2022 ANNUAL REPORT
Building a Distinct,
Growing and Durable
Global Wall Street Firm
JANUARY 9, 2023
Dear Fellow Shareholders,
From 2009 through 2021, the world was awash with incredibly cheap
(in some cases, nearly free) capital, as friendly stimulus became the antidote
to every financial problem rearing its ugly head. Even recent geopolitical
trauma and a global pandemic were no match for the central bank
printing presses of nations around the globe. Modest unemployment and
non-existent inflation somehow cohabitated in harmony. In 2021, the
environment was “near perfection” for Jefferies, as well as for many of our
clients. With 2022 behind us, the dreamy days of easy money and nonstop
“risk on” as a guiding mantra have passed into the history books.
Before we get too melancholy, there are more than a few reasons for us to
be optimistic, despite the industry-wide slowdown in 2022 and the litany
of other crosscurrents we are still facing. At the top of our list is our belief
that capital formation is not dead, it is just resting. It is incredibly difficult
to price risk and capital when interest rate increases have no end in sight.
This uncertainty makes everything freeze up and that is what happened in
2022, with this freeze eventually working its way into the M&A market.
The good news is that the pace and slope of interest rate increases appear
to be declining, which implies, unless something unusual happens, we are
closer to the thawing of the capital markets than the initial deep freeze.
Investors understand this and will begin acting in anticipation of the new
interest rate regime. As long as the stabilized rates aren’t unduly excessive
(and thus far, it appears they will be navigable), the world will go back to
pricing risk, as well as pursuing new capital formation and increased M&A.
We have no crystal ball and don’t know if this will start at some point in
2023 or 2024, but we are confident it is only a matter of time—it always is.
Jefferies could not be better positioned for this eventuality.
We have spent the last five years focusing on two goals: First, to do
everything in our power to position Jefferies as the best full service
global investment banking firm. Second, to optimize and monetize
our legacy merchant banking portfolio and return to our shareholders
any excess capital. In 2022, we finally crossed over to become a
straightforward, highly focused and readily understandable pure-play
investment banking firm.
Capital formation
is not dead, it is
just resting. ...
As long as the
stabilized rates aren’t
unduly excessive
(and thus far, it
appears they will
be navigable), the
world will go back
to pricing risk, as
well as pursuing new
capital formation and
increased M&A. ...
Jefferies could not be
better positioned for
this eventuality.
2
#6
IN BOTH M& A AND
ECM GLOBALLY
#7
GLOBALLY IN COMBINED
M& A, ECM AND
LEVERAGED FINANCE
$1.1
Billion
CAPITAL RETURNED TO
SHAREHOLDERS IN 2022
$5.0
Billion
Ironically, 2022 also was the year that two of Jefferies’ most important
businesses—IPOs and leveraged finance—were substantially closed
due to unique market conditions. It is easy to think that this confluence
of events is beyond frustrating and would cause us to question our
original assumptions and strategic direction. For us, this could not be
further from the truth. While part of our team was successfully wrapping
up some additional legacy asset sales, preparing a major spin-off to
shareholders and collapsing our holding company structure, the vast
majority of our team did such a solid job that Jefferies’ overall results
in 2022 were incredibly respectable. Not only were we able to deliver a
10.3% return on adjusted tangible equity in a “really tough year,” but more
importantly, we continued to build upon the significant investments in
people and infrastructure we have made over the past decades. We
have never been more optimistic about our human capital, product
capabilities, industry expertise and geographic breadth. Our goal is to
continue to gain market share, further strengthening our “never better”
competitive position, and continue our quest to be the best full service
global investment banking firm.
Jefferies’ 2022 total investment banking revenues, while down 38% from
an off-the-charts 2021, represented our second-best year ever and were
substantially above 2019 levels. Our advisory net revenues were only
5% below last year’s all-time record result, while our underwriting net
revenues were down 59% due to the IPO and leveraged finance markets
being substantially closed for much of the year, as discussed above. Our
combined equities and fixed income revenues were down only 19% versus
2021 and up meaningfully versus 2019.
Most significantly, for our fiscal 2022, Jefferies was the #6 largest
investment banking firm in both global M&A, as well as global equity
capital markets (excluding China), up from #12 and #13, respectively,
only five years ago. We also moved up one spot from the prior year to #7
globally in combined M&A, ECM and leveraged finance, an improvement
from #10 in 2017. It is worth noting that all the competitors ahead of us on
these lists are trillion dollar plus global bank holding companies who often
lead with their balance sheet, while Jefferies leads with ideas, expertise
and human capital.
CAPITAL RETURNED
TO SHAREHOLDERS OVER
THE LAST FIVE YEARS
Our Equities franchise continued to expand in breadth and capability,
while gaining market share across the majority of equity products in
2022. We achieved a U.S. ranking of #6 and a European ranking of #7
for equity research, while we were ranked #3 best overall in Asia for
JEFFERIES 2022 ANNUAL REPORT 3
combined equity research and sales. While our Fixed Income business
was down for the year, our fourth quarter was up over 71% and we carried
that momentum through the first month of fiscal 2023.
As mentioned above, monetizing our legacy merchant banking portfolio
and returning capital to shareholders remains one of our overriding
priorities, and we made continued progress in 2022. We expect to take a
further important step later this week with our spin-off to shareholders
of Vitesse Energy (“Vitesse”). In 2022, we returned an aggregate of $1.14
billion to shareholders in the form of $280.1 million in dividends and the
repurchase of 25.6 million shares for a total of $859.6 million, or $33.58
per share. Over the last five years, we have now returned $5.0 billion in
total capital to shareholders, representing two-thirds of total tangible book
value at January 1, 2018 and including 152.8 million shares repurchased
at an average of $23.57 per share. Further, our Vitesse spin-off delivers
to our shareholders an additional estimated more than $500 million of
our shareholders’ equity. Pro forma for the Vitesse spin-off, we will have
returned over $5.5 billion in total capital to shareholders over the last five
years, representing over 72% of tangible book value at January 1, 2018.
Our goal is to continue
to gain market share,
further strengthening
our “never better”
competitive position,
and continue
our quest to be the
best full service
global investment
banking firm.
JEFFERIES 2022 ANNUAL REPORT 4
OBSERVATIONS AS WE PROCEED IN 2023
Be Aware and Wary of the Macro Forces,
But Focus On What You Can Effect.
At this point in our careers, we would like to think we have seen it all, but
even if we haven’t, we probably have seen enough. Everyone who knows
us is likely tired of hearing our experiences and lessons from all the
ups and downs over the past three-plus decades. In just the 2020s, we
have experienced a global pandemic, an active European war, incredible
tension between the two leading world powers, the storming of the U.S.
Capitol Building, dramatic declines in the prices of most risk assets,
raging inflation, a series of massive interest rate increases and the
freezing up of the equity and leveraged finance new issue markets.
And this is just the last three years!
We have stopped waiting for a “return to normalcy” because, after being
beaten over the head for a combined 55 years at Jefferies, it is crystal
clear to us that volatility, crosscurrents, surprises and challenges are
what is normal. There is a relatively obscure movie where an aging Jack
Nicholson looks back on his frustrating life and wonders: “What if this
is as good as it gets?” We accept the complicated world for what it is,
and we count our lucky stars Jefferies is in a position to confront it with
outstanding resources and capabilities and find growing opportunity
everywhere we look. Instead of driving ourselves nuts anticipating what
will be thrown next at us, we are continuing to make sure our foundation is
tremendously secure in terms of capital, risk systems, smart self-imposed
limits and diversification by product, service, sector and geography.
As important as our financial footing is our cultural foundation
at Jefferies. A team that is honest, transparent, empowered,
entrepreneurial, ambitious, diverse and committed will get the job done
regardless of the environment. With solid diversification of risk and
opportunity, as well as the right team, we can devote our resources
exclusively to the benefit of our clients—this will allow Jefferies not
only to survive all the turmoil, but to find opportunities within each
challenge. Many of our competitors have different approaches to these
macro issues, as well as their capital foundation and culture, and often
this provides Jefferies with the opportunity to succeed, better serve
our clients and grow our market share. We have done this consistently
for many decades, and our confidence in this approach has only been
reinforced in recent years.
JEFFERIES 2022 ANNUAL REPORT 5
Every senior leader
at Jefferies, including
the two of us, proudly
lives and works in
the trenches every
single day in
partnership with
our teammates
for the benefit of
our clients.
Flatter for Longer.
One of our differentiators at Jefferies has been the flatness of our
organization. Every senior leader at Jefferies, including the two of us,
proudly lives and works in the trenches every single day in partnership with
our teammates for the benefit of our clients. Jefferies has always attracted
the kind of individual who relishes truly adding value by providing great
advice and execution tailored to our clients’ needs. We create, innovate
and solve the most important problems for our clients, whom we care
deeply about. We have said it before, but we cannot say it enough:
for Team Jefferies, everything is personal.
So, what happens when an organization grows to over 5,000 people and the
hierarchy remains incredibly flat? We are not saying we have the same firm
structure as we did 10, 20 or 30 years ago, because we clearly have made
necessary changes, but those who know us or work at Jefferies realize how
flat we really are—only an email or phone call away. There are many upsides
to this structure. Issues get elevated instantly. There is really no place to
hide at our firm and if you are lazy, political, ineffective or a conniver—
we will find you, quickly. In fact, our structure is so well known that for the
most part those types of people don’t even bother to apply because they
know that they would not last long at Jefferies.
On the other hand, if you are special, you will also be identified and
embraced, and your responsibility and position will rise very quickly
because, quite frankly, we can never have too many of these partners at
our firm. We admit proudly that we need the help and certainly do not have
all the answers. Clearly, we provide our people with a lot of guidance and
oversight, but we trust our people more than many of our competitors do
and we believe our firm is better for this partnership. Promotions are earned
and celebrated at Jefferies, but rewarding career paths are valued even
more highly. As we continue to grow our firm, we will remain cognizant
that we must make adjustments to manage our growth, but the underlying
message is that everyone is an active contributor and no task is below
anyone’s pay grade, continuing to keep us hungry, motivated and humble.
JEFFERIES 2022 ANNUAL REPORT A team that is
honest, transparent,
empowered,
entrepreneurial,
ambitious, diverse
and committed will
get the job done
regardless of the
environment.
6
We Love Our Support Teams.
We are very cognizant of what goes into supporting Jefferies from an
operational, technological and legal perspective, since we have been
building from the ground up everything one sees at Jefferies today
versus inheriting the infrastructure, legacy systems and businesses
that our massive bank holding company competitors have possessed
for what feels like forever. We don’t take for granted any of the people
who settle our trades, build or support our technology, monitor our
risk, market our brand, keep us in compliance or otherwise support
our team and business. Jefferies’ ownership mentality and “can do”
entrepreneurial spirit permeates the entire support team of our firm,
as much as it does the folks directly touching our clients. This is a
secret weapon at Jefferies and we have never been let down, not
even once. Going forward, this team will continue to be integral to
our collective success.
