KKR & Co (KKR) Risk Analysis

Our business is subject to extensive regulation, legislative focus and regulatory scrutiny, and our compliance with laws and regulations is subject to frequent examinations, inquiries and investigations by U.S. federal and state as well as non-U.S. governmental agencies and regulators and self-regulatory organizations in the various jurisdictions in which we operate around the world. See Note 24 "Commitments and Contingencies-Litigation" in our financial statements for a description of certain pending matters. Any of these governmental and regulatory authorities may challenge our and our employees' compliance with any applicable laws and regulations, and we and our employees could become subject to civil or criminal proceedings brought by them for such noncompliance. Many of these regulators are empowered to demand fines, penalties, restrictions on activities, third-party oversight of various business processes, divestiture of certain investments, suspensions of personnel or other sanctions, including censure, the issuance of cease-and-desist orders or the suspension or expulsion of applicable licenses, authorizations and memberships. Any resolution of claims brought by a governmental and regulatory authority may, in addition to the imposition of significant monetary penalties, require an admission of wrongdoing or result in adverse limitations or prohibitions on our ability to conduct our business, including potential statutory disqualifications described below. Even if a sanction is not imposed, or a sanction imposed against us or our personnel by a regulator were small in monetary amount, the adverse publicity, costs relating to legal defenses, and reputational harm relating to the regulatory activity or imposition of these sanctions could be significant. Any of the foregoing consequences or events may damage our relationships with existing and potential investors in our publicly traded stock, our investment vehicles or our insurance products, impair our ability to raise capital for our investment vehicles, impair our ability to carry out investment activities, impair our ability to conduct our insurance business, and contravene provisions concerning compliance with laws and regulations in the agreements to which we are a party. In addition, as discussed further below, certain events could disqualify KKR from relying on various exemptions in the United States from various regulatory requirements, including pursuant to the Securities Act, the Exchange Act, the Investment Company Act, the Commodity Exchange Act, and Employee Retirement Income Security Act of 1974 ("ERISA") in conducting our investment management activities. For example, if we could no longer rely on private placement exemptions from registration under the Securities Act, this would materially and adversely affect our ability to raise financing for KKR and our ability to conduct our capital markets business. Moreover, any of these governmental or regulatory actions could also lead to increased exposure to: other allegations, examinations, inquiries or investigations by other U.S. and non-U.S. governmental and regulatory agencies on related or unrelated matters, civil litigation by our stockholders, fund investors, or other third parties, or could have other negative effects, which could materially and adversely affect us. The private equity industry has been and continues to be under intense regulatory and news media scrutiny with governmental officials and regulators focusing on the private equity industry's fees, the taxation of its investments, business practices, antitrust compliance and operations of its portfolio companies, conflicts of interest, and other issues. In particular, the SEC's areas of focus on private equity firms have included, among others, fiduciary duty and compliance programs, conflicts of interest, allocation of investment opportunities, the allocation of fees and expenses, including the acceleration of monitoring fees and the allocation of broken-deal and other expenses, valuation practices, the disclosure, use and compensation of operating partners or consultants as well as third-party compliance or similar service providers, outside investment and business activities of firm principals and employees, group purchasing arrangements, disclosure of affiliated service providers, disclosure of conflicts of interest and investment risks, adherence to notice, consent and other contractual requirements, electronic communications, cybersecurity, data privacy and protection, the use of purchased data, valuation, retail investors, foreign bribery and corruption, and policies covering custody, auditing, handling of material nonpublic information, insider trading, business continuity and transition planning, conflicts of interest relating to liquidity, such as certain adviser-led fund restructurings, as well as private fund advisers' portfolio strategies, risk management, and investment recommendations and allocations. Certain Recent and Potential Regulatory Developments In April 2024, the U.S. Department of Labor ("DOL") finalized a rule which redefines when a person would be an "investment advice fiduciary" for purposes of ERISA, (the "2024 Rule"), as well as amending associated prohibited transaction exemptions ("PTEs"), including PTE 84-24, which, among other things, provide exemptive relief to certain transactions relating to the purchase of insurance contracts, annuities and securities issued by an investment company. In addition, the DOL amended certain prohibited transaction class exemptions for investment advice fiduciaries, including PTE 2020-02, which permits an investment advice fiduciary to receive fees in connection with investment advice provided by the fiduciary on the condition that the fiduciary satisfies certain requirements including a "care obligation" and a "loyalty obligation" described in the exemption, and receive no more than reasonable compensation for the advice (the 2024 Rule and the PTE and Prohibited Transaction Class Exemption amendments proposed as a part of the 2024 Rule release collectively referred to as the "2024 Rule Release"). The 2024 Rule imposes fiduciary status on certain financial institutions that were not considered fiduciaries under applicable historical DOL rules, including, for example, institutions providing "one time" recommendations in connection with retirement plan rollovers such as those made to individual retirement accounts ("IRAs") subject to Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code"). The 2024 Rule would materially increase the likelihood that a fund sponsor could inadvertently become a fiduciary to plans governed by ERISA and the Code, by reason of being deemed to have rendered investment advice in the context of fundraising and investor engagement. The 2024 Rule broadly applies to any communication made to ERISA-governed plans, IRAs, and their fiduciaries that would reasonably be viewed as a suggestion that the plan engage in, or refrain from taking, a particular course of action, and, therefore, may potentially create a fiduciary relationship between the fund sponsor and an ERISA plan or IRA for purposes of that communication. In the event that the fund sponsor was deemed to be an investment advice fiduciary, such fund sponsor would generally need to satisfy a complicated exemption to avoid a self-dealing prohibited transaction under ERISA and the Code. When and if some or all of the 2024 Rule Release becomes effective is uncertain as a result of recent and potential litigation pertaining to the 2024 Rule Release. In June 2024, a three-judge panel of the US Court of Appeals for the Fifth Circuit unanimously vacated the SEC's private fund adviser new rules and amendments to existing rules under the Investment Advisers Act of 1940 (the "Advisers Act") (collectively, the "Private Fund Adviser Rules"), which the SEC had previously adopted in August 2023. The SEC did not appeal the Fifth Circuit's ruling. Despite the SEC's decision to not appeal the decision, the SEC's focus on private funds may continue, including regarding particular industry practices and potential areas of focus for exams and enforcement going forward, which could still have a significant effect on private fund advisers and their operations, including by increasing regulatory and compliance costs and burdens and heightening the risk of regulatory action. The FTC and the Antitrust Division of the U.S. Department of Justice ("DOJ") have in prior years and recently announced several initiatives and policy shifts to increase antitrust enforcement in the United States, where we and many of our portfolio companies conduct business. It remains to be seen to what extent these changes will be maintained and/or continued by the FTC and DOJ in the current U.S. administration. For example: - In November 2024, the DOJ published updated guidance on how the DOJ's Antitrust Division will evaluate corporate compliance programs when making charging decisions and sentencing recommendations relating to criminal antitrust violations, such as bid-rigging, price-fixing, and market allocation schemes. The updated guidance places a particular emphasis on scrutinizing an antitrust compliance program's assessment of risks associated with the use of emerging technologies. This guidance follows recent enforcement actions and interventions in litigations that involve the alleged use of algorithms to determine pricing and facilitate collusive activity. - In October 2024, the FTC published a final rule effective for HSR Act filings submitted on or after February 10, 2025 that significantly modifies the pre-merger notification requirements under the Hart-Scott-Rodino Act ("HSR Act"). The new requirements impose extensive additional information and document obligations on those required to file such notifications (such as certain of our affiliates), including requiring information on competition and supply relationships, additional documents in certain instances, and narrative descriptions of both a transaction's rationale and the parties' commercial activities. This rule could potentially limit the ability to file expeditiously in any transaction requiring such filing as it will take additional time and cost to prepare HSR filings. On January 10, 2025, the Chamber of Commerce of the United States of America, Business Roundtable, American Investment Council and Longview Chamber of Commerce filed a complaint in the United States District Court for the Eastern District of Texas for declaratory and injunctive relief against the FTC and Lina Khan in her official capacity at the time as Chair of the Commission, challenging the new requirements. The litigation is still pending. Please see Note 24 "Commitments and Contingencies-Litigation" in our financial statements for further information with respect to ongoing litigation between the DOJ and us related to the accuracy and completeness of certain filings made by KKR pursuant to the premerger notification requirements under the HSR Act for certain transactions in 2021 and 2022. - In December 2023, the FTC and the DOJ jointly issued the final updated Merger Guidelines, which describe and guide FTC and DOJ's review of mergers and acquisitions under the federal antitrust laws. These Merger Guidelines reflect the U.S. government's commitment to rigorous and aggressive antitrust enforcement practices under the Biden Administration. Similarly, DOJ enforcement of Section 8 has resulted in several director resignations from companies (including private equity investments) since the effort began in October 2022. Across all areas of antitrust enforcement, FTC and DOJ officials have explicitly identified the private equity industry an area of focus. The increased scope and vigor of antitrust regulation and enforcement could impact our business, the investment activities of us and our funds and the businesses of our portfolio companies. - In November 2022, the FTC issued a policy statement regarding the scope of unfair methods of competition under Section 5 of the Federal Trade Commission Act, declaring that Section 5 reaches beyond the Sherman and Clayton Acts to encompass various types of unfair conduct that tend to negatively