1335249--3/28/2008--HIGHBURY_FINANCIAL

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Risks Related to the Financial Services Industry and Aston The financial services industry faces substantial regulatory risks and we may experience reduced revenues and profitability if our services are not regarded as compliant with the regulatory regime. We may face legal liability that may result in reduced revenues and profitability. We face strong competition from financial services firms, many of whom have the ability to offer clients a wider range of products and services than we offer, which could lead to pricing pressures that could have a material adverse affect on our revenue and profitability. The investment advisory fees we receive may decrease in a market or general economic downturn, which would decrease our revenues and net income. Aston s investment advisory contracts are subject to termination on short notice. Termination of a significant number of investment advisory contracts will have a material impact on our results of operations. To the extent Aston is forced to compete on the basis of price, it may not be able to maintain its current fee structure. Termination of Aston s sub-advisory contracts could have a material adverse impact on the Aston Funds performance, and consequently, on our revenues and operating results. Aston depends on third-party distribution channels to market its investment products and access its client base. A substantial reduction in fees from assets under management generated by third-party intermediaries could have a material adverse effect on its business. A change of control of our company would automatically terminate our investment management agreements with our clients, unless our managed account clients consent and, in the case of fund clients, the funds board of trustees and shareholders voted to continue the agreements. If Aston s advisory contracts are assigned, we may receive a benefit in connection with the sale of Aston s business only if certain conditions are met. Investors in open-end funds can redeem their investments in these funds at any time without prior notice, which could adversely affect our earnings. A decline in the prices of securities, the performance of the Aston Funds or changes in investors preference of investing styles could lead to a decline in our assets under management, revenues and earnings. Loss of key employees could lead to the loss of clients, a decline in revenue and disruptions to our business. Any significant limitation or failure of Aston s software applications and other technology systems that are critical to its operations could constrain its operations. We could suffer losses in earnings or revenue if our reputation is harmed. We rely on a few major clients for a significant majority of our business, and the loss of any of these clients, or adverse developments with respect to the financial condition of any of our major clients could reduce our revenue. If we issue capital stock or convertible debt securities in connection with the acquisition of another investment management firm, your equity interest in us could be reduced. Difficult market conditions may adversely affect our ability to execute our business model, which could materially reduce our revenue and cash flow and adversely affect our business, results of operations or financial condition. to the Structure of our Business The agreed-upon expense allocation under our revenue sharing arrangement with Aston may not be large enough to pay for all of Aston s operating expenses. The failure to receive regular distributions from Aston will adversely affect us. In addition our holding company structure results in substantial structural subordination that may affect our ability to make payments on our obligations. Aston s autonomy limits our ability to alter its day-to-day activities, and we may be held responsible for liabilities it incurs. Risks Relating to Ownership of our Warrants If we are unable to maintain a current prospectus relating to the common stock underlying our warrants, our warrants may have little or no value and the market for our warrants may be limited. We may choose to redeem our outstanding warrants when a prospectus relating to the common stock issuable upon exercise of such warrants is not current and the warrants are not exercisable. Our securities are registered only in specific states, and you may not be able to exercise your warrants if you are not located in one of such states. Our outstanding warrants may be exercised in the future, which would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders. This might have an adverse effect on the market price of the common stock. Risks Related to Ownership of our Common Stock If our stockholders who acquired their shares or warrants prior to or contemporaneously with our initial public offering exercise their registration rights or sell their securites, it may have an adverse effect on the market price of our common stock. Our securities are quoted on the OTC Bulletin Board, which limits the liquidity and price of our securities more than if our securities were quoted or listed on The Nasdaq Stock Market or another national exchange. The market price for our common stock could be volatile and could decline, resulting in a substantial or complete loss of your investment. Future sales of our common stock may depress the price of our common stock.

Full 10-K form ▸

1335249--3/28/2008--HIGHBURY_FINANCIAL_INC