Practical and Honest ESG.
We embrace ESG as individuals and as a firm not because we want
check marks from graders to tell us that we passed, but because we
believe it is the best way to run a business and live one’s life. We know
that having a diverse group of people with different backgrounds and
experiences will always help us make the best long-term decisions,
regardless of the problem or issue. We are grateful that through our
eight Employee Resource Groups (“ERGs”), many employees have
taken wonderful and deserved leadership roles throughout Jefferies
and appreciate every day where we are getting better because of their
efforts and the contagiousness of their drive, personalities and beliefs.
We have made great progress as a firm, and we are proud of it. That
said, we also know there are areas where we have room for major
improvement, most notably the diversity of our senior operating ranks.
We are committed to building a more diverse firm and have long-term
action plans to achieve specific results, while remaining steadfast in
hiring the most qualified individuals for each role. We are confident that
we will get to where we want to be and are as impatient and focused as
every member of our ERGs (and countless others throughout Jefferies)
who share with us these same beliefs.
Another example is fossil fuels. We believe in the reality of climate
change and understand the pressure on all of us to transform the way
JEFFERIES 2022 ANNUAL REPORT 7
the world deals with energy. We consider this one of the most important
responsibilities of our generation, as we pass the baton to the next. We
have made tremendous strides in this regard throughout our firm and are
proud to be leaders. However, it is also clear to us that this switch is not
an on/off, but rather a dimmer that will take time. For every action there is
a reaction, and a cold turkey stop will cause short-term problems that will
preclude us from solving the more important long-term issue. That is why
we are working with our clients to do our best to finance and implement a
smart, long-term transition that is practical, intelligent and sustainable.
The point here is that Jefferies is a firm that stands up for what is right
and we have no issue questioning conventional thinking regardless of
the short-term implications. That said, a mature, all-encompassing and
realistic view of each issue is required, and then specific action must
be charted and we must be held accountable. This approach is more
nuanced, honest and valuable than contorting to a short-term goal of an
arbitrary checklist.
Building a Distinct, Growing and Durable Firm.
Jefferies has always played the long game and for over 60 years has been
building a distinct, growing and durable firm around client service and talent.
Our success reflects the power of continuity of strategy and focus, and is
borne out by our results and growth over time. Today, our value proposition is
built on three pillars that set us apart from other leading firms:
First: differentiated insight. Our success is driven by distinct industry,
market and strategic insights. We have in-depth research and investment
banking coverage of virtually every industry sector, allowing us to deliver
unique macro and sector perspectives and analyses. This further translates
for our clients to bespoke advice tailored to their needs and challenges and
informed by our vast expertise.
Second: relationships matter. At Jefferies, every relationship is personal
—client engagements are partnerships and high-touch. We strive to
deploy the full resources of our firm to meet our clients’ needs every
time. Similarly, we are built for global collaboration, without borders or
bureaucracy. This has been true since Jefferies was founded and is why
we’ve become one of a handful of investment banking firms that truly
matter, with a consistent repeat client base. With our relentless focus on
client service first, our clients trust that we care about their business and
their success as much as they do.
JEFFERIES 2022 ANNUAL REPORT 8
$48+
Million
DONATED IN THE LAST 5 YEARS
Third: we are a firm built on immediacy and client service. With a flat,
nimble and entrepreneurial culture, Jefferies treats each person as an
individual and values them as a partner. As a result, Jefferies has become
an increasingly more powerful magnet for the best talent. We expect to
attract more special partners, but more importantly we will retain our
existing team. Our team is driven to anticipate and deliver precisely what
our clients need when they need it. Underlying our continuing growth story
is that no matter the conventional wisdom, groupthink or market cycle at
any given time, we are patient, focused on the long-term and committed to
serving our clients best.
Doing Good is Good Business.
One of our biggest privileges at Jefferies is being surrounded by our
team, clients and shareholders who work in concert to devote our global
platform to raising enormous amounts of precious dollars for those in the
world who are far less fortunate than all of us. In 2022, we sent over $13
million to support the people of Ukraine within days of the war breaking
out. In the past five years, we have distributed over $48 million, providing
aid and relief efforts for Australia’s wildfires, COVID-19, Haiti, Hurricane
Dorian, Asia Pacific Tonga and Ukraine. Additionally, we and others at
Jefferies contribute a great amount of our personal money and, more
importantly, our time to countless causes throughout our communities
around the globe to help make a difference in the lives of so many in
need of assistance. This is the culture at Jefferies, as it permeates our
newest hires, our most senior leaders and everyone in between. This is a
responsibility and a privilege, and we are incredibly proud that it will always
be an important and permanent part of the Jefferies social fabric.
JEFFERIES 2022 ANNUAL REPORT 9
JEFFERIES RANKING ACROSS GLOBAL M&A, ECM AND LEVERAGED FINANCE
#10 #9
#8
#7
2 017
2 018 -2 019
2 0 2 0 -2 0 21
2 0 2 2
Now, for a further update on our businesses:
INVESTMENT BANKING
For fiscal 2022, Jefferies ranked as the 7th largest investment banking firm
globally across our three core businesses—M&A, equity capital markets and
leveraged finance. This ranking represents a record for our firm and sustains
a multi-decade trajectory of market share growth.
We have been able to elevate our market position because we have been
providing our clients with differentiated service. This is a result of our
consistent investment across the cycle in (i) the best sub-sectoral experts in
every major field of business activity and (ii) an ever-expanding and extensive
local team across the globe. Most importantly, our exceptional team delivers
the entirety of our firm’s resources and capability to every client and every
transaction. This combination—the best sub-sectoral experts, an extensive
global footprint and a culture of service—has made Jefferies a unique
investment banking partner for our clients.
With each year that passes, the expanding breadth of our resources and
the stability and longevity of our team further extend these advantages.
Commensurately, our competitors (primarily bank holding companies) have
increasingly moved away from a culture of service and prioritizing professional
talent and towards a balance sheet and off-the-shelf product model, which
JEFFERIES 2022 ANNUAL REPORT 10
has served to further differentiate our clients’ experience in partnering
with Jefferies.
While our market position and share has continued to elevate, the
deterioration in capital markets over the course of 2022 materially reduced
our short-term opportunity. In M&A, we were able to achieve near record
revenues in 2022, despite an 11% reduction in the global fee pool, reflecting
the strength of our offering and our increased standing amongst clients
globally. Conversely, in ECM and leveraged finance, our revenues declined
by 69%, commensurate with a decline in fee pools of 60%, representing the
weakest capital markets fee pools since 2009. While our absolute revenue
in 2022 represents a significant decline from our record results in 2021, the
strength of our team, elevation of our market position and the continued
opportunity we have to add the most talented professionals globally to our
firm (all as reflected in our exceptional advisory results) leaves us optimistic
about our ability to serve clients and deliver revenue growth over the cycle.
Consistent with our opportunity and longstanding strategy, in 2022
we continued to invest in our team in order to further serve our clients,
with notable additions to our senior team across the TMT, Consumer,
Healthcare and Industrials sectors, as well as further investments in areas
of specialization such as private capital advisory and EMEA restructuring.
We also continued to expand our global reach and capability, further
expanding our teams in France, Italy, Scandinavia, Hong Kong, India and
Southeast Asia (Singapore).
The strength of our team, elevation of
our market position and the continued
opportunity we have to add the most
talented professionals globally to our firm
(all as reflected in our exceptional advisory
results) leaves us optimistic about our
ability to serve clients and deliver revenue
growth over the cycle.
JEFFERIES 2022 ANNUAL REPORT 11
JEFFERIES FINANCE
The dislocation in the leveraged finance market presented a difficult
backdrop for Jefferies Finance (“JFIN”), our lending joint venture
with MassMutual. JFIN posted a net loss of $129 million for 2022,
as commitments to LBO transactions were sold at a loss or marked
down at year-end in anticipation of their syndication. JFIN has been highly
productive over the years and, despite these challenges, is well-positioned
entering 2023. JFIN remains focused on utilizing its expanded underwriting
capacity from our strategic alliance with Sumitomo Mitsui Financial Group
(“SMFG”) to grow market share as the environment improves and credit
markets stabilize. We expect that, similar to prior market downturns, JFIN
will emerge stronger from this period, and again prove the strength of our
market position and the resiliency of our business model.
JFIN is also focused on growing the asset management segments of
its business, as we build upon the tangible progress achieved in 2022
raising and managing third party capital across our private credit and
CLO vehicles. JFIN goes to market with a distinct advantage that sets it
apart from its competitors, as JFIN is able to leverage our longstanding
investment banking relationships to source high quality loan investment
opportunities. With the recent expansion of JFIN’s capital raising team,
JFIN expects continued growth in lending capacity leading to significant
value creation for Jefferies.
JEFFERIES 2022 ANNUAL REPORT 12
BERKADIA
Berkadia, our commercial real estate finance and investment sales 50/50
joint venture with Berkshire Hathaway, generated $283 million of pre-
tax income and $259 million of cash earnings for 2022. After a robust
start to the year, rising interest rates slowed debt and investment sales
volume in the second half. Reduced fee revenue was offset by net interest
income increasing 44% to $109 million. Total debt originations were $39.4
billion, up 4% from the prior year. Debt origination volumes with Freddie
Mac, Fannie Mae and HUD were $18.8 billion, down 14% from the prior
year. Third-party funded originations were $19.1 billion, up 26% from the
prior year. Investment sales volumes were $28.5 billion, up 34% from
the prior year. Debt origination and additional third-party loan servicing
arrangements increased our loan servicing portfolio to a new record of
$389.9 billion by year-end, up 19% in twelve months.
Berkadia continues to invest in and develop its mortgage banking
and investment sales networks. Despite a slowing real estate market,
Berkadia’s growing servicing portfolio and market share in core debt
origination and investment sales combine to position Berkadia for
continued success in 2023 and beyond.
SMFG ALLIANCE
In July 2021, we entered a strategic alliance with Sumitomo Mitsui
Financial Group to collaborate on future corporate and investment banking
business opportunities. The first twelve months of our strategic alliance
were limited by COVID lockdowns that prevented travel to facilitate our
collaboration, as well as the limited window in the leveraged finance market
in 2022 meaningfully reducing our near-term joint opportunity. Over the
last few months, we have been experiencing increasing engagement and
We are incredibly pleased that our long-held
thesis of aligning a great global Wall Street
firm with a substantial, forward-looking global
commercial bank holding company is playing
out well and will provide the opportunity to
expand our businesses considerably.
JEFFERIES 2022 ANNUAL REPORT 13
Jefferies is now
among a select few
leaders in global
equities.
momentum, including our first jointly underwritten IPO, and we expect
accelerating success in 2023.
