| Type | Public (NYSE: JEF) |
|---|---|
| Industry | Investment services |
| Founded | 1962 |
| Headquarters | New York City, New York, United States |
| Key people | Richard B. Handler, Chairman & CEO |
| Products | Financial Services Investment Banking |
| Revenue | $2.85 billion USD (2010) |
| Net income | $283 million USD (2010) |
| Employees | ~3,800 |
| Website | www.jefferies.com |
Jefferies & Company, Inc., the principal operating subsidiary of Jefferies Group, Inc. (NYSE: JEF) is a 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 & Company offers mergers and acquisitions (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 market 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 City, Jefferies has over 25 offices in U.S. cities, including Boston, Los Angeles and San Francisco as well as in leading financial centers around the world that include London, Frankfurt, Zürich, Hong Kong, Singapore, Shanghai, and Mumbai.
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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.[1] 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 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 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 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.[2]
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 Jefferies' current 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.[3]
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:
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.
Beginning in 2009, the firm expanded its European businesses. Based in London, the newly established European Rates unit became an official member of the Federal Republic of Germany's bidding group in October 2009, a Gilt-edged Market Maker (GEMM) appointed jointly by the UK Debt Management Office and London Stock Exchange and was recognised as a Dutch Primary Dealer by the Dutch State Treasury, both in December 2009. Additionally, in February 2010 Jefferies were appointed as an EBT (Especialistas em Bilhetes do Tesouro) for Treasury Bills and as an OMP (Operadores de Mercado Primário) for long-term bonds by the Portuguese Treasury and Government Debt Agency (Instituto de Gestão da Tesouraria e do Crédito Público, IGCP). Jefferies is also providing liquidity across the whole spectrum of other European government bonds.
Jefferies also continues to develop a strong European presence in Agency, Supranational, Covered Bond and Structured Note markets.
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, restructuring, and recapitalization.