Jefferies Group

Jefferies & Company

Jefferies & Company
Company type	Public NYSE: JEF
Industry	Investment services
Founded	1962
Headquarters	New York, New York
Key people	Richard B. Handler, Chairman & CEO
Products	Financial Services Investment Banking
Revenue	$2.71 billion USD (2007)
Net income	$144 million USD (2007)
Number of employees	2,254 (2006)
Website	www.jefferies.com

Jefferies & Company, Inc., the principal operating subsidiary of Jefferies Group, Inc. (NYSE: JEF) is a full-service global investment bank and institutional securities firm focused on growth companies and their investors. Headquartered in New York, with nearly 30 offices around the world, Jefferies provides clients with capital markets and financial advisory services, institutional brokerage, securities research and asset management. Jefferies has offices in leading financial centers including New York, Boston, Los Angeles, San Francisco, London, Zürich, Paris, and Shanghai with recent office openings in Frankfurt and New Delhi. Jefferies provides a broad range of investment banking services in a number of global growth sectors including aerospace and defense, cleantech, consumer, energy, healthcare, industrial and technology. The firm is also a leader in the sale of global equities, convertible and high yield bonds, providing a variety of leading-edge solutions in sales, trading, analysis and investment management for institutional investors and high net worth individuals.

History (1962 - 1999)

Jefferies & Company was started in 1962 at the Pacific Coast Stock Exchange by Boyd Jefferies. In the early years, the firm was a successful trader in the emerging "third market," which involved trading listed stocks in an over-the-counter style, providing an attractive anonymity to buyers. In addition to the third market niche, Jefferies pioneered use of the split commissions in 1964. By 1965, Jefferies had joined the Detroit, Midwest, Boston, and Philadelphia stock exchanges. In 1967, the company joined the New York Stock Exchange (NYSE), opening a five-person office in New York. The growing third market helped Jefferies become the seventh largest firm in size and trading on the NYSE during those years.

Jefferies & Company was acquired in 1969 by Minneapolis-based Investors Diversified Services, Inc. (IDS), the second largest U.S. financial services company at the time. Jefferies saw the acquisition as a means to increase the size of its institutional business with additional capital. However, because IDS did not derive at least 50 percent of its gross income from broker-dealer operations, Jefferies had to quit the New York exchange under Exchange Rule 318. In 1971, IDS and Jefferies filed an antitrust lawsuit against the exchange, seeking $6 million in damages. Jefferies and its parent company claimed that the NYSE Big Board was an illegal monopoly, and that exclusion had placed the company at a competitive disadvantage. In 1973, the presiding judge informed the NYSE that he planned to rule in Jefferies favor. Membership was opened to brokerage firms owned by other kinds of companies, so long as 80 percent of brokerage was conducted with the public. Jefferies rejoined the exchange in March 1973.

The period during which IDS owned Jefferies was tumultuous and ultimately Boyd Jefferies bought back the company in August 1973. By 1977, Jefferies had expanded with offices in Los Angeles, New York, Chicago, Dallas, Boston and Atlanta. Jefferies went public on October 13, 1983, with an initial offering of 1.75 million shares at $13 per share. By 1984, according to Business Week, Jefferies was among the ten most profitable publicly held brokerages. International expansion led the company to develop a new overseas office in London, headed by Frank Baxter. In 1986, Baxter became president and chief operating officer, returning to New York to manage the company.

In 1987, Boyd Jefferies, founder and CEO, was charged by the government and the SEC with two securities violations: "parking" stock for customer Ivan Boesky and a customer margin violation. Jefferies pleaded guilty, receiving a fine and a probation barring him from the securities industry for five years. The company itself was not charged, but its brokerage unit was censured by the SEC. Jefferies resigned from the company.

Frank Baxter took over as CEO and under his leadership, the company focused on diversification, delving beyond its third market niche. Baxter's expansion plans included global expansion in electronic trading, corporate finance, international convertible sales, and derivative sales. Jefferies also moved quickly into the fourth market: off-exchange, computer-based (electronic) trading. In the fourth market, the broker's position was eliminated by the Portfolio System for Institutional Trading (POSIT), which traded portfolios and matched buyers and sellers automatically. The company created a wholly owned subsidiary (Investment Technology Group) in 1987 to run POSIT. Investment Technology Group was eventually spun-off as a separate public company in 1999.

Beginning in 1990, Jefferies sought to diversify its business which derived about 80 percent of revenues from equity block trades. In that year, Los Angeles-based Drexel Burnham Lambert, the fifth largest investment bank at the time, collapsed. Jefferies hired 60 bankers and traders from the defunct Drexel Burnham Lambert, most notably the chairman and CEO, Richard B. Handler, marking its entry into the high yield markets and investment banking. Three years later, Jefferies launched its first sector-focused investment banking effort, hiring a group of bankers from Howard Weil, an oil and gas specialty boutique.

History (2000 - Today)

In January 2000, Frank Baxter stepped down as president of Jefferies and relinquished the CEO title later that year. In January 2001, Handler became CEO and John Shaw became sole president and COO. Handler and Shaw set out to build a fully integrated investment bank and to develop a merchant bank. The new leadership proposed to fire people who didn't produce, give equity to every employee and diversify the firm's revenue with asset management, a more aggressive buildup of investment banking and merchant banking.

In 2001, Brian Friedman, former president of Furman Selz, joined Jefferies with his 12-person private equity team to head what would become Jefferies Capital Partners.

In April 2008, investment company Leucadia National acquired a 14% stake in Jefferies which was subsequently increased to almost 30%.

Notable acquisitions:

• Putnam Lovell (financial services advisory firm) - July 2007
• Helix (private equity fund placement group) - May 2005
• Randall & Dewey (energy-focused advisory firm) - February 2005
• Broadview International (technology-focused advisory firm) - December 2003
• Quarterdeck Investment Partners, LLC (aerospace and defense advisory firm) - December 2002
• BBY Ltd (25% stake in Australian stockbroking and corporate advisory firm) - March 1994

Management

• Richard B. Handler, Chairman & Chief Executive Officer
• Brian P. Friedman, Chairman, Executive Committee (JG) Chairman of the Executive Committee
• David Weaver, President, Jefferies International Ltd.
• Andrew R. Whittaker, Vice Chairman
• Peregrine Broadbent, Chief Financial Officer and Executive Vice President
• Chris M. Kanoff, Executive Vice President and Co-Head Investment Banking
• Lloyd H. Feller, General Counsel and Executive Vice President

External links

• Jefferies & Company - Official Website

Sources

• New York Times article
• Los Angeles Business Journal article
• Background source
• Background source