Our opportunities to collaborate are expanding and Jefferies is working
together with SMFG to develop further ways to work together to better serve
our clients globally. We are incredibly pleased that our long-held thesis of
aligning a great global Wall Street firm with a substantial, forward-looking
global commercial bank holding company is playing out well and will provide
the opportunity to expand our businesses considerably.
EQUITIES
Our Equities net revenues of $1.06 billion reflected strong performance,
despite a challenging market environment experienced across all
developed global equity markets. 2022 was a year that saw Jefferies
continue to benefit from consolidation, with improved market share and
ranking across research, sales and trading in every region. Jefferies is
now among a select few leaders in global equities.
The Jefferies equities strategy is built on three pillars: advisory and insight
driven by our equity and macro research teams, differentiated distribution
around the world, and cutting-edge execution capabilities. Our global
research effort is now recognized as one of the top equity research
JEFFERIES 2022 ANNUAL REPORT 14
franchises across relevant surveys. We produced a record high of more
than 34,000 research reports in 2022.
Our client footprint has expanded by approximately 20% over the last five
years, resulting in record commission and advisory payment levels. We
are excited about the opportunities to continue expanding our market
share gains as we add more solutions for our clients through expanded
product capabilities and intensified global footprint.
FIXED INCOME
Our Fixed Income trading results in 2022 declined 20% versus 2021, as
persistent inflation caused the Federal Reserve to embark on its largest
tightening campaign since the 1970s. While we were prudent in reducing
inventory and risk, we did take losses in our commercial mortgage business
as spreads widened meaningfully in that market. The good times always
take care of themselves, and it is smarter to assess a business in a period
of severe dislocation and rising rates to best judge the team and strategy. By
these measures, we could not be happier with our team as they enter 2023.
In 2022, we continued to improve our client franchise and take market
share, particularly in our credit businesses. Our ongoing focus on
technology-enabled trading capabilities and strong collaboration between
the high touch and low touch desks has enabled us to help our clients
reposition risk in these difficult markets, increasing our relevance and
driving incremental opportunities in high yield. By expanding this strategy
across other businesses globally, we anticipate similar improvements in
both market share and revenues.
We continue to execute our plan to grow our European fixed income business
and synergistically complement the investments we are making in European
investment banking. We were voted by our clients as having the #1 net
positive business momentum in European credit for the third year in a row.
LEUCADIA ASSET MANAGEMENT
Despite a turbulent year with sustained high volatility and declines in
most major indices and asset classes, Leucadia Asset Management
(“LAM”) continued to grow its key operating metrics, namely assets under
management (“AUM”) and management fee related revenue. The overall
value proposition of our offering of actively managed, alternative strategies
was enhanced and highlighted in an environment where the S&P, HFRI
Hedge Fund Index, Bloomberg High Yield and Bloomberg Investment Grade
indices were down 11%, 8%, 13% and 17%, respectively, while our strategies
on a whole outperformed these indices.
JEFFERIES 2022 ANNUAL REPORT 15
This relative outperformance has led to sustained AUM increases despite
a difficult fund-raising environment. (We define AUM as assets of funds
and separately managed accounts managed by us or an affiliated asset
manager in which we have an equity interest or with whom we have an
ongoing revenue sharing arrangement.) AUM increased by 22% from
$23.8 billion to $29.1 billion during fiscal 2022. $2.3 billion of the increase
was organic growth from managers that were on the LAM platform at the
beginning of the year. The gains were driven in particular by positive flows
into CoreCommodity (commodities), Schonfeld (multi-manager) and Point
Bonita (alternative credit trade finance). This continues the trend from
prior years leading to a 52% increase in management fee related revenue
to $50.5 million. The growth in AUM suggests a solid base for a continued
increase in the coming year.
We continued to expand the offerings of alternative strategies on our
platform, adding Hildene (opportunistic structured credit), Illuminate
(fin-tech focused venture capital), ISO-mts (financial institution niche
credit), Pearlstone (European credit) and Tephra (liquid digital assets).
These strategies often take a bit of time to get traction and build their
track records but with the offerings that were added in prior years we
believe we are well positioned with a diversified offering for institutional
investors. We also have a strong pipeline of new opportunities as we seek
to continue to enhance our product offering.
ANNUAL MEETING AND INVESTOR MEETING
Thanks for hearing us out. We look forward to answering any further
questions you may have at our upcoming Annual Meeting on March
29, 2023. We also will hold our annual Jefferies Investor Meeting on
October 17, 2023, at which time you will have the opportunity to hear
from our senior leaders across the Jefferies platform. We thank all of
you—our clients and customers, employee-partners, fellow shareholders,
bondholders, vendors and all others associated with our businesses—
for your continued partnership and support.
Sincerely,
RICHARD B. HANDLER
BRIAN P. FRIEDMAN
Chief Executive Officer
President
JEFFERIES 2022 ANNUAL REPORT 16
Appendix
The following tables reconcile financial results reported in accordance with
generally accepted accounting principles ("GAAP") to non-GAAP financial
results. The Shareholder Letter contains non-GAAP financial information to
aid investors in viewing our businesses and investments through the eyes
of management while facilitating a comparison across historical periods.
However, these non-GAAP financial measures should be viewed in addition to,
and not as a substitute for, reported results prepared in accordance with GAAP.
Reconciliation of Return on Adjusted Tangible Equity
($ millions)
Net income attributable to common shareholders (GAAP)
Intangible amortization and impairment expense, net of tax
Adjusted net income attributable to common shareholders
(non-GAAP)
($ millions)
Shareholders' equity (GAAP)
Less: Intangible assets, net and goodwill
Less: Deferred tax asset
Less: Weighted average year-to-date impact of cash dividends
and share repurchases
(Unaudited)
Year Ended
Nov. 30, 2022
$
$
777
8
785
Nov. 30, 2021
$
10,554
(1,898)
(328)
(671)
Adjusted tangible shareholders' equity (non-GAAP)
$
7,657
Return on adjusted tangible shareholders' equity (non-GAAP)
10.3%
Calculation of Tangible Book Value as of January 1, 2018
($ millions)
Shareholders' equity (GAAP)
Less: Intangible assets, net and goodwill
Tangible book value (non-GAAP)
BERKADIA
Reconciliation of Pre-Tax Income to Cash Earnings
($ millions)
Pre-tax income (GAAP)
Less: Gains attributable to origination of mortgage
servicing rights
Amortization, impairment and depreciation
Unrealized (gains) losses; and all other, net
Cash earnings (non-GAAP)
Dec. 31, 2017
$
$
10,106
(2,463)
7,643
(Unaudited)
Year Ended
Nov. 30, 2022
$
$
283
(241)
190
27
259
ADDITIONAL SHAREHOLDER LETTER NOTES
Market Position Statistics presented within the Shareholder Letter are
referenced from several independent sources, as noted below:
Dealogic
• 6th globally in mergers and acquisitions and equity capital markets (excluding
China), up from #12 and #13, respectively five years ago
• 7th globally in mergers and acquisitions, equity capital markets and leveraged
finance, up from #10 in 2017
• 7th globally in Equity Underwriting; 6th in EMEA and 7th in the U.S.
in Equity Underwriting
• Global mergers and acquisitions fee pool declined 11% in 2022
• Equity capital markets and leveraged finance global fee pool declined by 60%
Coalition Greenwich 2022 Fixed Income Study
• 1st in net positive business momentum in European Credit
for three years in a row
Research II
• #6 in U.S. equity research
• #7 in European equity research
Asiamoney
• 3rd best overall combined research and sales
CAUTIONARY NOTE ON FORWARD-LOOKING
STATEMENTS
This letter contains certain “forward-looking statements” within the meaning of
the safe harbor provisions of the U.S. Private Securities Litigation Reform Act
of 1995. Forward-looking statements are based on current views and include
statements about our future and statements that are not historical facts. These
forward-looking statements are usually preceded by the words “should,” “expect,”
“intend,” “may,” “will,” “would,” or similar expressions. Forward-looking statements
may contain expectations regarding revenues, earnings, operations, and other
results, and may include statements of future performance, plans, and objectives.
Forward-looking statements may also include statements pertaining to our
strategies for future development of our businesses and products. Forward-
looking statements represent only our belief regarding future events, many of
which by their nature are inherently uncertain. It is possible that the actual results
may differ, possibly materially, from the anticipated results indicated in these
forward-looking statements. Information regarding important factors, including
Risk Factors that could cause actual results to differ, perhaps materially, from
those in our forward-looking statements is contained in reports we file with the
SEC. You should read and interpret any forward-looking statement together with
reports we file with the SEC. We undertake no obligation to update or revise any
such forward-looking statement to reflect subsequent circumstances.
Past performance may not be indicative of future results. Different types of
investments involve varying degrees of risk. Therefore, it should not be assumed
that future performance of any specific investment or investment strategy will be
profitable or equal the corresponding indicated performance level(s).
JEFFERIES 2022 ANNUAL REPORT
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(cid:2) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended November 30, 2022
OR
(cid:3) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission file number 1-5721
JEFFERIES FINANCIAL GROUP INC.
13-2615557
New York
(I.R.S. Employer Identification No.)
(State or other jurisdiction of
incorporation or organization)
(Exact name of registrant as specified in its charter)
520 Madison Avenue,
New York, New York
(Address of principal executive offices)
10022
(Zip Code)
(212) 284-2300
Registrant’s telephone number, including area code:
Securities registered pursuant to Section 12(b) of the Act:
Title of each class:
Trading Symbol(s)
Name of each exchange on which registered:
Common Shares, par value $1 per share
4.850% Senior Notes Due 2027
2.750% Senior Notes Due 2032
JEF
JEF 27A
JEF 32A
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes (cid:2)
No (cid:3)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes (cid:3)
No (cid:2)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes (cid:2)
No (cid:3)
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be
submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit such files).
Yes (cid:2)
No (cid:3)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See the definitions of ‘‘large accelerated filer,’’ ‘‘accelerated
filer,’’ ‘‘smaller reporting company,’’ and ‘‘emerging growth company’’ in Rule 12b-2 of the Exchange Act.
Large accelerated filer (cid:2)
Smaller reporting company (cid:3)
Accelerated filer (cid:3)
Non-accelerated filer (cid:3)
Emerging growth company (cid:3)
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. (cid:3)
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the
effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.
7262(b)) by the registered public accounting firm that prepared or issued its audit report. (cid:2)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes (cid:3)
No (cid:2)
Aggregate market value of the voting stock of the registrant held by non-affiliates of the registrant at May 31, 2022
(computed by reference to the last reported closing sale price of the Common Shares on the New York Stock Exchange on
such date): $6,658,740,985.
On January 19, 2023, the registrant had outstanding 226,162,081 Common Shares.
DOCUMENTS INCORPORATED BY REFERENCE:
Certain portions of the registrant’s Definitive Proxy Statement pursuant to Regulation 14A of the Securities Exchange Act of 1934
in connection with the 2023 Annual Meeting of Shareholders are incorporated by reference into Part III of this Form 10-K.