affect competition conditions, including private equity roll ups, price discrimination, interlocking directorates, and non-compete agreements. - The FTC announced in September 2022 that it would increase enforcement of the Robinson Patman Act, which targets price discrimination, across all industries. In prior years and recently, the SEC has also been active in promulgating proposed and final rules relating to their oversight of investment advisers. For example: - In May 2023, the SEC adopted changes to Form PF, a confidential form relating to reporting by private funds, which expands existing reporting obligations by requiring large hedge fund advisers to make a filing within 72 hours of certain current reporting events and large private equity fund advisers to provide additional information regarding general partner clawbacks and fund strategy and borrowing in their annual Form PF filings. These changes took effect in December 2023 and June 2024. In addition, the SEC (in May 2023) and the Commodity Futures Trading Commission ("CFTC") (in February 2024), jointly adopted amendments to Form PF that expand the information that private fund advisers must provide in their Form PF filings. The compliance date for these joint amendments is June 2025. The SEC has also adopted new and amended rules applicable to KKR and/or its investment advisory and other entities that, among other things, shorten the deadlines for filing beneficial ownership reports with the SEC, require annual reporting of votes on say-on-pay proxy matters, and increase reporting of short positions in equity securities. - On February 15, 2023, the SEC proposed amendments to the custody rule for SEC-registered investment advisers. If adopted, the amendments would require, among other things, the adviser to: obtain certain contractual terms from each advisory client's qualified custodian; document that privately offered securities cannot be maintained by a qualified custodian; and promptly obtain verification from an independent public accountant of any purchase, sale or transfer of privately offered securities. The amendments also would apply to all assets of a client, including real estate and other assets that generally are not considered securities under the federal securities laws. If adopted, these amendments could expose our registered investment advisers to additional regulatory liability, increase compliance costs, and impose limitations on our investing activities. - The SEC's amended rule for investment adviser marketing became effective in November 2022. The rule increases regulatory obligations and imposes more prescriptive requirements on investment advisers' marketing activities, including prohibitions on advertisements that are misleading or contain material statements that an investment adviser cannot substantiate, as well as requirements for performance advertising and the use of placement agent arrangements. The rule impacts the marketing of certain of our funds and other investment advisory functions both within and outside of the United States. The SEC has settled multiple actions against investment advisers for violating the marketing rule, and compliance with the marketing rule may remain a significant focus in SEC exams. - On October 26, 2022, the SEC proposed a new rule and related amendments to prohibit SEC-registered investment advisers from outsourcing certain services or functions to service providers without meeting certain requirements, including substantial diligence and monitoring obligations. The National Association of Insurance Commissioners ("NAIC") continues to consider various initiatives to change and modernize its financial and solvency regulations. For instance, the NAIC is undertaking a review of regulatory considerations applicable to insurers and reinsurers owned by a private equity firm and has appointed the Macroprudential (E) Working Group ("MWG") to coordinate this workstream. The MWG has adopted a list of "Regulatory Considerations Applicable (But Not Exclusive) to Private Equity (PE) Owned Insurers", which list was subsequently adopted by the NAIC (the "NAIC List"),which consists of regulatory considerations that pertain to the ability of state insurance regulators to effectively monitor the solvency of an insurer owned by a private equity group and to assess risks faced by such insurer's holding company system. The NAIC has referred several of the issues to certain NAIC working groups so that the regulatory considerations set forth in the NAIC List can be further evaluated. These actions signify increased scrutiny of insurance companies owned by private equity firms and the potential for additional regulation. The NAIC and state insurance regulators use the NAIC List to review additional information related to affiliates and investment structures (including revisions to the capital charges for asset-backed securities, in particular CLOs), investment management agreements, governance, market conduct practices and use of third-party administrators. For example, insurance regulators, including the NAIC, have increasingly focused on the terms and structure of investment management agreements, including whether they are at arms' length, establish a control relationship with the insurance company, grant the asset manager excessive authority or oversight over the investment strategy of the insurance company or provide for management fees that are not fair and reasonable or termination provisions that make it difficult or costly for the insurer to terminate the agreement. Regulators have also increasingly focused on the risk profile of certain investments held by insurance companies (including, without limitation, structured credit assets such as collateralized loan obligations), appropriateness of investment ratings and potential conflicts of interest (including affiliated investments), and potential misalignment of incentives and any potential risks from these and other aspects of an insurance company's relationship with alternative asset managers that may impact the insurance company's risk profile. This enhanced scrutiny may increase the risk of regulatory actions against us and could result in new or amended regulations that limit our ability, or make it more burdensome or costly, to enter into or amend existing investment management agreements or advisory with insurance companies and thereby grow our insurance strategy. Our relationships with Global Atlantic and other insurers and reinsurers are subject to additional scrutiny and potentially additional regulatory requirements, which may have a material impact on us. See also "-Risks Related to our Insurance Activities- Global Atlantic's businesses are heavily regulated across numerous jurisdictions, including with respect to capital requirements, and changes in regulation could reduce the profitability of our insurance business." There have been many new regulations, legislation, and initiatives promulgated in the European Union and the United Kingdom in prior years and recently announced, which are applicable to us or our investment vehicles. For example: - In June 2023, the UK's Financial Services and Markets Act 2023 (the "Financial Markets Act") was given royal assent and made significant changes to the UK's financial regulatory framework. The Financial Markets Act contains measures to, among other things: (i) establish a framework for the revocation of EU financial services law that was retained in English law following Brexit; (ii) reform the legislative framework governing the UK's capital markets; (iii) reform the financial promotion framework; and (iv) give the FCA and the Prudential Regulation Authority ("PRA") a new secondary objective to advance long-term economic growth and international competitiveness of the UK. The exact impact of these changes is not yet fully known, but they could result in increasing and, ultimately, potentially significant divergence between the UK's financial services regulatory framework and the EU financial services framework, which could increase regulatory compliance costs across our business and impact the ability of our regulated portfolio companies to scale across the UK and EU markets. - The Alternative Investment Fund Managers Directive ("AIFMD") provides for a comprehensive regulatory and supervisory framework for AIFMs managing or marketing alternative investment funds in the EU. The AIFMD imposes various substantive regulatory requirements on AIFMs, including a subsidiary of ours which is authorized as an AIFM by the Central Bank of Ireland, and there have been a number of significant changes that, if adopted, will affect our business. On August 2, 2021, Commission Delegated Regulation (EU) 231/2013 was amended to require sustainability risks and sustainability preferences to be integrated into the investment decision-making and risk management processes of AIFMs. The amendments applied from August 1, 2022. On March 26, 2024, Directive (EU) 2024/927 ("AIFMD II") amending the AIFMD in the EU was published in the Official Journal of the European Union and entered into force on April 15, 2024. EU member states will have until April 16, 2026 to implement AIFMD II, subject to specific transition provisions for existing loan originating funds and for new reporting requirements. The AIFMD II changes include, but are not limited to, amendments to provisions relating to delegation arrangements, liquidity risk management, supervisory reporting, provision of depositary and custody services and loan origination by alternative investment funds. Additionally, our business could be adversely affected if we or our portfolio companies fail to comply with existing and potential new applicable sustainability regulations. The potential impact to us of these regulations is further described in "-Risks Related to Our Business-We are subject to focus by some of our fund investors, stockholders, regulators and other stakeholders on sustainability matters." Additionally, our business could be adversely affected if we or our portfolio companies fail to comply with existing and potential new applicable regulations relating to artificial intelligence, including the EU AI Act, privacy, data, and information security. The potential impact to us of these regulations is in "-Risks Related to Our Business-Rapidly developing and changing global privacy and data laws and regulations could further increase compliance costs and subject us to enforcement risks and reputational damage" and "-Risks Related to Our Business-Cybersecurity failures and data security breaches may disrupt or have a material adverse impact on our businesses, operations and investments." Any current or future proposed rulemaking or rule amendments may lead to potential changes in the regulatory framework applicable to our business (including any changes or potential changes that are not described above or that we are unaware of or that may arise from new leadership at regulators and in governments in the U.S. and abroad), as well as adverse news media attention, may: impose additional expenses or capital requirements on us; limit our fundraising for our investment products; result in limitations in the manner in which our business is conducted; have an adverse impact upon our results of operations, financial condition, reputation or prospects; impair employee retention or recruitment; and require substantial attention by senior management. It is impossible to determine the extent of the impact of any new laws, regulations, initiatives, or regulatory guidance that may be proposed or may become law on our business or the markets in which we operate. If enacted, any new law, regulation, initiatives or regulatory guidance could negatively impact our funds and us in a number of ways, including: increasing our costs and the cost for our funds of investing, borrowing, hedging or operating; increasing the funds' or our regulatory operating costs; imposing additional burdens on our funds' or our staff; and potentially requiring the disclosure of sensitive information. Even if not enacted, evaluating, and responding to new rulemaking proposals could result in increased costs and require significant attention from management. In addition, we may be