharing interests in entities whose primary business is proprietary trading. These investments could expose us to losses that could adversely affect our net income and the value of our assets

RISKS RELATED TO OUR CORPORATE STRUCTURE

1. 44Because our voting control is concentrated among the holders of our Class B common stock, the market price of our Class A common stock may be materially adversely affected by its disparate voting rights
2. 45The holders of our Class A common stock and Class B common stock have substantially identical rights, except that holders of Class A common stock are entitled to one vote per share, while holders of Class B common stock are entitled to 10 votes per share on all matters to be voted on by stockholders in general
3. 46Delaware law may protect decisions of our Board that have a different effect on holders of our Class A common stock and Class B common stock
4. 47Delaware law, our corporate organizational documents and other requirements may impose various impediments to the ability of a third party to acquire control of us, which could deprive investors in our Class A common stock of the opportunity to receive a premium for their shares
5. 48The dual class structure of our common stock may adversely affect the trading market for our Class A common stock
6. 49If we were deemed an “investment company” under the Investment Company Act, the Investment Company Act’s restrictions could make it impractical for us to continue our business
7. 50We expect to take all legally permissible action to ensure that we are not deemed an investment company under the Investment Company Act, but no assurance can be given that this will not occur

Risks Related to Our Relationship with Cantor and its Affiliates

1. 51Our Class B common stock is held by Cantor and CFGM, whose interests may conflict with ours and may exercise their control in a way that favors their interests to our detriment
2. 52Further changes in Cantor’s management may occur pursuant to Howard Lutnick’s divestiture of his interests, which may impact Cantor’s control over and relationship with us in ways that we cannot currently predict
3. 53Agreements between us and Cantor and/or its affiliates are between related parties, and the terms of these agreements may be less favorable to us than those that we could negotiate with third parties and may subject us to litigation

RISKS RELATED TO OUR CLASS A COMMON STOCK

1. 54Purchasers of our Class A common stock, as well as existing stockholders, may experience significant dilution as a result of offerings of shares of our Class A common stock by us, and the perception that such sales could occur may adversely affect prevailing market prices for our stock
2. 55We may sell shares of our Class A common stock from time to time. As a well-known seasoned issuer, we may file an automatic shelf registration statement and commence a registered offering, including of our Class A common stock, immediately thereafter
3. 56We may use the net proceeds from future offerings of our Class A common stock to repurchase shares from Cantor, our executive officers, other employees and others, which may render the proceeds unavailable for other purposes

General Risks

1. 57Our operations are global and exchange rate fluctuations and international market events could materially and adversely impact our business, financial condition, results of operations and prospects
2. 58Employee error or miscommunication could impair our ability to attract and retain customers and subject us to significant financial losses, legal liability, regulatory sanctions and penalties, and reputational harm; moreover, misconduct is difficult to detect and deter, and error is difficult to prevent
3. 59Ongoing scrutiny and changing expectations from stockholders, clients and customers with respect to the Company’s corporate responsibility or ESG practices may result in additional costs or risks