JEFFERIES FINANCIAL GROUP INC.
INDEX TO ANNUAL REPORT ON FORM 10-K
November 30, 2022
PART I.
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART II. FINANCIAL INFORMATION
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases Equity Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 6. [Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Consolidated Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revenues by Source. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-interest Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounting Developments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Critical Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liquidity, Financial Condition and Capital Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Index to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management’s Report on Internal Control Over Financial Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reports of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9B. Other Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.. . . . . . . . . . . . . . . . . . . .
PART III. OTHER INFORMATION
Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 13. Certain Relationships and Related Transactions, and Director Independence. . . . . . . . . . . . .
Item 14. Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART IV. EXHIBITS AND SIGNATURES
Item 15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 16. Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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PART I
Item 1. Business
Introduction
Jefferies Financial Group Inc. (‘‘Jefferies,’’ ‘‘we,’’ ‘‘us’’ or ‘‘our’’) is a U.S.-headquartered global full service,
integrated investment banking and securities firm. Our largest subsidiary, Jefferies LLC, a U.S. broker-dealer,
was founded in the U.S. in 1962 and our first international operating subsidiary, Jefferies International Limited, a
U.K. broker-dealer, was established in the U.K. in 1986. Our strategy focuses on continuing to build out our
investment banking effort, enhancing our capital markets businesses and further developing our Leucadia Asset
Management alternative asset management platform.
Our global headquarters and executive offices are located at 520 Madison Avenue, New York, New York 10022.
We also have regional headquarters in London and Hong Kong. Our primary telephone number is 212-284-2300
and our Internet address is jefferies.com where we make available, free of charge, our annual reports on
Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and amendments to those reports
filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as well as proxy
statements, as soon as reasonably practicable after we electronically file with the U.S. Securities and Exchange
Commission (‘‘SEC’’) and can also be viewed at sec.gov.
The following documents and reports are also available on our public website:
• Audit Committee Charter
• Code of Business Practice
• Compensation Committee Charter
• Corporate Governance Guidelines
• Corporate Social Responsibility Principles
• Reportable waivers, if any, from our Code of Business Practice by our executive officers
• ESG, Diversity, Equity and Inclusion Committee Charter
• Health and Safety Policy
• Human Rights Statement
• Nominating and Corporate Governance Committee Charter
• Risk and Liquidity Oversight Committee Charter
• Supplier Code of Conduct
• Sustainable Investment Statement
• Whistle Blower Policy
We may use our website to disclose public information. We encourage you to visit our website for additional
information. In addition, you may also obtain a printed copy of any of the above documents or reports by
sending a request
to Investor Relations, Jefferies Financial Group Inc., 520 Madison Avenue, New York,
NY 10022, by calling 212-284-2300 or by sending an email to info@jefferies.com.
Jefferies Group LLC Merger into Jefferies Financial Group Inc.
On November 1, 2022, we streamlined and simplified our corporate structure by merging Jefferies Group LLC
with and into Jefferies Financial Group Inc. Prior to the merger, Jefferies Group LLC, a direct wholly-owned
subsidiary, was an SEC reporting company, filing annual, quarterly and periodic financial reports. The merger
has eliminated the requirement for two sets of SEC filings and other duplicative processes. In addition, in
connection with the merger, we assumed the debt obligations of Jefferies Group LLC.
1
Business Segments
We report our activities in two business segments: (1) Investment Banking and Capital Markets and (2) Asset
Management.
• Investment Banking and Capital Markets provides investment banking, capital markets and other related
services to our clients. We provide underwriting and financial advisory services across most industry
sectors in the Americas; Europe and the Middle East; and Asia. Our capital markets businesses operate
across the spectrum of equities and fixed income products. Related services include prime brokerage,
equity finance, research and strategy, corporate lending and real estate finance. Investment Banking and
Capital Markets also includes our corporate lending joint venture (‘‘JFIN Parent LLC’’ or ‘‘Jefferies
Finance’’), our commercial real estate finance joint venture (‘‘Berkadia Commercial Holding LLC’’ or
‘‘Berkadia’’) and our automobile lending and servicing activities.
• Asset Management provides alternate investment management services to investors globally. In addition,
through our asset management efforts, we often invest seed or additional strategic capital for our own
account in the strategies offered by us and affiliated asset managers.
Previously we reported certain businesses and activities as part of a Merchant Banking reportable segment and a
Corporate reportable segment. This legacy portfolio of businesses and investments are reflected in our
consolidated results as consolidated subsidiaries, equity investments, securities or in other ways. We have been
liquidating this portfolio through third party sales and distributions to shareholders and are committed to winding
down this portfolio and returning excess capital to shareholders. During the year ended November 30, 2022 and
in connection with the merger, we transferred these merchant banking investments primarily to our Asset
Management reportable segment. These investments are now managed by the respective segment managers and
we have revised our reportable segment presentation accordingly. Additionally, corporate activities are now fully
allocated to either the Investment Banking and Capital Markets reportable segment or the Asset Management
reportable segment. Prior year amounts have been revised to conform to the current segment reporting.
Financial information regarding our reportable business segments for the years ended November 30, 2022, 2021
and 2020 is set forth in Note 24, Segment Reporting in our consolidated financial statements included in this
Annual Report on Form 10-K in Part II, Item 8 as updated by Exhibit 99.1 to our Form 8-K filed on October 7,
2022. Also, refer to Management’s Discussion and Analysis in Part II., Item 7 for further information about
changes in the presentation of our revenues and results of operations.
Our Businesses
Investment Banking and Capital Markets
Our Investment Banking and Capital Markets segment focuses on Investment Banking, Equities and Fixed
Income. We primarily serve institutional investors, corporations and government entities.
Investment Banking
We provide our clients around the world with a full range of financial advisory, equity underwriting and debt
underwriting services. Our services are enhanced by our deep industry expertise, our global distribution
capabilities and our senior level commitment to our clients.
Our investment banking professionals operate in the Americas, Europe and the Middle East and Asia, and are
organized into industry, product and geographic coverage groups. Our industry coverage groups include:
Consumer & Retail; Energy; Financial
Industrials; Media, Communications and
Institutions; Healthcare;
Information Services; Real Estate, Gaming & Lodging; Financial Sponsors, Public Finance and Technology. Our
product coverage groups include advisory (which comprises both mergers and acquisitions, private capital and
restructuring and recapitalization expertise), equity underwriting and debt underwriting. Our geographic coverage
2
groups include teams based in major cities in the United States, London, Frankfurt, Paris, Milan, Madrid,
Warsaw, Amsterdam, Stockholm, Dubai, Mumbai, Hong Kong, Singapore, Sydney, Tokyo and Zurich.
Advisory Services
restructurings/recapitalizations and private capital advisory services to
We provide mergers/acquisitions,
companies, financial sponsors and government entities. In the mergers and acquisitions area, we advise
business owners and corporations on mergers and acquisitions, divestitures, strategic ventures and corporate
defense activities. In the restructuring and recapitalization area, we provide companies, bondholders and lenders
a full range of restructuring advisory capabilities as well as expertise in the structuring, valuation and placement
of securities issued in recapitalizations. As part of our private capital advisory business, we advise financial
sponsors on the creation and structuring of funds and fund offerings, and we also advise large institutional
investors on the sale of private equity limited partnership and co-investment interests.
Equity Underwriting
We provide a broad range of equity financing capabilities to companies and financial sponsors. These capabilities
include private placements of equity, initial public offerings, including initial public offerings for special purpose
acquisition companies, follow-on offerings, at the market offerings, block trades and equity-linked securities
transactions.
Debt Underwriting
We provide a wide range of debt and acquisition financing capabilities to companies, financial sponsors and
government entities. We focus on structuring, underwriting and distributing public and private debt, including
investment grade debt, high yield bonds, leveraged loans, municipal debt, mortgage-backed and other asset-
backed securities and liability management solutions.
Other Investment Banking Activities
Jefferies Finance, our 50/50 joint venture with Massachusetts Mutual Life Insurance Company, structures,
underwrites and syndicates primarily senior secured loans to corporate borrowers; and manages proprietary and
third-party investments for both broadly syndicated and direct lending loans. Jefferies Finance conducts its
operations primarily through two business lines, Leveraged Finance Arrangement and Portfolio and Asset
Management. Loans are originated primarily through our investment banking efforts and Jefferies Finance
typically syndicates to third-party investors substantially all of its arranged volume through us. The Portfolio and
Asset Management business lines, collectively referred to as Jefferies Credit Partners, manages a broad portfolio
of assets under management comprised of portions of loans it has arranged, as well as loan positions that it has
purchased in the primary and secondary markets. Jefferies Credit Partners is comprised of three registered
Investment Advisors: Jefferies Finance, Apex Credit Partners LLC and JFIN Asset Management LLC, which
serve as a private credit platform managing proprietary and third-party capital across comingled funds, separately
managed accounts and collateralized loan obligations.
that provides capital solutions,
Berkadia Commercial Mortgage Holding LLC (‘‘Berkadia’’) is our 50/50 joint venture with Berkshire Hathaway,
Inc.
investment sales advisory and mortgage servicing for multifamily and
commercial real estate. Berkadia originates commercial real estate loans, primarily in respect of multifamily
housing units, for the Federal National Mortgage Association (‘‘Fannie Mae’’),
the Federal Home Loan
Mortgage Corporation (‘‘Freddie Mac’’) and the Federal Housing Authority and will typically sell the loans to
such entities shortly after the loans are funded with Berkadia retaining the mortgage servicing rights. For loans
sold to Fannie Mae, Berkadia assumes a shared loss position throughout the term of each loan, with a maximum
loss percentage of approximately one-third of the original principal balance. Berkadia also originates and brokers
commercial/multifamily mortgage loans, which are not part of the government agency programs. In addition,
3
Berkadia originates loans for its own balance sheet. These loans provide interim financing to borrowers who
intend to refinance the loan with longer-term loans from an eligible government agency or other third-party.
Berkadia also provides services related to the acquisition and disposition of multifamily real estate projects,
including brokerage services, asset review, market research, financial analysis and due diligence support and is a
servicer of U.S. commercial real estate loans.
Foursight Capital LLC (‘‘Foursight’’) purchases and services automobile loans. The loans are typically
transferred to securitization trusts and Foursight retains the equity interests in the trusts earning net interest
income and servicing income from these activities.
Strategic Alliance with SMBC Group
In July 2021, we entered into a strategic alliance with Sumitomo Mitsui Financial Group, Inc., Sumitomo Mitsui
Banking Corporation and SMBC Nikko Securities Inc. (together referred to as ‘‘SMBC Group’’) to collaborate
on future corporate and investment banking business opportunities. We aim to, among other things, coordinate
efforts in the U.S. leveraged finance business to expand and scale existing offerings; form a global strategic
partnership to seek cross-border mergers and acquisition opportunities involving Japanese companies; and jointly
pursue investment banking, capital markets and financing opportunities by leveraging our shared strengths.