materially and adversely affected by changes in the interpretation or enforcement of existing laws and rules by these governmental authorities, courts, regulators, and self-regulatory organizations. New laws, regulations, initiatives or regulatory guidance, or changes in interpretation or enforcement, could make compliance more difficult or more expensive, affect the manner in which we conduct business and divert significant management and operational resources and attention from our business. Moreover, an increase in regulatory investigations and new or enhanced reporting requirements of the trading and other investment activities of alternative investment management funds and firms, including our funds and us, is possible. Such investigations and reporting requirements could impose additional expenses on us, require the attention of senior management, increase the complexity of managing our business, or result in fines or other sanctions if we or any of our funds are deemed to have violated any law or regulations. Current Alternative Asset Manager Legal and Regulatory Environment. We regularly rely on exemptions in the United States from various regulatory requirements, including pursuant to the Securities Act, the Exchange Act, the Investment Company Act, the Commodity Exchange Act and ERISA in conducting our investment management activities. These exemptions are sometimes highly complex and may in certain circumstances, depend on compliance by third parties whom we do not control. If for any reason these exemptions were to become unavailable to us, we could become subject to additional restrictive and costly registration requirements, regulatory action or third-party claims and our business could be materially and adversely affected. For example, in raising new funds or certain other vehicles, we typically rely on private placement exemptions from registration under the Securities Act, including Rule 506 of Regulation D. However, Rule 506 becomes unavailable to issuers (including our funds) if the issuer or any of its "covered persons" (certain officers and directors and also certain third parties including, among others, promoters, placement agents and beneficial owners of 20% of outstanding voting securities of the issuer) has been the subject of a "disqualifying event," which includes a variety of criminal, regulatory and civil matters (so-called "bad actor" disqualification). If our funds (or other vehicles) or any of the covered persons associated with our funds (or other vehicles) are subject to a disqualifying event, one or more of our funds could lose the ability to raise capital in a Rule 506 private offering for a significant period of time, which could significantly impair their ability to raise new funds (or other products) and our ability to organize and offer new funds (or other vehicles), and, therefore, could materially and adversely affect us. We also rely on Rule 506 in connection with our capital markets business activities, including with respect to various fundraising activities discussed above and in connection with transactions in which our investment funds or insurance companies may participate as a sponsor or as a purchaser or a seller of securities. The occurrence of a disqualifying event could materially and adversely affect our ability to raise financings for KKR and our ability to conduct our capital markets business, which depends on KKR's ability to participate in unregistered securities offerings. As we expand the array of vehicles that we offer to retail investors, we may increasingly rely on the Rule 506(c) safe harbor so that we can incorporate general solicitation or general advertising into offerings for certain investment products, which will require us to implement a more robust protocol to validate accredited investor status. In addition, we serve as an investment adviser to a number of investment companies registered under the Investment Company Act of 1940. A disqualification under Section 9(a) of the Investment Company Act of 1940 would bar us and our affiliates from serving in these roles and would materially and adversely affect our business. Even absent a disqualifying event, if the SEC were to initiate any administrative proceeding pursuant to Sections 203(e)(2)-(6) of the Investment Advisers Act of 1940, the SEC could initiate an action to censure, place limitations on the activities of, or suspend or revoke our registration as an investment adviser, which would materially and adversely restrict our ability conduct our business. Similarly, a disqualification event that renders us ineligible to rely on the Qualified Professional Asset Manager (QPAM) exemption as promulgated by the DOL (amendments to which went into effect in July 2024) could have a material adverse effect on our or our affiliates' businesses as we would no longer be able to use this exemption to manage the ERISA assets of third-party investors. In addition, if certain of our employees or any potential significant investor has been the subject of a disqualifying event as "covered persons" (as discussed above), we could be required to reassign or terminate such an employee or we could be required to reduce or refuse the investment of such an investor, which could impair our relationships with investors, harm our reputation, make it more difficult to raise new funds (or other products), or impact our ability to conduct our capital markets business, which depends on KKR's ability to participate in unregistered securities offerings. We are and will become further subject to additional regulatory and compliance burdens because our product offerings and investment platform include retail investors. For example, certain of our investment vehicles are registered under the Investment Company Act as investment companies. These funds and their investment advisers are subject to the Investment Company Act and the rules thereunder, which, among other things, regulate the relationship between a registered investment company and its investment adviser and prohibit or severely restrict principal transactions and joint transactions. In addition, we have one or more affiliates, which provide investment advisory services to a BDC. BDCs are subject to certain restrictions and prohibitions under the Investment Company Act. If the entity fails to meet the requirements for a BDC, it may be regulated as a closed-end investment company under the Investment Company Act and become subject to different regulatory restrictions, which could limit its operating flexibility and in turn result in decreased profitability for our affiliated advisor. We have also launched holding company conglomerates that are structured and operated in a manner that does not subject these entities to registration or regulation under the Investment Company Act. If a holding company conglomerate were required to register under the Investment Company Act, the applicable restrictions could make it impractical for the company to operate its business plans as contemplated, which could cause KKR significant harm and materially and adversely affect our business strategy and prospects. As our business expands, we may be required to make additional registrations under the Investment Company Act or similar laws, including in jurisdictions outside the United States. Compliance with these and other U.S. and non-U.S. rules will increase our compliance costs and create potential for additional liabilities and penalties, which would divert management's attention from our business and investments. Rule 206(4)-5 under the Investment Advisers Act regulates "pay to play" practices by investment advisers involving campaign contributions and other payments to elected state and local officials or candidates for political office who are able to exert influence on government clients. Among other restrictions, the rule prohibits investment advisers from providing advisory services for compensation to a government client for two years, subject to very limited exceptions, after the investment adviser, its senior executives or its covered associates, as defined under Rule 206(4)-5, makes a disqualifying political contribution or other payment to a governmental official. In addition to the two-year cooling off period, a disqualifying contribution presents potential enforcement risk, which may subsequently result in a monetary fine or, more significantly, a disqualification from reliance on the Regulation D exemption, which would further impact KKR's investment advisory business. Advisers are required to implement compliance policies designed, among other matters, to track contributions by certain of the adviser's employees and engagements of third parties that solicit government entities and to keep certain records in order to enable the SEC to determine compliance with the rule. There has also been similar rulemaking on a state-level regarding "pay to play" practices by investment advisers, including in California and New York. FINRA has released its own set of "pay to play" regulations that effectively prohibit the receipt of compensation from state or local government agencies for solicitation and distribution activities within two years of a prohibited contribution by a broker- dealer or one of its covered associates. Any failure on our part to comply with these rules could cause us to lose compensation for our advisory services or expose us to significant penalties, including those mentioned above, as well as reputational damage. Other Financial Markets Regulation. Certain requirements imposed by regulators in the United States and abroad, as well as by U.S. and non-U.S. legislation and proposed legislation, are designed primarily to ensure the integrity of the financial markets or other objectives and are not principally designed to protect our stockholders. These laws and regulations often serve to limit our activities. U.S. federal bank regulatory agencies have issued leveraged lending guidance covering transactions characterized by a degree of financial leverage. Although the status of the U.S. federal bank regulatory agencies' 2013 leveraged lending guidance is currently uncertain as the U.S. Government Accountability Office determined, in October 2017, that such guidance is subject to review under the U.S. Congressional Review Act, the possibility exists that, under the current or future administrations, the U.S. federal bank regulatory agencies could apply leveraged lending guidance in its 2013 form, or implement a revised or new rule that limits leveraged lending by banks. If applied by the U.S. federal bank regulatory agencies as a binding restriction, such guidance or rules could limit the amount or availability of debt financing available to borrowers and may increase the cost of financing we are able to obtain for our transactions and may cause the returns on our investments to suffer. Moreover, there has been recurring consideration among U.S. and non-U.S. regulators regarding the role of nonbank institutions in providing credit and, particularly, so-called "shadow banking," a term generally taken to refer to financial intermediation involving entities and activities outside the regulated banking system. In addition, the Financial Stability Oversight Council ("FSOC"), an interagency body charged with identifying and monitoring systemic risk to financial markets, can designate certain nonbank financial companies as systemically important financial institutions ("SIFI") to be supervised by the U.S. Board of Governors of the Federal Reserve System. Currently, there are no nonbank financial companies with a nonbank SIFI designation. The FSOC has, however, designated certain nonbank financial companies as SIFIs in the past, and additional nonbank financial companies, which may include large asset management companies, may be designated as SIFIs in the future. In November 2023, FSOC adopted amendments to its guidance regarding procedures for designating nonbank financial companies as SIFIs, which eliminated FSOC's prioritization of an "activities-based" approach under its prior guidance for identifying, assessing and addressing potential risks to financial stability. The elimination of an "activities-based" approach over designation