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Jefferies & Company, Inc., the principal operating subsidiary of Jefferies Group, Inc. ( ) is a major global investment bank and institutional securities firm. Jefferies provides clients with capital markets and financial advisory services, institutional brokerage, securities research and asset management.

Jefferies offers capital markets, merger and acquisition (M&A), restructuring and other financial advisory services. The firm also provides investors fundamental research and trade execution in equity, equity-linked, and fixed income securities, including corporate bonds, United States government and agency securities, repo finance, mortgage- and asset-backed securities, municipal bonds, whole loans and emerging markets debt, as well as commodities and derivatives. In addition, Jefferies provides asset management services and products to institutions and other investors.

Headquartered in New York Citymarker, Jefferies has over 25 offices in U.S. cities, including Bostonmarker, Los Angelesmarker and San Franciscomarker as well as in leading financial centers around the world that include Londonmarker, Frankfurtmarker, Zürichmarker, Hong Kongmarker, Singaporemarker, Shanghai, and Mumbaimarker.

History

1962 - 1987

Jefferies was founded by Boyd Jefferies in 1962. The firm started with $30,000 in borrowed capital, which Boyd Jefferies used to purchase a seat on the Pacific Coast Stock Exchange. In the early years, the firm was a successful trader and pioneer in the what would be called the "third market" which allowed for the trading of listed stocks directly between institutional investors in an over-the-counter style, providing an liquidity and anonymity to buyers. In addition to its third market niche, Jefferies pioneered use of the split commissions in 1964.

By 1965, Jefferies had joined the Detroit, Midwest, Boston, and Philadelphiamarker stock exchanges. In 1967, the company joined the New York Stock Exchangemarker (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 was acquired in 1969 by Minneapolis-based Investors Diversified Services (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 was charged by the government and the Securities and Exchange Commission with two securities violations: "parking" stock for customer Ivan Boesky and a customer margin violation. Jefferies, who had also earlier testified against Boesky, 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. Boyd Jefferies resigned from the company in 1987.

1988-1999

Frank Baxter took over as CEO and under his leadership, the company focused on diversification, delving beyond its third market niche. In 1990, Jefferies derived approximately 80 percent of its revenues from equity block trades. In that year, Los Angeles-based Drexel Burnham Lambert, the fifth largest investment bank at the time, collapsed following the conviction of its leading investment banker, Michael Milken. Following the collapse of Drexel, Jefferies hired 60 bankers and traders from the defunct bank, 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. In March 1994, Jefferies acquired a 25% stake in BBY Ltd, an Australian stockbroking and corporate advisory firm.

Baxter's expansion plans also 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.

Since 2000

In January 2000, Frank Baxter stepped down as president of Jefferies and relinquished the CEO title later that year. In January 2001, Handler became Chairman and 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 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 September 2001, the firm moved its headquarters from Los Angeles to New York. During this period, Jefferies built its investment banking division primarily by acquiring boutique advisory firms with specific sector expertise, most notably Randall & Dewey (energy) and Broadview (technology). Significant acquisitions during this period included:

  • FS Private Investments, renamed Jefferies Capital Partners, 2001
  • Lawrence Helfant, an institutional trading specialist, August 2001
  • Quarterdeck Investment Partners, an aerospace and defense advisory firm, December 2002
  • Broadview International, a technology-focused advisory firm, December 2003
  • Randall & Dewey, an energy-focused advisory firm, February 2005
  • Helix, a private equity fund placement firm, May 2005
  • LongAcre Partners, a media advisory firm, May 2007
  • Putnam Lovell, a financial services advisory firm, July 2007
  • Depfa First Albany Securities, municipal securities, March 2009


Beginning in 2008, the firm took advantage of the dislocation created during the credit crisis to enter several new business segments, including mortgage-backed securities and municipal bonds. In June 2009, Jefferies has become a primary dealer participating in the New York Fed’s open-market buying and selling of securities and Treasury auctions and providing market information to the New York Fed. Including Jefferies, 17 firms have been designated as primary dealers by the New York Fed. A number of former primary dealers, including Lehman Brothers, Bear Stearns and Merrill Lynch, either collapsed or were acquired by other firms.

Jefferies also developed existing business units significantly. Recently the firm hired more than 35 healthcare-focused investment-banking professionals from UBS, expanded its product offerings and recruited professionals in equity capital markets and restructuring and recapitalization.

References

  1. Boyd L. Jefferies Dies at 70; Headed Institutional Broker. New York Times, August 25, 2001
  2. The Trials And Errors Of Boyd Jefferies. New York Times, January 15, 1989
  3. JEFFERIES GROUP TO SPLIT ITSELF INTO 2 PARTS. New York Times, March 19, 1998
  4. JEFFERIES GROUP TO ACQUIRE LAWRENCE HELFANT. New York Times, August 21, 2001
  5. Canada: Jefferies Acquires An Advisory Unit. Reuters, June 22, 2007




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