Equities
Equities Research, Capital Markets
We provide our clients full-service equities research, sales and trading capabilities across global equities markets
with key capabilities in cash equities, electronic trading, equity derivatives, convertibles and corporate access.
We earn commissions or spread revenue by executing, settling and clearing transactions for clients across these
markets in equity and equity-related products, including common stock, American depository receipts, global
depository receipts, exchange-traded funds, exchange-traded and over-the-counter (‘‘OTC’’) equity derivatives,
convertible and other equity-linked products and closed-end funds. Our equity research, sales and trading efforts
are organized across three geographical regions: the Americas; Europe and the Middle East; and Asia. Our
clients are primarily institutional market participants such as mutual funds, hedge funds, investment advisors,
pension and profit sharing plans, and insurance companies. Through our global research team and sales force, we
maintain relationships with our clients, distribute investment research and insights,
trading ideas, market
information and analyses across a range of industries and receive and execute client orders.
Equity Finance
Our Equity Finance business provides financing, securities lending and other prime brokerage services. We offer
prime brokerage services in the U.S. that provide hedge funds, money managers and registered investment
advisors with execution, financing, clearing, outsourced trading, reporting and administrative services. We
finance our clients’ securities positions through margin loans that are collateralized by securities, cash or other
acceptable liquid collateral. We earn an interest spread equal to the difference between the amount we pay for
funds and the amount we receive from our clients. We also operate a matched book in equity and corporate bond
securities, whereby we borrow and lend securities versus cash or liquid collateral and earn a net interest spread.
We offer selected prime brokerage clients the option of custodying their assets at an unaffiliated U.S. broker-
dealer that is a subsidiary of a bank holding company. Under this arrangement, we directly provide our clients
with all customary prime brokerage services.
Wealth Management
We provide tailored wealth management services designed to meet the needs of high net worth individuals, their
families and their businesses, private equity and venture funds and small institutions. Our advisors provide
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access to all of our institutional execution capabilities and deliver other financial services. Our open architecture
platform affords clients access to products and services from both our firm and from a variety of other major
financial services institutions.
Fixed Income
Our global Fixed Income business is led by our global credit franchise, which is supported by our leverage
finance investment banking platform. We provide our clients with sales and trading across all fixed income
securities, including investment grade corporate bonds, U.S. and European government and agency securities,
municipal bonds, mortgage-backed and asset-backed securities, leveraged loans, consumer loans, high yield and
distressed securities, emerging markets debt, interest rate and credit derivative products, as well as foreign
exchange trade execution and securitization capabilities. Jefferies LLC is designated as a Primary Dealer by the
Federal Reserve Bank of New York and Jefferies GmbH is designated in similar capacities for several countries
through the use of repurchase agreements, we act as an
in Europe and the Middle East. Additionally,
intermediary between borrowers and lenders of short-term funds and obtain funding for various of our inventory
positions. We trade and make markets globally in cleared and uncleared swaps and forwards referencing, among
other things, interest rates, investment grade and non-investment grade corporate credits, credit indexes and
asset-backed security indexes.
Our strategists and economists provide ongoing commentary and analysis of the global fixed income markets. In
addition, our fixed income desk strategists provide ideas and analysis to clients across a variety of fixed income
products.
Asset Management
Under the Leucadia Asset Management (‘‘LAM’’) umbrella, we manage and provide services to a diverse group
of alternative asset management platforms across a spectrum of investment strategies and asset classes. LAM
offers institutional clients an innovative range of investment strategies through its directly owned and affiliated
managers. Our products are currently offered to pension funds, insurance companies, sovereign wealth funds,
investors globally. The investment products under LAM range from multi-manager
and other institutional
products to niche equity long/short strategies to credit strategies, among other strategies. We offer our affiliated
asset managers access to capital, robust operational infrastructure and global marketing and distribution. We
often invest seed or additional strategic capital for our own account in the strategies offered by us and associated
third-party asset managers in which we have an interest.
We continue to expand our asset management efforts and establish further strategic relationships to expand our
offerings including sector and region specific long/short equity and quantitative strategies with a view to growth
in our overall assets under management and scale in fee revenue.
On December 1, 2021 and on November 1, 2022 in connection with the merger of Jefferies Group LLC into
Jefferies Financial Group Inc., we expanded the activities of our asset management business and transferred
certain of our historical merchant banking portfolio investments to our Asset Management segment. These
investments are now managed by the co-heads of Asset Management. Included in this portfolio as of
November 30, 2022 are investments in certain public equity securities; investments in OpNet S.p.A. (‘‘OpNet,’’
formerly known as ‘‘Linkem’’), 63% (wireless broadband services in Italy); Vitesse Energy, LLC (‘‘Vitesse
Energy’’), 97%, and JETX Energy, LLC (‘‘JETX Energy’’), 98%, (oil and gas); HomeFed LLC (‘‘HomeFed’’),
100% (real estate); 54 Madison, 48.1% (real estate development fund); Golden Queen Mining Company, LLC
(‘‘Golden Queen’’), 50% (gold and silver mining); and FXCM Group, LLC (‘‘FXCM’’), 50% voting interest in
FXCM and a majority of all distributions in respect of the equity of FXCM (provider of online foreign exchange
trading services); and other investments in private companies and asset management funds.
We intend to sell or distribute to our shareholders a significant portion of this portfolio over the next few years.
During the third quarter of 2022, we sold all of our interests in Idaho Timber and, on January 13, 2023, we
distributed our ownership interests in Vitesse Energy on a tax-free pro rata basis to our shareholders.
5
Additionally, during the fourth quarter we sold all of our interests in the Oak Hill investment management
company.
Human Capital
Our people make up the fabric of our firm, which comprises diverse and innovative teams. We are focused on
the durability, health and long-term growth and development of our business, as well as our long-term
contribution to our shareholders, our clients, our employees, the communities in which we live and work, and
society in general. Instrumental to all of this is our culture, which derives from our employees.
We have employees located throughout the world. At November 30, 2022, we had 5,381 employees globally
with approximately 66.5%, 23.1% and 10.4% of our workforce distributed across the Americas, Europe and the
Middle East and Asia, respectively.
Our employees are predominantly in our Investment Banking and Capital Markets segment or the support
thereof. During fiscal 2022, our overall employee count decreased by 3.1%, primarily as a result of the sale of a
wholly-owned subsidiary, Idaho Timber, partially offset by growth of our investment banking business, as well
as additions in technology and other corporate services staff to support our growth and other strategic priorities.
Talent Acquisition and Campus Recruiting
In order to compete effectively and continue to provide best-in-class service to our clients, we must attract,
retain, and motivate qualified professionals. Our workforce is predominately composed of employees in roles
such as investment bankers, salespeople,
revenue
trading professionals,
producing or specialized personnel. During 2022, we hired approximately 1,200 professionals globally. Within
our Investment Banking and Capital Markets segment, our voluntary turnover rate was approximately 12.4%,
which makes our overall retention rate very high in our view. We believe our culture, our effort to maintain a
meritocracy in terms of opportunity and our continued evolution and growth contribute to our success in
attracting and retaining strong talent.
research professionals and other
We are focused on broadening the pipeline from which we recruit and hiring diverse talent through both campus
and lateral hiring initiatives. For campus recruiting, we have partnered with several organizations globally to
broaden our pipeline of candidates. We host insight days and symposiums that describe Jefferies to candidates
that come from a diverse range of backgrounds. For all roles, we recommend both a diverse slate of candidates
to be considered for roles and a diverse panel of interviewers. Interviewing guides and resources are provided to
hiring managers in an effort to support inclusive hiring.
We have launched two targeted recruiting programs aimed at diversifying the pipeline of our lateral hires,
including a career relaunch program, aimed at those who have taken a break from the workforce, and a job
switch program aimed at recruiting individuals who are interested in changing careers into Equity Research. Both
programs yielded full time hires in 2022.
Talent Development
We value continued training and development for all employees. We seek to equip our people at all stages in
their careers with the tools necessary to become thoughtful and effective leaders. We have a large number of
development programs, including our Women in Leadership Series, a program focused on providing learning and
development opportunities to position our female leaders for success. In 2022, the program was expanded to
include opportunities for in-person networking across regions. Our leadership development program sponsored
by our Jefferies Black & Latino Network (J-NOBLE) and Jefferies Ethnic Minority Society (JEMS) is aimed at
providing professional development and career advancement training to participants. Additionally, we offer
customized, year-long training curriculums across all divisions and title levels globally for Investment Banking,
Fixed Income, Equities and Corporate focused on technical skills, professional development, and management
best practices. These training programs are also available to employees of our subsidiaries. In 2022, we
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introduced our inaugural New Managing Director Promotion Program, a leadership development program
tailored to our newly promoted Managing Directors at the firm.
Wellness
In addition to training and development programs, we continue to be incredibly focused on the physical and
mental well-being of our employees. We host frequent wellness webinars and offer confidential, 1:1 wellness
counseling globally. To support our employee’s physical well-being, we host both in-person and virtual fitness
classes and have partnered with a fitness application our employees can utilize.
Diversity, Equity, and Inclusion
The foundation of our culture is our approach to employee engagement, diversity, equity and inclusion, which is
summed up in our Corporate Social Responsibility Principle: Respect People. We embrace diversity and
inclusion, which we believe fosters creativity, innovation and thought leadership through the infusion of new
ideas and perspectives. We have implemented a number of policies and measures focused on non-discrimination,
sexual harassment prevention, health and safety, and training and education. We have strong internal partnerships
engaging Employee Resource Groups that are fostering a diverse, inclusive workplace. Our Diversity Council,
co-sponsored by Rich Handler, our CEO, and Brian Friedman, our President, gives our Employee Resource
Groups a platform to come together and discuss best practices, as well as collaborate on firmwide diversity
initiatives.
In conjunction with the Employee Resource Groups, firmwide Diversity and Inclusion initiatives are focused on
open firm-wide dialogues, promotion of allyship and bias mitigation, and providing resources for development
and recruiting the best talent from a diverse pool. In 2023, we are rolling out the next iteration of our inclusion
training focused on inclusive leadership. We are focused on improving the collection and transparency of
diversity metrics and the information flow to senior leadership and utilize an annual inclusion-focused employee
engagement survey, which enables staff to provide feedback on an anonymous basis. We have also made a
commitment to building a culture that provides opportunities for all employees regardless of our differences. As
a result, we are able to pool our collective insights and intelligence to provide fresh and innovative thinking for
our clients.
Our Board has established an ESG, Diversity, Equity and Inclusion (‘‘ESG/DEI’’) Committee, which, among
other things, oversees the sustainability matters arising from our business and includes oversight over diversity
and inclusion. The ESG/DEI Committee demonstrates our and the Board’s ongoing commitment of driving and
fostering diversity in the workforce and in the communities in which we operate.