of an individual firm as a nonbank SIFI under the amendments to the FSOC's nonbank SIFI designation guidance adopted in November 2023 may increase the likelihood of FSOC designating one or more asset management companies as a nonbank SIFI. If we were to be designated as a SIFI, or if any of our business activities were to be identified by the FSOC or any other regulatory agency as warranting enhanced regulation or supervision by certain regulators, we could be subject to materially greater regulatory burdens, which could adversely impact our compliance and other costs, the implementation of certain of our investment strategies and our profitability. The FSOC 2022, 2023 and 2024 annual reports noted the potential for increased interconnectivity of the financial markets as a result of private equity firms' growing role in the insurance sector and raised concerns with the growing concentration of private debt and other complex alternative investments on the balance sheets of insurers owned by private equity firms. The FSOC 2024 annual report re-emphasized its support for the ongoing monitoring of companies in this industry to ensure scope, the adequacy and effectiveness of regulatory and supervisory tools and its support for strengthening supervisory, credit analysis, risk management and capital frameworks applicable to insurers and reinsurers, including affiliated and offshore entities. In addition, the FSOC 2024 annual report emphasized its support for state insurance authorities and the NAIC to consider concentrations of risk and counterparty exposure to affiliated offshore entities to address the supervisory implications of the growing use of offshore reinsurance, including asset adequacy testing to assess asset-intensive reinsurance and reduce potential incentives for regulatory arbitrage and its support for such regulators to work toward greater disclosure of private market investments and offshore reinsurance in statutory financial reporting, and to consider whether enhancements in supervisory tools and processes related to ratings assessment of, and risk-based capital charges for, such assets should be required. In addition to FSOC's recent focus on the private equity industry more generally, the International Monetary Fund has urged global insurance authorities, and FSOC, to focus specifically on the relationships between private equity and insurance companies and has encouraged regulatory authorities to consider additional oversight of participants in the market for private credit. The SEC has adopted a rule that requires a U.S. broker-dealer, or a natural person who is an associated person of a broker-dealer, to act in the best interest of a retail customer when making a recommendation of any securities transaction or investment strategy involving securities, without placing the financial or other interest of the broker, dealer or natural person who is an associated person of a broker-dealer making the recommendation ahead of the interest of the retail customer ("Regulation Best Interest"). The term "retail customer" is defined as a natural person who uses such a recommendation primarily for personal, family or household purposes, without reference to investor sophistication or net worth. The "best interest" standard would be satisfied through compliance with certain disclosure, duty of care, conflict of interest mitigation and compliance obligations. Regulation Best Interest may impose additional costs to us if we continue to expand our product offerings and investment platforms to retail customers. For discussions of the risks posed by Regulation Best Interest and similar rules on Global Atlantic, see "-Risks Related to Our Insurance Activities-Global Atlantic's businesses are heavily regulated across numerous jurisdictions, including with respect to capital requirements, and changes in regulation could reduce the profitability of our insurance business." The CFTC, and in certain cases the SEC, has proposed or adopted regulations governing transactions in futures and swaps, which may limit our trading activities and our ability to implement effective hedging strategies or increase the costs of compliance. In general, our subsidiaries have not registered as regulated entities with the CFTC, and our funds generally operate pursuant to exemptions from registration, but certain transactions in futures and swaps remain subject to regulatory requirements regardless of our registration status. Among other things, CFTC regulations require aggregation of positions in futures and swaps on physical commodities that are under common ownership, for purposes of compliance with position limits. We and other asset management firms rely on an exemption from aggregation for portfolio companies that hold positions in the relevant contracts. In addition, our funds are subject to regulatory minimum swap margin requirements, which increase the costs of trading and could make it infeasible in certain instances. Any changes in application or interpretation of the rules applicable to futures and swaps, including rules regarding registration, reporting, margin, capital requirements, and position limits, could result in significant costs for us and our funds. Certain of the investment vehicles we manage and certain portfolio companies that engage in originating, lending and/or servicing loans, may consider investments that would subject such investment vehicles or portfolio companies to U.S. state and federal regulation. If our investment vehicles or portfolio companies engage in these activities, they may be subject to state-level regulatory requirements including borrower disclosure requirements, limits on fees and interest rates on some loans, state lender licensing requirements, and other state regulatory requirements, as well as federal regulatory requirements including consumer disclosures and substantive requirements on consumer loan terms and other federal regulatory requirements applicable to consumer lending that generally are administered by the U.S. Consumer Financial Protection Bureau. These U.S. state and federal regulatory programs are designed to protect borrowers. There is a potential for increased risk of legislative and regulatory action that could adversely limit and affect our and our portfolio companies' businesses relating to these activities. U.S. state and federal regulators and other governmental entities, including state attorneys general, have authority to bring administrative enforcement actions or litigation to enforce compliance with applicable lending or consumer protection laws, with remedies that can include fines and monetary penalties, restitution of borrowers, injunctions to conform to law, or limitation or revocation of licenses and other remedies and penalties. In addition, lenders and servicers may be subject to litigation brought by or on behalf of borrowers for violations of laws or unfair or deceptive practices. If we enter into transactions that subject us to these risks, failure to conform to applicable regulatory and legal requirements could be costly and have a detrimental impact on certain of our investment vehicles and ultimately on us. In Europe and the Asia-Pacific, there are also laws and regulations that are designed to ensure the integrity of the financial markets or other objectives and are not principally designed to protect our stockholders, including, for example, our subsidiaries and investment vehicles managed by us outside of the United States which are subject to various laws, rules, regulations, their respective national implementing legislation, including in the EU, the UK, and various countries in Asia-Pacific, including, for example: - the European Market Infrastructure Regulation ("EMIR"), the legislation amending EMIR ("EMIR Refit") and their UK equivalents, which impose various reporting, margining and central clearing requirements on certain derivative transactions;- finalized rules and guidance published by the FCA in July 2022 regarding its Consumer Duty which sets out a standard of care applicable to firms providing products to retail customers. This standard of care sets out certain outcomes related to products and services, price and value, consumer understanding and consumer support. Firms must consider the needs and characteristics of their retail customers to ensure that these outcomes are being met and that the products and services provided are appropriate for the customers in question. These rules only apply to products offered to retail customers in the UK, and as certain of our products are now available to such investors through third-party distributors, these rules may increase the regulatory compliance cost of doing business in the UK;- the second Markets in Financial Instruments Directive ("MiFID II") and its UK equivalent (as implemented in English law via the European Union (Withdrawal) Act 2018, the Markets in Financial Instruments (Capital Markets) (Amendment) Regulations 2021 and the rules of the FCA), which imposes a range of compliance requirements on our business in areas such as transaction reporting, marketing infrastructure and securities and derivatives trading. On March 8, 2024, Directive 2024/790 ("MIFID III") amending MiFID II in the EU and Regulation 2024/791 ("MiFIR II") amending the Markets in Financial Instruments Regulation ("MiFIR") were published in the Official Journal of the EU and entered into force on March 28, 2024. EU member states will have until September 29, 2025 to implement MiFID III. The MiFID III and MiFIR II changes include, but are not limited to, amendments to provisions relating to trade transparency, share and derivatives trading obligations, payment for order flow, transaction reporting and consolidated tape providers;- the Market Abuse Regulation ("MAR") and its UK equivalent, which requires, among other things, systems and controls regarding inside information, record keeping and other prescribed procedures for market soundings, and conflicts of interest and other relevant disclosure when providing investment recommendations;- the EU's Investment Firms Directive and the Investment Firms Regulation and their UK equivalents, which imposes a prudential regime for certain investment firms in Europe (including capital and liquidity standards), as well as various governance and remuneration obligations (including certain performance adjustment requirements to variable remuneration such as malus and clawback that apply in certain circumstances), with different rules applying depending on an investment firm's classification, which is based on factors such as the firm's size and the nature of its activities;- other EU bank regulatory initiatives, including the Second Bank Recovery and Resolution Directive and the European Banking Authority's guidelines on limits to exposures to shadow banking entities which carry out banking activities outside a regulated framework under EU law (including funds employing leverage on a substantial basis, within the meaning of AIFMD and its implementing rules, and credit funds);- the Securitization Regulation and its UK equivalent, which establishes due diligence, risk retention and disclosure regarding certain of our European investments, subsidiaries and CLOs;- the Short Selling Regulation and its UK equivalent, which limits naked short selling of sovereign bonds and stocks;- the Financial Conglomerates Directive and its UK equivalent, which establishes a prudential regime for financial conglomerates to address perceived risks associated with large cross-sector businesses, and could increase the costs of investing in insurance companies, investment firms and banks located in the EU;- the United Kingdom Financial Conduct Authority has heightened its oversight of private markets, initiating thorough reviews to evaluate valuation practices and the management of confidential information within the sector. This heightened regulatory scrutiny is anticipated to lead to increased compliance obligations and oversight measures. As a result, additional laws, regulations and guidance targeting private markets are expected to be introduced in the United Kingdom in the near future;- the Securities Financing Transaction Regulation, which requires securities