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.[7] In the early years, the firm was a successful trader and pioneer in 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, and resigned all its stock exchange memberships.[8] 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.[9] In 1973 the presiding judge informed the NYSE that he planned to rule in Jefferies' favour. Membership was opened to brokerage firms owned by other kinds of companies, so long as 80 percent of brokerage was conducted with the public.[10] Jefferies rejoined the exchange in March 1973.
The period during which IDS owned Jefferies was tumultuous and ultimately in September 1973 Boyd Jefferies bought back the company, then based in Los Angeles.[11] 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.[12]
In 1987, Boyd Jefferies was charged by the government and the Securities and Exchange Commission with two securities violations: "parking" stock for a 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.[13]
1988–1999
Frank Baxter took over as CEO in 1987 and under his leadership the company focused on diversification, moving beyond its third market niche.[14] In 1990, Jefferies derived approximately 80 percent of its revenues from equity block trades. In that year, following the collapse of Los Angeles-based Drexel Burnham Lambert, the fifth largest investment bank at the time, Jefferies hired 60 of its bankers and traders, including Jefferies' current chairman and CEO, Richard B. Handler.[15] The hires marked the firm's entry into the high yield markets and investment banking. Three years later Jefferies launched its first sector-focused investment banking effort by hiring a group of bankers from Howard Weil, an oil and gas specialty boutique. In March 1994, Jefferies acquired a 25% stake in BBY, 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) that traded portfolios and matched buyers and sellers automatically. The company created a wholly owned subsidiary, Investment Technology Group
2000–2010
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, Jefferies took advantage of the dislocation created during the credit crisis to enter several new business segments, including mortgage-backed securities and municipal bonds. On June 17, 2009, after several primary dealers, including Lehman Brothers, Bear Stearns, and Merrill Lynch, either collapsed or were acquired by other firms, Jefferies was named one of just 17 primary dealers 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.[19]
2010 onward
In November 2011, Jefferies was accused by Egan-Jones of having 77% of its shareholder's equity tied up in the same illiquid sovereign debt securities that just toppled MF Global.[26] This was accompanied by a concurrent large-scale short seller attack and a campaign of what turned out to be misinformation. Handler and the management team responded with unprecedented immediacy and transparency, collapsed 75% of the position to prove the bonds were hedged and highly liquid, sharply reduced the rest of Jefferies balance sheet and publicly addressed every false accusation. This aggressive and unconventional response resulted in an eventual 100% increase in Jefferies share price from the November lows. Leucadia, a 29% shareholder, later called this event Jefferies' "finest hour."[27]
On April 16, 2012, Jefferies CEO Richard Handler and Chairman of the Executive Committee Brian Friedman formed the Jefferies Global Senior Advisory Board which includes James D Robinson III, Lord Hollick, Michael Goldstein, Bernard Bourigeaud, Dennis Archer, Gilles Pélisson and Sir David Reid.[28]