We encourage you to review our ESG Report (located on our website) for more detailed information regarding
our human capital programs and initiatives. Nothing on our website, including the ESG Report or sections
thereof is deemed incorporated by reference into this Report. In addition, for discussion of the risks relating to
our ability to attract, develop and retain highly skilled and productive employees, see ‘‘Part 1. Item 1A. Risk
Factors.’’
Employee Benefits
Our benefits are designed to attract and retain employees by providing employees and their spouses, partners and
retirement wealth
families with health and wellness programs (medical, dental, vision and behavioral),
accumulation, paid time off, income replacement (paid sick and disability leaves and life insurance) and family-
oriented benefits (parental leaves and child care assistance). This year, we rolled out a new benefit for employees
to support inclusive fertility health and family-forming benefits to all employees. We also endeavor to provide
location specific health club, transportation and employee discounts.
7
Giving Back to Community
The firm is committed to giving back to our communities. In 2022, we donated $15.7 million to approximately
28 organizations across two ‘‘Doing Good’’ trading days. Additionally, through our Employee Resource Groups,
employees have created lasting partnerships by volunteering time to support several of these charitable partners.
Competition
All aspects of our business are intensely competitive. We compete primarily with large global bank holding
companies that engage in investment banking and capital markets activities as one of their lines of business and
that have greater capital and resources than we do. We also compete against other broker-dealers, asset managers
and boutique firms. We believe the principal factors driving our competitiveness include our ability to provide
differentiated insights to our clients that lead to better business outcomes; to attract, retain and develop skilled
professionals; to deliver a competitive breadth of high quality service offerings; and to maintain a flat, nimble
and entrepreneurial culture built on immediacy and client service.
Regulation
is the federal agency responsible for
Regulation in the United States. The financial services industry in which we operate is subject to extensive
regulation. In the U.S., the SEC is the federal agency responsible for the administration of federal securities laws,
and the Commodity Futures Trading Commission (‘‘CFTC’’)
the
administration of laws relating to commodity interests (including futures, commodity options and swaps). In
addition, the Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) and the National Futures Association
(‘‘NFA’’) are self-regulatory organizations (‘‘SROs’’) that are actively involved in the regulation of financial
services businesses (securities businesses in the case of FINRA and commodities/futures businesses in the case
of the NFA). In addition, broker-dealers that conduct securities activities involving municipal securities are
subject
to regulation by the Municipal Securities Rulemaking Board (‘‘MSRB’’). In addition to federal
regulation, we are subject to state securities regulations in each state and U.S. territory in which we conduct
securities or investment advisory activities. The SEC, FINRA, CFTC, NFA and state securities regulators
conduct periodic examinations of broker-dealers, investment advisors, futures commission merchants (‘‘FCMs’’),
swap dealers and security-based swap dealers (‘‘SBS dealers’’). The designated examining authority under the
U.S. Securities Exchange Act of 1934, as amended (the ‘‘Exchange Act’’) for Jefferies LLC’s activities as a
broker-dealer is FINRA, and the designated self-regulatory organization under the U.S. Commodity Exchange
Act for Jefferies LLC’s non-clearing FCM activities is the NFA. Financial services businesses are also subject to
regulation and examination by state securities regulators and attorneys general in those states in which they do
business. In addition, broker-dealers, investment advisors, FCMs, swap dealers and SBS dealers must also
comply with the rules and regulation of clearing houses, exchanges, swap execution facilities and trading
platforms of which they are a member.
including sales and trading methods,
Broker-dealers are subject to SEC, FINRA, MSRB and, state securities regulations that cover all aspects of the
securities business,
trade practices among broker-dealers, use and
safekeeping of customers’ funds and securities, capital structure and requirements, anti-money laundering efforts,
recordkeeping and the conduct of broker-dealer personnel including officers and employees (although state
securities regulations are, in a number of cases, more limited). Registered investment advisors are subject to,
among other requirements, SEC regulations concerning marketing, transactions with affiliates, custody of client
assets, disclosures to clients, conflict of interest, insider trading and recordkeeping; and investment advisors that
are also registered as commodity trading advisors or commodity pool operators are also subject to regulation by
the CFTC and the NFA. FCMs, introducing brokers and swap dealers that engage in commodity options, futures
or swap transactions are subject to regulation by the CFTC and the NFA, and SBS dealers are subject to
regulation by the SEC. Additional legislation, changes in rules promulgated by the SEC, FINRA, CFTC, NFA,
other SROs of which the broker-dealer is a member, and state securities regulators, or changes in the
interpretation or enforcement of existing laws or rules may directly affect the operations and profitability of
broker-dealers,
investment advisors, FCMs, commodity trading advisors, commodity pool operators, swap
dealers and SBS dealers. The SEC, CFTC, FINRA, NFA, state securities regulators and state attorneys general
8
its affiliates,
may conduct administrative proceedings or initiate civil litigation that can result in adverse consequences for
including affiliated investment advisors, as well as its and their officers and
Jefferies LLC,
employees (including, without
impact
injunctions, censures,
business operations (including proposed expansions), membership expulsions, or revocations of licenses and
registrations).
fines, suspensions, directives that
limitation,
SEC Regulation Best Interest (‘‘Reg BI’’) requires that a broker-dealer and its associated persons act in a retail
customer’s best interest and not place their own financial or other interests ahead of a retail customer’s interests
when recommending securities transactions or investment strategies, including recommendations of types of
accounts. To meet this best interest standard, a broker-dealer must satisfy four component obligations including a
disclosure obligation, a care obligation, a conflict of interest obligation, and a compliance obligation and both
broker-dealers and investment advisors are required to provide disclosures about their standard of conduct and
conflicts of interest.
In addition, certain states, have proposed or adopted measures that would make broker-dealers, sales agents and
investment advisors and their representatives subject to a fiduciary duty when providing products and services to
customers. The SEC did not indicate an intent to pre-empt state regulation in this area, and some of the state
proposals would allow for a private right of action. Since our Wealth Management division makes
recommendations to retail customers, it is required to comply with the obligations imposed under Reg BI and
applicable state laws.
Regulatory Capital Requirements. Several of our entities are subject to financial capital requirements that are set
by regulation. Jefferies LLC is a dually registered broker-dealer and FCM and is required to maintain net capital
in excess of the greater of the SEC or CFTC minimum financial requirements. As a broker-dealer, Jefferies LLC
is subject to the SEC’s Uniform Net Capital Rule (the ‘‘Net Capital Rule’’). Jefferies LLC has elected to compute
its minimum net capital requirement in accordance with the ‘‘Alternative Net Capital Requirement’’ as permitted
by the Net Capital Rule, which provides that a broker-dealer shall not permit its net capital, as defined, to be less
than the greater of 2% of its aggregate debit balances (primarily customer-related receivables) or $250,000
($1.5 million for prime brokers). Compliance with the Net Capital Rule could limit Jefferies LLC’s operations,
such as underwriting and trading activities, and financing customers’ prime brokerage or other margin activities,
in each case, that could require the use of significant amounts of capital, limit its ability to engage in certain
financing transactions, such as repurchase agreements, and may also restrict its ability (i) to make payments of
dividends, withdrawals or similar distributions or payments to a stockholder/parent or other affiliate, (ii) to make
a redemption or repurchase of shares of stock, or (iii) to make an unsecured loan or advance to such shareholders
or affiliates. As a carrying/clearing broker-dealer, under FINRA Rule 4110, FINRA could impose higher
minimum net capital requirements than required by the SEC, and could restrict a broker-dealer from expanding
business or require the broker-dealer to reduce its business activities. If the broker dealer also carries accounts for
other broker dealers which are engaged in proprietary trading, it may need net capital of $7 million or tentative
net capital of $25 million, depending on circumstances. As a non-clearing FCM, Jefferies LLC is also required to
maintain minimum adjusted net capital of $1.0 million.
SEC registered broker-dealers that also register with the SEC as security-based swap dealers engaging in
principal transactions of security-based swaps (‘‘SBS’’) are subject to rules regarding capital, segregation and
margin requirements. The SEC rules establish similar standards for an entity registering as a standalone SBS
dealer. The CFTC and NFA have also adopted swap dealer capital rules. Under the rules there is a minimum net
capital requirement for, among others, an entity that acts as a dealer in SBS or swaps, which is the greater of
$20 million or 2% (that the SEC could, in the future, increase up to 4% or 8%) of a risk margin amount. The risk
margin amount for the SEC means the sum of (i) the total initial margin required to be maintained by the SEC-
registered SBS dealer at each clearinghouse with respect to SBS or swap transactions cleared for SBS or swap
customers and (ii) the total initial margin amount calculated by the SEC-registered SBS dealer with respect to
non-cleared SBS and swaps under the SEC rules. The risk margin amount for the CFTC means the total initial
margin amount calculated by the CFTC-registered swap dealer with respect to non-cleared SBS and swaps under
the CFTC rules.
Jefferies Financial Services, Inc. (‘‘JFSI’’), one of our subsidiaries, is registered with the CFTC as a swap dealer
and registered with the SEC as an SBS and is required to comply with the SEC and CFTC capital rules for SBS
9
dealers and swap dealers, respectively. Further, as an OTC derivatives dealer, JFSI is subject to compliance with
the SEC’s net capital requirements.
Under the Exchange Act, state securities regulators are not permitted to impose capital, margin, custody,
financial responsibility, making and keeping records, bonding, or financial or operational reporting requirements
on registered broker-dealers that differ from, or are in addition to, the requirements in those areas established
under the Exchange Act, including the rules and regulations promulgated thereunder.
For additional information see Item 1A. Risk Factors – ‘‘Legislation and regulation may significantly affect our
business.’’
Jefferies Financial Group Inc. is not subject to any regulatory capital rules.
See Net Capital within Item 7. Management’s Discussion and Analysis and Note 23, Net Capital Requirements
in this Annual Report on Form 10-K for additional discussion of net capital calculations.
Regulation outside the United States. We are an active participant in the international capital markets and provide
investment banking services internationally, primarily in Europe and the Middle East and Asia. As in the U.S.,
our international subsidiaries are subject to extensive regulations proposed, promulgated and enforced by, among
the European Commission and European Supervisory Authorities (including the
other regulatory bodies,
European Banking Authority and European Securities and Market Authority), U.K. Financial Conduct Authority,
German Federal Financial Supervisory Authority (‘‘BaFin’’), Investment Industry Regulatory Organization of
Canada, Hong Kong Securities and Futures Commission, the Japan Financial Services Agency, the Monetary
Authority of Singapore and the Australian Securities and Investments Commission. Every country in which we
do business imposes upon us laws, rules and regulations similar to those in the U.S., including with respect to
some form of capital adequacy rules, customer protection rules, data protection regulations, anti-money
laundering and anti-bribery rules, compliance with other applicable trading and investment banking regulations
and similar regulatory reform.