financing transactions to be reported to trade repositories, places additional reporting requirements on investment managers and introduces prior risk disclosures and written consent before assets are rehypothecated;- the EU regulation on digital operational resilience for the financial sector, designed to harmonize and strengthen digital operational resilience requirements for the EU's financial services sector; and - in addition to applicable antitrust, merger, and acquisition-related laws, rules, and regulations in the United States discussed above, we, our subsidiaries, our investment vehicles, or certain of our investments are also subject to similar laws outside the United States. For example: ?in October 2024, the Australian government released the Treasury Laws Amendment (Mergers and Acquisitions Reform) Bill (the "Bill") introducing significant reforms to Australia's merger laws for which compliance will be formally required commencing on January 1, 2026. The Bill transitions Australia to a mandatory notification administrative regime when certain monetary thresholds are met and where an investment has the requisite nexus to Australia. The Bill will impose extensive new information and document requirements when such filings are required. ?In addition, in November 2022, the EU adopted Regulation (EU) 2022/2560 on foreign subsidies distorting the internal market, which came into force in mid-2023, which, subject to certain thresholds, requires mandatory notification of acquisitions involving financial contributions by non-EU governments. As noted above, any changes or potential or proposed changes in the regulatory framework applicable to our business may impose conduct standards, additional expenses or capital requirements on us; limit our fundraising for our investment products; result in limitations in the manner in which our business is conducted; impair employee retention or recruitment; require substantial attention by senior management; or otherwise materially and adversely impact us. Portfolio Company Legal and Regulatory Environment We are subject to certain laws, such as certain environmental laws, takeover laws, anti-bribery, trade sanctions, economic control, anti-money laundering and anti-corruption laws, escheat or abandoned property laws, antitrust laws, data privacy and data protection laws, foreign direct investment laws and insolvency laws that may impose requirements on us and our portfolio companies as an affiliated group. As a result, we could become jointly and severally liable for all or part of fines imposed on, or debts of, our portfolio companies or be fined directly for violations committed by portfolio companies, and such fines imposed directly on us could be greater than those imposed on the portfolio company. Moreover, portfolio companies may seek to hold us responsible if any fine imposed on them is increased because of their membership in a larger group of affiliated companies. For example, on January 27, 2021, the Court of Justice of the European Union ("CJEU") affirmed the 2014 decision of the European Commission to fine 11 producers of underground and submarine high voltage power cables a total of 302 million euros for participation in a ten-year market and customer sharing cartel. Fines were also imposed, and confirmed by the CJEU, on parent companies of the producers involved, including Goldman Sachs, the former parent company of one of the cartel members. Similarly, on July 29, 2021, the United Kingdom Competition and Markets Authority announced that it had fined a pharmaceutical company and its former parent companies, two private equity firms, more than 100 million British pounds for abuse of dominance by charging excessive and unfair prices. In addition, the DOJ has named private equity sponsors as co-defendants in cases brought under the False Claims Act involving allegedly unlawful conduct by portfolio companies. In various cases, private equity sponsors and portfolio companies have settled claims by agreeing to the payment of substantial monetary penalties. In addition, compliance with certain laws or contracts could also require us to commit significant resources and capital towards information gathering and monitoring, thereby increasing our operating costs. For example, because we may indirectly control voting securities in public utilities subject to regulation by the Federal Energy Regulatory Commission ("FERC"), including entities that may hold electric transmission assets and/or FERC authorization to charge market-based rates for sales of wholesale power and energy, we may be subject to certain FERC regulations, including regulations requiring us and our portfolio companies to collect, report and keep updated substantial information concerning our control of such voting interests and voting interests in other related energy companies, corporate officers, and our direct and indirect investment in such utilities and related companies. Additionally, certain of our portfolio companies may be subject to reporting requirements under, among others, Australia's Foreign Acquisitions and Takeovers Act (1975), which is administered by the Foreign Investment Review Board ("FIRB"), because of the composition of KKR's investment funds, among other reasons. Such rules may subject our portfolio companies and us to costly and burdensome data collection and reporting requirements and penalties for non-compliance. In the United States, certain statutes may subject us or our funds to the liabilities of our portfolio companies. The Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), also referred to as the "Superfund," requires cleanup of sites from which there has been a release or threatened release of hazardous substances and authorizes the U.S. Environmental Protection Agency to take any necessary response action at Superfund sites, including ordering potentially responsible parties liable for the release to pay for such actions. Potentially responsible parties are broadly defined under CERCLA and could include us. In addition, we or certain of our investment vehicles could potentially be held liable under ERISA for the pension obligations of one or more of our portfolio companies if we or the investment vehicle were determined to be a "trade or business" under ERISA and deemed part of the same "controlled group" as the portfolio company under such rules, and the pension obligations of any particular portfolio company could be material. On March 28, 2016, a Federal District Court judge in Massachusetts ruled that two private equity funds affiliated with Sun Capital were jointly and severally responsible for unfunded pension liabilities of a Sun Capital portfolio company. While neither fund held more than an 80% ownership interest of the portfolio company, the percentage required under existing regulations to find liability, the court found the funds had formed a partnership-in-fact conducting a trade or business and that as a result each fund was jointly and severally liable for the portfolio company's unfunded pension liabilities. While a federal appellate court only upheld certain aspects of the District Court holding, if the rationale of the District Court decision were to be applied by other courts, we or certain of our investment funds could be held liable under ERISA for certain pension obligations of portfolio companies. In addition, if this same rationale were expanded to apply also for U.S. federal income tax purposes, then certain of our investors could be subject to increased U.S. income tax liability or filing obligations in certain contexts. Similar laws that could be applied with similar results also exist outside of the United States. Moreover, if the general accounts or separate accounts of one or more of our insurance subsidiaries were to constitute "plan assets" for purposes of ERISA, in the absence of an exemption we could incur liability under the prohibited transaction provisions of ERISA and the Code as a result of any investment management activities by KKR with respect to, or transactions involving Global Atlantic or KKR's investment vehicles with respect to, such general account or separate account assets, and we could become prohibited from being compensated for managing our insurance subsidiaries' assets. See also "-Risks Related to Our Business-Extensive regulation of our businesses affects our activities and creates the potential for significant liabilities and penalties, which could materially and adversely affect KKR- Certain Recent and Potential Regulatory Developments" above regarding the April 2024 U.S. DOL final rule that would materially increase the likelihood that an investment adviser, such as us, could inadvertently become a fiduciary to certain retirement plans by reason of being deemed to have rendered investment advice. Similarly, our portfolio companies may be subject to contractual obligations, which may impose obligations or restrictions on their affiliates. The interpretation of such contractual provisions will depend on local laws. Given that we do not control all of our portfolio companies, and that our portfolio companies generally operate independently of each other, there is a risk that we could contravene one or more of such laws, regulations and contractual arrangements due to limited access and opportunities to monitor compliance. In addition, compliance with these laws or contracts could require us to commit significant resources and capital towards information gathering and monitoring, thereby increasing our operating costs. Because of our ownership interest in portfolio companies, attention on our portfolio companies can also result in attention on us. For example, in the past, heightened governmental scrutiny of the healthcare, educational and other industries has resulted in requests by a U.S. Congressional committee and members of Congress for information from us about our investments in portfolio companies that operate in these industries. Congressional scrutiny and other similar inquiries by governmental bodies may damage our reputation and may also result in potential legislation designed to further regulate portfolio companies or the industries in which they operate, which may materially and adversely affect our portfolio companies' businesses, which in turn could decrease the value of our investments. Significant failures of our investments to comply with laws and regulations applicable to them could affect the ability of our funds or us to invest in other companies in certain industries in the future and could harm our reputation. For additional information about our litigation and regulatory matters, see Note 24 "Commitments and Contingencies-Litigation" in our financial statements. For additional information about regulatory risks we face with respect to portfolio companies in various asset classes, such as real assets, or risks we face with respect to our insurance business, please see other risks discussed in this report, including "-Risks Related to Our Investment Activities-Our investments in real assets such as real estate, infrastructure and energy may expose us to increased risks and liabilities" and "-Risks Related to Our Insurance Activities-Global Atlantic's businesses are heavily regulated across numerous jurisdictions, including with respect to capital requirements, and changes in regulation could reduce the profitability of our insurance business." Anti-corruption, economic sanctions, trade controls, and foreign direct investment laws Federal, state and foreign anti-corruption and economic sanctions, trade control laws and restrictions on foreign direct investment applicable to us and our portfolio companies create the potential for significant liabilities and penalties, the inability to complete transactions, imposition of significant costs and burdens, and reputational harm. If we fail to comply with these laws and regulations, we could be exposed to claims for damages, civil or criminal financial penalties, reputational harm, incarceration of our employees, restrictions on our operations and other liabilities, any of which could materially and adversely affect our business, results of operations and financial condition. In addition, we may be subject to