Item 1A. Risk Factors
Factors Affecting Our Business
The following factors describe some of the assumptions, risks, uncertainties and other factors that could
adversely affect our business or that could necessitate unforeseen changes to the ways we operate our businesses
or could otherwise result in changes that differ materially from our expectations. In addition to the specific
factors mentioned in this report, we may also be affected by other factors that affect businesses generally, such as
global or regional changes in economic, business or political conditions, acts of war, terrorism, pandemics,
climate change, and natural disasters.
Market and Liquidity Risks
Our business is subject to significant credit risk.
In the normal course of our businesses, we are involved in the execution, settlement and financing of various
customer and principal securities and derivative transactions. These activities are transacted on a cash, margin or
delivery-versus-payment basis and are subject to the risk of counterparty or customer nonperformance. Even
when transactions are collateralized by the underlying security or other securities, we still face the risks
associated with changes in the market value of the collateral through settlement date or during the time when
margin is extended and collateral has not been secured or the counterparty defaults before collateral or margin
can be adjusted. We may also incur credit risk in our derivative transactions to the extent such transactions result
in uncollateralized credit exposure to our counterparties.
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We seek to control the risk associated with these transactions by establishing and monitoring credit limits and by
monitoring collateral and transaction levels daily. We may require counterparties to deposit additional collateral
or return collateral pledged. In certain circumstances, we may, under industry regulations, purchase the
underlying securities in the market and seek reimbursement for any losses from the counterparty. However, there
can be no assurances that our risk controls will be successful.
We are exposed to market risk and our principal trading and investments expose us to risk of loss.
Market risk generally represents the risk that values of assets and liabilities or revenues will be adversely affected
instruments associated with our
by changes in market conditions. Market risk is inherent
operations and activities, including trading account assets and liabilities, loans, securities, short-term borrowings,
corporate debt, and derivatives. Market conditions that change from time to time, thereby exposing us to market
risk, include fluctuations in interest rates, equity prices, relative exchange rates, and price deterioration or
changes in value due to changes in market perception or actual credit quality of an issuer.
in the financial
In addition, disruptions in the liquidity or transparency of the financial markets may result in our inability to sell,
syndicate, or realize the value of security positions, thereby leading to increased concentrations. The inability to
reduce our positions in specific securities may not only increase the market and credit risks associated with such
positions, but also increase capital requirements, which could have an adverse effect on our business, results of
operations, financial condition, and liquidity.
A considerable portion of our revenues is derived from trading in which we act as principal. We may incur
trading losses relating to the purchase, sale or short sale of fixed income, high yield, international, convertible,
and equity securities, loans, derivative contracts and commodities for our own account. In any period, we may
experience losses on our inventory positions as a result of the level and volatility of equity, fixed income and
commodity prices (including oil prices), lack of trading volume and illiquidity. From time to time, we may
engage in a large block trade in a single security or maintain large position concentrations in a single security,
securities of a single issuer, securities of issuers engaged in a specific industry, or securities from issuers located
in a particular country or region. In general, because our inventory is marked to market on a daily basis, any
adverse price movement in these securities could result in a reduction of our revenues and profits. In addition,
we may engage in hedging transactions that if not successful, could result in losses.
See Management’s Discussion and Analysis of Financial Condition and Results of Operations-Risk Management
within Part II, Item 7. of this Annual Report on Form 10-K for additional discussion.
A credit-rating agency downgrade could significantly impact our business.
Maintaining an investment grade credit rating is important to our business and financial condition. If our credit
ratings were downgraded, or if rating agencies indicate that a downgrade may occur, our business, financial
position and results of operations could be adversely affected and perceptions of our financial strength could be
damaged, which could adversely affect our client relationships. Additionally, we intend to access the capital
markets and issue debt securities from time to time, and a decrease in our credit ratings or outlook could
adversely affect our liquidity and competitive position, increase our borrowing costs, decrease demand for our
debt securities and increase the expense and difficulty of financing our operations. In addition, in connection
with certain over-the-counter derivative contract arrangements and certain other trading arrangements, we may be
required to provide additional collateral to counterparties, exchanges and clearing organizations in the event of a
credit rating downgrade. Such a downgrade could also negatively impact the prices of our debt securities. There
can be no assurance that our credit ratings will not be downgraded.
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We may be adversely affected by changes in or the discontinuance of Interbank Offered Rates (‘‘IBORs’’), in
particular, London Interbank Offered Rate (‘‘LIBOR’’).
Central banks and regulators in a number of major jurisdictions (for example, the U.S., U.K., European Union
(‘‘EU’’), Switzerland and Japan) have convened working groups to find, and implement the transition to, suitable
replacements for IBORs. On January 1, 2022, the publication of the one-week and two-month U.S. Dollar
LIBOR maturities and all non-U.S. Dollar LIBOR maturities ceased and the remaining U.S. Dollar LIBOR
maturities will cease immediately after June 30, 2023. Accordingly, many existing LIBOR obligations will
transition to another benchmark after June 30, 2023 or, in some cases, have already transitioned. It is not
possible to know what the effect of any such changes in views or alternatives may have on the financial markets
for LIBOR-linked financial instruments. Similar developments have occurred with respect to other IBORs.
We continue to work towards reducing our exposure to IBOR-referencing contracts,
including derivatives,
securities, and other financial products, to meet the industry milestones and recommendations published by
National Working Groups (‘‘NWG’’), including the Alternative Reference Rates Committee (the ‘‘ARRC’’) in
the U.S.
On October 23, 2020, the International Swaps and Derivatives Association, Inc. (‘‘ISDA’’) published a new
supplement to the ISDA 2006 definitions and the related 2020 IBOR Fallbacks Protocol (the ‘‘Protocol’’). These
publications are intended to facilitate the incorporation of robust rate fallback provisions into both legacy and
new derivative contracts with effect from January 25, 2021. A significant portion of our derivative exposures
have incorporated the Protocol.
Our centralized LIBOR transition program continues to make progress with a focus on:
• continuing to reduce our overall exposure to LIBOR,
• implementing rate fallback provisions in new LIBOR contracts, where appropriate,
• continuing to educate and inform clients on LIBOR transition and the necessity to prepare for the
cessation of LIBOR,
• assisting clients with discontinuing their issuance or use of LIBOR-linked products within the timelines
specified by NWGs,
• supporting clients in their efforts to remediate contracts linked to LIBOR, including contracts to which
we are a party, and
• planning for the implementation of rate fallback mechanisms across products based on the conventions
recommended by NWGs.
Uncertainty regarding IBORs and the taking of discretionary actions or negotiation of rate fallback provisions
could result in pricing volatility, loss of market share in certain products, adverse tax or accounting impacts,
legal and operational costs and risks associated with client disclosures, as well as systems
compliance,
disruption, model disruption and other business continuity issues. In addition, uncertainty relating to IBORs
could result in increased capital requirements for us given potential low transaction volumes, a lack of liquidity
or limited observability for exposures linked to IBORs or any emerging successor rates and operational incidents
associated with changes in and the discontinuance of IBORs.
The language in our contracts and financial instruments that define IBORs, in particular LIBOR, have developed
over time and have various events that trigger when a successor rate to the designated rate would be selected. If
a trigger is satisfied, contracts and financial instruments often give the calculation agent (which may be us)
discretion over the successor rate or benchmark to be selected. As a result, there is considerable uncertainty as to
how the financial services industry will address the discontinuance of designated rates in contracts and financial
instruments or such designated rates ceasing to be acceptable reference rates. This uncertainty could ultimately
result in client disputes and litigation surrounding the proper interpretation of our IBOR-based contracts and
financial instruments. Although we have adhered to the Protocol, it is applicable only to derivatives when both
parties adhere to the Protocol or otherwise agree for it to apply to their derivatives.
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Further, the discontinuation of an IBOR, changes in an IBOR or changes in market acceptance of any IBOR as a
reference rate may also adversely affect the yield on loans or securities held by us, amounts paid on securities we
have issued, amounts received and paid on derivative instruments we have entered into, the value of such loans,
securities or derivative instruments, the trading market for securities, the terms of new loans being made using
different or modified reference rates, our ability to effectively use derivative instruments to manage risk, or the
availability or cost of our floating-rate funding and our exposure to fluctuations in interest rates.
As a holding company, we are dependent for liquidity from payments from our subsidiaries, many of which
are subject to restrictions.
As a holding company, we depend on dividends, distributions and other payments from our subsidiaries to fund
payments on our obligations, including debt obligations. Many of our subsidiaries, including our broker-dealer
subsidiaries, are subject to regulation that restrict dividend payments or reduce the availability of the flow of
funds from those subsidiaries to us. In addition, our broker-dealer subsidiaries are subject to restrictions on their
ability to lend or transact with affiliates and are required to maintain minimum regulatory capital requirements.
From time to time we may invest in securities that are illiquid or subject to restrictions.
From time to time we may invest in securities that are subject to restrictions which prohibit us from selling the
securities for a period of time. Such agreements may limit our ability to generate liquidity quickly through the
disposition of the underlying investment while the agreement is effective.
Economic Environment Risks
The effects of the outbreak of the novel coronavirus (‘‘COVID-19’’) have negatively affected the global
economy, the United States economy and the global financial markets, and may continue to disrupt our
operations and our clients’ operations, which could have an adverse effect on our business, financial
condition and results of operations.
The ongoing COVID-19 pandemic has caused significant disruption in the international and United States
economies and financial markets. The spread of COVID-19 has caused illness, quarantines, cancellation of
events and travel, business and school shutdowns, reduction in business activity and financial transactions, labor
shortages, supply chain interruptions and overall economic and financial market instability. The ongoing effects
of COVID-19 remain challenging to predict due to multiple uncertainties, including the transmissibility, severity,
duration and resurgences of the outbreak; new virus variants and the potential extent of their spread; the
application and effectiveness of health and safety measures that are voluntarily adopted by the public or required
by governments or public health authorities, including vaccines and treatments; the speed and strength of an
economic recovery; and the impact to our employees and our operations, our clients’ operations, suppliers and
business partners. Impacts to our business could be widespread and global, and material
impacts may be
possible, including the following:
• Employees contracting COVID-19
• Reductions in our operating effectiveness as our employees work from home or disaster-recovery
locations
• Unavailability of key personnel necessary to conduct our business activities
• Unprecedented volatility in global financial markets
• Reductions in revenue across our operating businesses
• Closure of our offices or the offices of our clients
• De-globalization
• Potential regulatory scrutiny of our ability to adequately supervise our activities in accordance with
applicable regulatory requirements
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• Risk of cyber attacks or security vulnerabilities due to remote work environments and other changes in
our operations
We are taking necessary and recommended precautions to protect the safety and well-being of our employees
and clients. However, no assurance can be given that the steps being taken will be deemed to be adequate or
appropriate, nor can we predict the level of disruption which will occur to our employees’ ability to provide
client support and service. We will continue to evaluate the nature and extent of the impact to our business.