successor liability for Foreign Corrupt Practices Act ("FCPA") violations or other acts of bribery, or violations of applicable sanctions, other trade control, or foreign direct investment laws committed by companies in which we or our funds invest or which we or our funds acquire. We are subject to a number of laws and regulations relating to the prevention of financial crime, including restrictions imposed by the FCPA, as well as economic sanctions and trade control laws administered by the U.S. Department of the Treasury's Office of Foreign Assets Control ("OFAC"), the U.S. Department of Commerce, and the U.S. Department of State, and anti-money laundering laws, including the Corporate Transparency Act (together with its implementing regulations, the "CTA"). The FCPA is intended to prohibit bribery of foreign governments and their officials and political parties and requires public companies in the United States to keep books and records that accurately and fairly reflect those companies' transactions. The CTA is an anti-money laundering law that went into effect January 1, 2024, and requires entities formed or registered to do business in the U.S. that do not qualify for an exemption to disclose beneficial ownership information regarding natural persons who are its "beneficial owners"-which includes 25% or greater beneficial owners, certain senior officers, and other individuals who otherwise exercise "substantial control" over the reporting company-to the U.S. Department of the Treasury's Financial Crimes Enforcement Network ("FinCEN"). However, due to various ongoing litigation efforts challenging the constitutionality of the CTA, legislation passed by the House seeking to extend the CTA's reporting deadlines, and FinCEN's recently-stated intent to assess "options to modify further deadlines or reporting requirements," as-of the date of this report, the go-forward enforceability of the CTA and scope of the CTA's reporting requirements are somewhat unclear. In August 2024, the FinCEN issued a final rule that will require registered investment advisers and exempt reporting advisers to, among other measures, adopt an anti-money laundering and countering the financing of terrorism ("AML/CFT") program and file certain reports with FinCEN starting on January 1, 2026. The final rule will delegate authority to the SEC to examine registered investment advisers and exempt reporting advisers' compliance with these requirements. The final rule will impose additional regulatory obligations related to AML/CFT on our investment advisory business. In May 2024, the SEC and FinCEN issued a joint notice of proposed rulemaking to apply customer identification program (CIP) obligations to both registered investment advisers and exempt reporting advisers; however, as of the date of this report, it is unclear when this rulemaking will be finalized. OFAC, the U.S. Department of Commerce, and the U.S. Department of State administer and enforce various economic sanctions and trade control laws and regulations, including economic and trade sanctions based on U.S. foreign policy and national security goals against targeted foreign states, organizations and individuals. These laws and regulations implicate a number of aspects of our business, including servicing existing investment vehicle investors, finding new investors, and sourcing new investments, as well as activities by the portfolio companies in our investment portfolio or other controlled investments. Some of these regulations provide that penalties can be imposed on us for the conduct of a portfolio company, even if we have not ourselves violated any regulation. In addition, we are subject to the UK Economic Crime and Corporate Transparency Act 2023 (the "UK Corporate Transparency Act"), which aims to prevent the abuse of UK corporate structures and address various financial crimes by introducing measures such as introducing a new criminal offense for large organizations for failing to prevent fraud offenses and reforms the criminal liability regime for corporate entities. The UK Corporate Transparency act also requires in-scope entities to provide additional identification information, such as registered office and email address information and the identities of directors to the UK Companies House. In addition, in June 2024 the European Union published a package of legislation designed to strengthen the EU's anti-money laundering and countering the financing of terrorism rules (the "AML Package"). Certain regulations within the AML Package are designed to harmonize the anti-money laundering rules in the EU and introduces more stringent customer due diligence requirements for in-scope entities, which includes our EU subsidiaries and EU-domiciled investment vehicles managed by KKR. Implementation of the AML Package will be phased in over time with full compliance expected by July 2027. These laws and regulations may impact us, our investment vehicles, or our investments in various ways, including the ways in which we service and onboard fund investors, source new investments, and activities engaged in by the portfolio companies in our investment portfolio or other controlled investments. Further, certain of these regulations provide that penalties may be imposed on us for the conduct of a portfolio company, even if we have not ourselves otherwise violated any regulation. The Iran Threat Reduction and Syrian Human Rights Act of 2012 ("ITRA") expanded the scope of U.S. sanctions against Iran and requires public reporting companies to disclose in their annual or quarterly reports certain dealings or transactions the company or its affiliates "knowingly" engaged in during the previous reporting period involving Iran or other individuals and entities targeted by certain OFAC sanctions. Disclosure of such activity, even if such activity is not subject to sanctions under applicable law, and any sanctions actually imposed on us or our affiliates as a result of these activities, could harm our reputation and have a negative impact on our business. The U.S. government has also implemented and expanded a number of economic and trade sanctions programs and export controls that target Chinese entities and nationals on national security grounds and has imposed restrictions on acquiring and retaining interests in the securities of certain Chinese entities. These initiatives target, for example, entities associated with the Chinese government's response to political demonstrations in Hong Kong, the Chinese government's treatment of Uighurs and other ethnic minorities, the Chinese government's capabilities to conduct surveillance on its own population and internationally, and the capabilities of the Chinese military, paramilitary, security and police forces. The U.S. has also enacted rules aimed at restricting China's ability to obtain advanced computing chips, develop and maintain supercomputers, and manufacture advanced semiconductors, as well as expanded export control laws to reach additional items produced outside of the United States, restricted the ability of U.S. persons to support the development or production of integrated circuits at certain semiconductor fabrication facilities in China, and added new license requirements for certain items destined for China. In return, China has issued rules and laws to counteract the impact of these measures, including by enabling Chinese citizens, legal persons, and other organizations to seek remedies as a result of prohibitions or restrictions on normal economic, trade, and related activities with persons of other countries, and by authorizing the imposition of countermeasures such that a company that complies with U.S. sanctions against a Chinese entity may face penalties in China. China has also instituted tariffs on certain U.S. goods and may impose additional tariffs on U.S. products in the future. Anti-corruption, anti-money laundering, economic sanctions, and trade control laws imposed by non-U.S. jurisdictions, such as EU and UK sanctions or blocking statutes and the UK Bribery Act, may also impose stricter or more onerous requirements than the FCPA, OFAC, the U.S. Department of Commerce, the U.S. Department of State or U.S. Department of Treasury, and implementing them may disrupt our business or cause us to incur significantly more costs to comply with those laws. Different laws may also contain conflicting provisions, making compliance with all laws more difficult. In addition, the U.S. and many non-U.S. countries have laws designed to protect national security or to restrict foreign direct investment. For example, under the U.S. Foreign Investment Risk Review Modernization Act ("FIRRMA"), the Committee on Foreign Investment in the United States ("CFIUS") has the authority to review, block or impose conditions on investments by non-U.S. persons in U.S. companies or real assets deemed critical or sensitive to the United States. Many non-U.S. jurisdictions have similar laws. For example, pursuant to an EU-wide requirement, most EU Member States now have a foreign investment screening mechanism in place or have initiated a consultative or legislative process expected to result in the adoption of such mechanisms or amendments to existing mechanisms. The EU has adopted a regulation aimed at foreign subsidies that could distort the internal EU market. Additionally, outside the EU, certain transactions in Australia are subject to review by the FIRB; transactions in the UK must comply with the National Security and Investment Act 2021; and transactions in China must comply with the Measures for the Security Review of Foreign Investment. In addition, during 2022, Japan enacted economic security legislation to protect Japanese national security from adverse economic activities, focusing in particular on protecting sensitive industry sectors, such as semiconductors, rare earths, infrastructure, as well as research and development of defense and dual-use technologies. More recently, the Department of the Treasury promulgated regulations pursuant to a U.S. Presidential Executive Order establishing an outbound investment screening regime restricting certain investments by U.S. persons in advanced technology sectors in jurisdictions designated as a "country of concern" (presently, as of the date of this report, China, Hong Kong, and Macau). The corresponding notification requirements and prohibitions took effect on January 2, 2025. Other jurisdictions, including the EU, may adopt similar outbound investment restrictions in the future. Additionally, certain U.S. states have enacted their own-state level restrictions on Chinese investments and a number of U.S. states are passing and implementing state laws prohibiting or otherwise restricting the acquisition of interests in real property located in the state by foreign persons. These laws may impact the ability of non-U.S. limited partners to participate in certain of our investment strategies. Under the laws described above, governments have the authority to impose a variety of actions, including requirements for the advanced screening or notification of certain transactions, blocking or imposing conditions on certain transactions, limiting the size of foreign equity investments or control by foreign investors, and restricting the employment of foreigners as key personnel. These actions could limit our ability to find suitable investments, cause delays in consummating transactions, result in the abandonment of transactions, and impose burdensome operational requirements on our portfolio companies. These laws could also negatively impact our fundraising and syndication activities by causing us to exclude or limit certain investors in our funds or co-investors for our transactions. Moreover, these laws may make it difficult for us to identify suitable buyers for our investments that we want to exit and could constrain the universe of exit opportunities generally. Complying with these laws imposes potentially significant costs and complex additional burdens, and any failure by us or our portfolio companies to comply with them could expose us to significant penalties, sanctions, loss of future investment opportunities, additional regulatory scrutiny, or reputational harm.

The activities of our businesses, including the investment decisions we make and the activities of our employees, may subject us, our business, and our employees, officers and directors to the risk of litigation by third parties, including various governmental and regulatory authorities who may conduct examinations, inquiries and investigations of KKR. See "-Risks Related to Our Business-Extensive regulation of our businesses affects our activities and creates the potential for significant liabilities and penalties, which could materially and adversely affect KKR." Other potential litigants include our stockholders, our fund investors, holders of our or our portfolio companies' debt or equity, our insurance policyholders, and a variety of other potential litigants. For a description of certain litigation against KKR, see Note 24 "Commitments and Contingencies-Litigation" in our financial statements. We, our investment vehicles, and our employees are each exposed to the risks of litigation relating to our investment activities or insurance business, as well as relating to actions taken by the officers and directors (some of whom may be KKR employees) of our portfolio companies, such as lawsuits by other stockholders of our public portfolio companies or holders of debt instruments of our portfolio companies. We are also exposed to risks of litigation, investigation or negative publicity in the event of any transactions that are alleged not to have been properly considered and approved under applicable law. An adverse judgment, order or decree could have a material adverse impact to our ability to conduct our business if it were to constitute a disqualifying event under the laws and regulations applicable to our firm. See "-Risks Related to Our Business-Extensive regulation of our businesses affects our activities and creates the potential for significant liabilities and penalties, which could materially and adversely affect KKR- Current Alternative Asset Manager Legal and Regulatory Environment." Although investors in our funds do not have legal remedies against us, the general partners of our funds, our funds, our employees or our affiliates solely based on their dissatisfaction with the investment performance of those funds, such investors may have remedies against us, the general partners of our funds, our funds, our employees or our affiliates to the extent any losses result from fraud, gross negligence, willful misconduct or other similar misconduct. While the general partners and investment advisers to our investment funds, including their directors, officers, employees and affiliates, are generally indemnified to the fullest extent permitted by law with respect to their conduct in connection with the management of the business and affairs of our investment funds, such indemnity generally does not extend to actions determined to have involved fraud, gross negligence, willful misconduct or other similar misconduct. If any civil or criminal lawsuits were brought against us and resulted in a finding of substantial legal liability or culpability, the lawsuit could materially and adversely affect us. In addition, public attention could at any time focus on us, our industry or companies in which our investment vehicles are invested, which could result in heightened scrutiny and criticisms of our business and our investments, including governmental or regulatory inquiries and investigations or other adverse consequences. See "-Risks Related to Our Business-Extensive regulation of our businesses affects our activities and creates the potential for significant liabilities and penalties, which could materially and adversely affect KKR" and "-Risks Related to Our Business-We are subject to focus by some of our fund investors, stockholders, regulators and other stakeholders on sustainability matters." We depend to a large extent on our business relationships and our reputation for integrity and high-caliber professional services to attract and retain investors and qualified professionals and to pursue investment opportunities. As a result, allegations of improper conduct by private litigants or by governmental or regulatory authorities, whether the ultimate outcome is favorable or unfavorable to us, as well as negative publicity and press speculation about us, our investment activities or the private equity industry in general, whether or not valid, may harm our reputation, cause volatility and speculation in the trading of our common stock, and impair our relationships with existing and prospective investors, employees, and other stakeholders.

Our effective tax rate and tax liability is based on the application of current income tax laws, regulations and treaties. These laws, regulations and treaties are complex, and the manner in which they apply to us and our investment vehicles is sometimes open to interpretation. Significant management judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets. Although management believes its application of current laws, regulations and treaties to be correct and sustainable upon examination by the tax authorities, the tax authorities could challenge our interpretation resulting in additional tax liability or adjustment to our income tax provision that could increase our effective tax rate. Tax laws, regulations or treaties newly enacted or enacted in the future may cause us to revalue our net deferred tax assets and have a material change to our effective tax rate and tax liabilities. There could be significant changes in U.S. tax law and regulations. While the likelihood and nature of any such legislation or regulations is uncertain, any such changes could materially increase the amount of taxes we or our portfolio companies are required to pay. Both the current U.S. administration and certain members of the U.S. Congress have stated that one of their top legislative priorities is significant reform of the Internal Revenue Code and other federal tax laws. Among other things, the current U.S. administration and the U.S. Congress may pursue tax policies seeking to alter the income tax rates and brackets applicable to individuals and corporations, exempt certain types of income from taxation, reduce or eliminate energy incentives enacted by the Inflation Reduction Act of 2022, provide tax incentives for domestic production and impose significant new tariffs on foreign goods. Both the timing and the details of any such tax reform are unclear. These changes could materially increase the amount of taxes and tax-related regulatory and compliance costs we and our portfolio companies are required to pay. For example, changes in the corporate tax rate may adversely impact the cash flow of our portfolio companies and result in our investment vehicles selling assets at values that are less than we projected, which could in turn have a negative impact to the investment vehicle's performance and to the pace of realizations. Further, any new regulations relating to compensation for certain covered employees under Section 162(m) could meaningfully reduce the amount of related tax deductions available to us. Additionally, foreign, state and local governments may enact laws that could result in further changes to foreign, state and local taxation and materially affect us in jurisdictions in which we or our portfolio companies operate. In addition to general tax law changes discussed above, there could be significant changes in U.S. federal, state, local or foreign tax law, regulations or interpretations that could adversely affect the taxation of carried interest, which could have an adverse effect on our ability to recruit, retain and motivate employees and key personnel. Investments generally must be held for more than three years for carried interest to be treated for U.S. federal income tax purposes as capital gain. The holding period requirement may result in some of our carried interest being taxed as ordinary income to our U.S. employees and other key personnel, which could materially increase the amount of taxes that they would be required to pay and may incentivize employees to hold investments for longer periods. This may create a conflict of interest between investment vehicle investors (whose investments would receive such capital gain treatment after a holding period of only one year) and the general partner on the execution, closing or timing of sales of investments in connection with the receipt of carried interest. Multi-national companies, such as us, continue to be a focus by the Organization for Economic Co-operation and Development (the "OECD") and other government agencies in jurisdictions in which we and our affiliates invest or do business. The OECD, which represents a coalition of member countries, has sought to make changes to numerous long-standing tax principles through its base erosion and profit shifting ("BEPS") project, which is focused on a number of issues, including profit shifting among affiliated entities in different jurisdictions, interest deductibility and eligibility for the benefits of double tax treaties. The OECD also recently finalized guidelines that recommend certain multinational enterprises to be subject to a minimum 15% tax rate, effective from 2024 ("Pillar Two"). Various countries have implemented or intend to implement the OECD's recommended model rules. By way of example, the Council of the European Union formally adopted Pillar Two and required all 27 EU member states to adopt local legislation during 2023 to implement Pillar Two rules that apply in respect of the fiscal years beginning from December 31, 2023. However, the current U.S. administration is not expected to adopt Pillar Two, creating additional uncertainty as to the application of these rules to multinational enterprises with a U.S. parent entity. Our business and our sponsored vehicles' and portfolio companies' businesses could be significantly impacted if the model rules, or any future variation, have been or will be implemented in any of the countries in which our business, our portfolio companies' businesses, or our investment structures are located. For example, the effect of Bermuda's commitment to the OECD to eliminate harmful tax practices is uncertain and could adversely affect Global Atlantic's tax status in Bermuda. Effective tax rates could increase within our business, our portfolio companies' businesses, or our investment structures, including by way of higher levels of tax being imposed than is currently the case, possible denial of deductions or increased withholding taxes and/or profits being allocated differently. The OECD's proposals may also lead to an increase in the complexity, burden and cost of tax compliance for us and our funds' portfolio companies. Given ongoing design, implementation, administration, and interpretation of such proposals, the timing, scope, and impact of any relevant domestic legislation or multilateral conventions remain subject to significant uncertainty. See Note 18 "Income Taxes" in our financial statements for further information regarding various tax matters.

Our investment management and insurance businesses, and therefore our financial results, are materially affected by market and economic conditions or events throughout the world in the countries in which we operate, invest or have investors, including conditions relating to interest rates, fiscal and monetary stimulus (and stimulus withdrawal), availability of credit, inflation rates, economic uncertainty growth (and contraction), changes in laws (including laws relating to taxation), trade barriers, commodity prices, currency exchange rates, foreign exchange controls, liquidity conditions in equity and debt capital markets, and other conditions or events. These market and economic conditions are not in our control and are often difficult, if not impossible, to predict, manage, mitigate, hedge or foresee. Examples of how these market and economic conditions may materially and adversely affect our businesses include the following, each of which could materially and adversely impact our business or financial results: - the performance and value of the investments held by us and our investment vehicles,- opportunities for us and our investment vehicles to make, exit and realize value from our and their investments,- our ability to find suitable investments or secure financing for investments on attractive terms,- the attractiveness of our investment vehicles and insurance products to investors and policyholders, respectively, including our ability to raise capital for new or successor funds and other investment vehicles on attractive terms,- the frequency and size of fees generated from our capital markets business in connection with the issuance and placement of equity and debt securities, loans and credit facilities,- the availability and cost of capital for our insurance subsidiaries and our investment vehicles' portfolio companies,- policyholder behavior, including policyholders electing to defer paying insurance premiums, stop paying insurance premiums altogether or surrender their policies,- the amount and frequency of claims and policy benefit payments,- the cost of providing guaranteed insurance benefits, and - insurance capital requirements and collateral requirements under various insurance laws and agreements with third parties. In addition, the impact of these conditions has exacerbated, and will likely continue to exacerbate, other risks discussed in this report, including with respect to valuations, the cost of credit and debt financing terms, and our ability to identify, execute and exit investments on attractive terms. In particular, see "-Risks Related to Our Business-Many parts of our earnings and cash flow are highly variable due to the nature of our business." For a discussion of the risks relating to our asset management business, see the disclosures under "-Risks Related to Our Investment Activities," and for a discussion of the risks relating to our insurance business, please see the disclosures under "-Risks Related to Our Insurance Activities."

We rely on third parties whom we do not control for significant operational support and assistance with other aspects of our business, including for various operational, accounting, and data processes and systems as well as on the systems of third parties who provide services to us. Such third parties who provide services to us include law firms, accounting firms, prime brokers, custodians, escrow agents, placement agents, distribution partners, administrators and other consultants and agents to carry out administrative or other services, including insurance policy administration, securities transactions, recordkeeping, tax preparation, government filings, paying agent services, trustee services, technology services, administration services, and tax and accounting services. If any of these processes or systems do not operate properly, are disabled or not appropriately updated, or if the third parties' services are erroneous, sub-standard or otherwise deficient, we could suffer financial loss, a disruption of our businesses, liability to us or our investment vehicles, regulatory intervention, fines, sanctions or reputational damage. In certain third-party service provider relationships, including those where services are provided to our registered investment advisers or broker-dealer subsidiaries, we may be held liable if those service providers, their employees or their own third-party service providers are found to have violated regulations or engaged in misconduct. There can be no assurances that we or one of our investment vehicles will not experience, directly or indirectly, such negative impacts or otherwise be subject to or implicated by litigation or investigations involving any possible violation of such laws by such third-party service providers. For example, we or our investment vehicles may enter into agreements with third parties under which such parties will be entitled to indemnification under certain circumstances, including with respect to sanctions, fines, or penalties, including civil damage actions, imposed in connection with their activities related to our investment vehicles' investments. If we elect to replace any of these third-party service providers, we may incur costs or business disruptions in connection with finding, retaining and operationalizing suitable new providers. In addition, the time and attention of our senior management may be diverted away from ongoing business operations. From time to time, service disruptions have affected our products. For example, Global Atlantic has settled policyholder and agent class action litigation matters and a number of regulatory matters stemming from service disruptions caused by our third-party administrator for life insurance policies. In addition, periods of rapid sales of Global Atlantic's products have resulted and may in the future result in service disruptions, which may cause significant financial and reputational harm and draw increased scrutiny from regulators. A disaster, disruption, error or inability to operate or provide any of these services by us or our vendors or third parties with whom we conduct business, including a disruption involving electronic communications or other services used by us, our vendors or third parties with whom we conduct business, including paying agents and escrow agents, or directly affecting our principal offices, could have a material adverse impact on our financial results and our ability to continue to operate our business without interruption. Our business continuation or disaster recovery programs may not be sufficient to mitigate the harm that may result from such a disaster or disruption. In addition, insurance and other safeguards might only partially reimburse us for our losses, if at all. While we have endeavored to mitigate the risk of other disruptions in the future, there can be no guarantee these mitigation efforts will be successful. We may continue to experience reputational impacts and heightened regulatory scrutiny as a result of these matters. We and these third parties operate in businesses that are highly dependent on information systems and technology, and certain of our businesses are also highly dependent on our ability to process and evaluate, on a daily basis, transactions across markets and geographies in a time-sensitive, efficient and accurate manner. If any of our service providers fails to provide us with timely and accurate data, the accuracy of our financial reporting and our financial statements may be impacted. We cannot ensure that erroneous information received from third parties will be identified and resolved such that the information is included without error, which may impact our business and servicing quality. The precautions we take to prevent and detect this activity may not be effective in all cases. We are subject to risks of errors and mistakes made by these third parties, which may be attributed to us and could materially and adversely affect us. We may be unsuccessful in seeking reimbursement or indemnification from these third-party service providers. In instances where we hold assets at a prime broker or custodian, in the event of the insolvency of such entity, our investment vehicles may not be able to recover equivalent assets in full as they will rank among the prime broker's and custodian's unsecured creditors in relation to assets that the prime broker or custodian borrows, lends or otherwise uses. In addition, our and our investment vehicles' cash held with a prime broker or custodian may not be segregated from the prime broker's or custodian's own cash, and our investment vehicles therefore may rank as unsecured creditors in relation to that cash. The inability to recover assets from the prime broker or custodian could have a material adverse impact on the performance of our investment vehicles and our financial results. Furthermore, we rely on individual consultants and other contingent workers, who are not our employees but work directly in our business alongside our employees. Certain aspects of our business also depends on the efforts, skills, reputations, and business contacts, and conduct of these consultants and other contingent workers, sometimes to the same extent as our employees. We expect to continue to rely on the engagement of consultants and other contingent workers to service important aspects of our business, and our failure to retain them or to find their replacements could adversely impact KKR. In addition, even though these consultants and other contingent workers are not our employees, there are circumstances when their misconduct could adversely impact KKR to the same degree as if they were our employees. The risks of having such consultants and other contingent workers as integral parts of our business are similar to the risks for employees as discussed in "-Risks Related to Our Business-We depend on the efforts, skills, reputations, business contacts, and conduct of our employees and our ability to retain our employees and to recruit prospective employees."

As part of Global Atlantic's overall risk management strategy, it cedes business to other insurance companies through reinsurance. Global Atlantic's inability to collect from its reinsurers (including reinsurance clients in transactions where Global Atlantic reinsures business net of ceded reinsurance) on its reinsurance claims could have a material adverse effect on us. Although reinsurers are liable to Global Atlantic to the extent of the reinsurance coverage it acquires, Global Atlantic remains primarily liable as the direct insurer on all risks that it writes; therefore, Global Atlantic's reinsurance agreements do not eliminate its obligation to pay claims. As a result, Global Atlantic is subject to the risk that it may not recover amounts due from reinsurers. The risk could arise primarily in two situations: (1) Global Atlantic's reinsurers may dispute some of its reinsurance claims based on contract terms, and, as a result, Global Atlantic may receive partial or no payment or (2) Global Atlantic's reinsurers may default on their obligations. While Global Atlantic may manage these risks through transaction-related diligence, contract terms, collateral requirements, hedging, and other oversight mechanisms, Global Atlantic's efforts may not be successful. A reinsurer's insolvency, or its inability or unwillingness to make payments due to Global Atlantic under the terms of the relevant reinsurance agreements, could have a material adverse effect on us. Global Atlantic also bears the risk that the companies that reinsure its mortality risk on a yearly renewable term, where the reinsurer may reset the premium and other terms each year, increase the premiums they charge to levels Global Atlantic deems unacceptable. If that occurs, Global Atlantic will either need to pay such increased premiums, which will affect margins and financial results, or alternatively, Global Atlantic will need to limit or potentially terminate reinsurance, which will increase the risks that Global Atlantic retains. Conversely, certain of our insurance subsidiaries assume liabilities from other insurance companies. Changes in the ratings, creditworthiness or market perception of such ceding companies or in the administration of policies reinsured to Global Atlantic could cause policyholders of contracts reinsured to Global Atlantic to surrender or lapse their policies in unexpected amounts. In addition, to the extent such ceding companies do not perform their obligations under the relevant reinsurance agreements, Global Atlantic may not achieve the results intended and could suffer unexpected losses. Certain reinsurance transactions require additional operational support, administration, regulatory filings and compliance with jurisdiction-specific laws and regulations, subjecting Global Atlantic to additional scrutiny and risks. See also "Global Atlantic's growth strategy includes reinsurance of insurance obligations written by unaffiliated insurance companies, and its ability to both consummate and realize the anticipated financial benefits from reinsurance transactions is uncertain." These risks could materially and adversely affect us.