The impact of the COVID-19 outbreak has in the past, and may in the future, materially negatively impact stock
and other securities prices and materially disrupt banking and other financial activity generally and in the areas in
which we operate. This could likely result in a decline in demand for our products and services, which would
negatively impact our liquidity position and our growth strategy. Any one or more of these developments could
have a material adverse effect on our and our consolidated subsidiaries’ business, operations, consolidated
financial condition, and consolidated results of operations.
We may incur losses as a result of unforeseen or catastrophic events, including the emergence of a pandemic,
cybersecurity incidents and events,
trade policies, military conflict, climate-related
incidents, or other natural disasters.
terrorist attacks, war,
The occurrence of unforeseen or catastrophic events,
including the emergence of a pandemic, such as
COVID-19, or other widespread health emergency (or concerns over the possibility of such an emergency),
cybersecurity incidents and events, terrorist attacks, war, trade policies, military conflict, extreme climate-related
incidents or events or other natural disasters, could create economic and financial disruptions, and could lead to
operational difficulties (including travel limitations) that could impair our ability to manage our businesses. For
instance, military conflict and escalating tensions between Russia and Ukraine have and may continue to result
in geopolitical instability and adversely affect the global economy or specific markets, which could continue to
have an adverse impact or cause volatility in the financial services industry generally or on our results of
operations and financial conditions. In addition, these geopolitical tensions can cause an increase in volatility in
commodity and energy prices, creating supply chain issues, and causing instability in financial markets.
Sanctions imposed by the United States and other countries in response to such conflict could further adversely
impact the financial markets and the global economy, and any economic countermeasures by the affected
countries or others, could exacerbate market and economic instability. While we do not have any operations in
Russia or any clients with significant Russian operations and we have minimal market risk related to securities of
companies either domiciled or operating in Russia, the specific consequences of the conflict in Ukraine on our
business is difficult to predict at this time, but in addition to inflationary pressures affecting our operations, we
may also experience an increase in cyberattacks against us and our third-party service providers from Russia or
its allies.
Climate change concerns and incidents could disrupt our businesses, adversely affect the profitability of
certain of our investments, adversely affect client activity levels, adversely affect the creditworthiness of our
counterparties, and damage our reputation.
Climate change may cause extreme weather events that disrupt operations at one or more of our or our
customer’s or client’s locations, which may negatively affect our ability to service and interact with our clients,
and also may adversely affect the value of certain of our investments, including our real estate investments.
Climate change, as well as uncertainties related to the transition to a lower carbon dependent economy, may also
have a negative impact on the financial condition of our clients, which may decrease revenues from those clients
and increase the credit risk associated with loans and other credit exposures to those clients. Additionally, our
reputation and client relationships may be damaged as a result of our involvement, or our clients’ involvement,
in certain industries or projects associated with causing or exacerbating climate change, as well as any decisions
we make to continue to conduct or change our activities in response to considerations relating to climate change.
New regulations or guidance relating to climate change and the transition to a lower carbon dependent economy,
as well as the perspectives of shareholders, employees and other stakeholders regarding climate change, may
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affect whether and on what terms and conditions we engage in certain activities or offer certain products, as well
as impact our business reputation and efforts to recruit and retain employees and customers.
Abrupt changes in market and general economic conditions have in the past adversely affected, and may in
the future adversely affect, our business and profitability and cause volatility in our results of operations.
Economic and market conditions have had, and will continue to have, a direct and material impact on our results
of operations and financial condition because performance in the financial services industry is heavily influenced
by the overall strength of general economic conditions and financial market activity.
Our investment banking revenue, in the form of advisory services and underwriting, is directly related to general
economic conditions and corresponding financial market activity. When the outlook for such economic
conditions is uncertain or negative, financial market activity generally tends to decrease, which reduces our
investment banking revenues. Reduced expectations of U.S. economic growth or a decline in the global
economic outlook could cause financial market activity to decrease and negatively affect our investment banking
revenues.
A sustained and continuing market downturn could lead to or exacerbate declines in the number of securities
transactions executed for clients and, therefore, to a decline in the revenues we receive from commissions and
spreads. Correspondingly, a reduction of prices of the securities we hold in inventory or as investments would
lead to reduced revenues.
Revenues from our asset management businesses have been and may continue to be negatively impacted by
declining securities prices, as well as widely fluctuating securities prices. Because our asset management
businesses hold long and short positions in equity and debt securities, changes in the prices of these securities, as
well as any decrease in the liquidity of these securities, may materially and adversely affect our revenues from
asset management.
Similarly, our merchant banking businesses may suffer from the above-mentioned impacts of fluctuations in
economic and market conditions, including reductions in business activity and financial transactions, labor
shortages, supply chain interruptions and overall economic and financial market instability. In addition, other
factors, most of which are outside of our control, can affect our merchant banking businesses, including the state
of the real estate market, the state of the Italian telecommunications market, and the state of international market
and economic conditions which impact
trading volume and currency volatility, and changes in regulatory
requirements.
In addition, global economic conditions and global financial markets remain vulnerable to the potential risks
posed by certain events, which could include, among other things,
level and volatility of interest rates,
availability and market conditions of financing, economic growth or its sustainability, unforeseen changes to
gross domestic product, inflation, energy prices, fluctuations or other changes in both debt and equity capital
markets and currencies, political and financial uncertainty in the United States and the European Union, ongoing
concern about Asia’s economies, global supply disruptions, complications involving terrorism and armed
conflicts around the world (including the conflict between Russia and Ukraine), or other challenges to global
trade or travel, such as those that have occurred due to the COVID-19 pandemic. More generally, because our
business is closely correlated to the general economic outlook, a significant deterioration in that outlook or
realization of certain events would likely have an immediate and significant negative impact on our business and
overall results of operations.
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Changing financial, economic and political conditions could result in decreased revenues, losses or other
adverse consequences.
Global or regional changes in the financial markets or economic and political conditions could adversely affect
our business in many ways, including the following:
• A market downturn, potential recession and high inflation, as well as declines in consumer confidence
and increase in unemployment rates, could lead to a decline in the volume of transactions executed for
customers and, therefore, to a decline in the revenues we receive from commissions and spreads. Any
such economic downturn, volatile business environment, hostile third-party action or continued
unpredictable and unstable market conditions could adversely affect our general business strategies;
• Unfavorable conditions or changes in general political, economic or market conditions could reduce the
number and size of transactions in which we provide underwriting, financial advisory and other services.
Our investment banking revenues, in the form of financial advisory and sales and trading or placement
fees, are directly related to the number and size of the transactions in which we participate and could
therefore be adversely affected by unfavorable financial, economic or political conditions. In particular,
the increasing trend toward sovereign protectionism and de-globalization has resulted or could result in
decreases in free trade, erosion of traditional international coalitions, the imposition of sanctions and
tariffs, governmental closures and no-confidence votes, domestic and international strife, and general
market upheaval in response to such results, all of which could negatively impact our business;
• Adverse changes in the securities markets could lead to a reduction in revenues from asset management
fees and losses on our own capital invested in managed funds. Even in the absence of a market
downturn, below-market investment performance by our funds and portfolio managers could reduce asset
management revenues and assets under management and result in reputational damage that might make
it more difficult to attract new investors;
• Adverse changes in the financial markets could lead to regulatory restrictions that may limit or halt
certain of our business activities;
• Limitations on the availability of credit can affect our ability to borrow on a secured or unsecured basis,
which may adversely affect our liquidity and results of operations. Global market and economic
conditions have been particularly disrupted and volatile in the last several years and may be in the future.
Our cost and availability of funding could be affected by illiquid credit markets and wider credit spreads;
• New or increased taxes on compensation payments such as bonuses may adversely affect our profits;
• Should one of our clients or competitors fail, our business prospects and revenue could be negatively
impacted due to negative market sentiment causing clients to cease doing business with us and our
lenders to cease loaning us money, which could adversely affect our business, funding and liquidity;
• Unfavorable economic conditions could have an adverse effect on the demand for new loans and the
servicing of loans originated by third-parties, which would have an adverse impact on the operations and
profitability of some of our financial services businesses.
Operational Risks
Damage to our reputation could damage our business.
Maintaining our reputation is critical to our attracting and maintaining customers, investors and employees. If we
fail to deal with, or appear to fail to deal with, various issues that may give rise to reputational risk, we could
significantly harm our business prospects. These issues include, but are not limited to, any of the risks discussed
in this Item 1A, appropriately dealing with potential conflicts of interest, legal and regulatory requirements,
ethical issues, money-laundering, cybersecurity and privacy, record keeping, sales and trading practices, failure to
sell securities we have underwritten at the anticipated price levels, and the proper identification of the legal,
reputational, credit, liquidity and market risks inherent in our products. A failure to deliver appropriate standards
of service and quality, or a failure or perceived failure to treat customers and clients fairly, can result in customer
litigation and heightened regulatory scrutiny, all of which can lead to lost revenue, higher
dissatisfaction,
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operating costs and harm to our reputation. Further, negative publicity regarding us, whether or not true, may
also result in harm to our prospects. Our operations in the past have been impacted as some clients either ceased
doing business or temporarily slowed down the level of business they do, thereby decreasing our revenue. There
is no assurance that we will be able to successfully reverse the negative impact of allegations and rumors in the
future and our potential failure to do so could have a material adverse effect on our business, financial condition
and liquidity.
We may incur losses if our risk management is not effective.
We seek to monitor and control our risk exposure. Our risk management processes and procedures are designed
to limit our exposure to acceptable levels as we conduct our business. We apply a comprehensive framework of
limits on a variety of key metrics to constrain the risk profile of our business activities. These limits reflect our
risk tolerances for business activity. Our framework includes inventory position and exposure limits on a gross
and net basis, scenario analysis and stress tests, Value-at-Risk, sensitivities, exposure concentrations, aged
inventory, amount of Level 3 assets, counterparty exposure, leverage, cash capital and performance analysis. See
Management’s Discussion and Analysis of Financial Condition and Results of Operations - Risk Management
within Part II. Item 7. of this Annual Report on Form 10-K for additional discussion. While we employ various
those techniques and the judgments that accompany their
risk monitoring and risk mitigation techniques,
application, including risk tolerance determinations, cannot anticipate every economic and financial outcome or
the specifics and timing of such outcomes. As a result, we may incur losses notwithstanding our risk
management processes and procedures.
The ability to attract, develop and retain highly skilled and productive employees is critical to the success of
our business.
judgment, business generation
Our ability to develop and retain our clients depends on the reputation,
capabilities and skills of our professionals. To compete effectively, we must attract, retain and motivate qualified
professionals, including successful investment bankers, sales and trading professionals, research professionals,
portfolio managers and other revenue producing or specialized personnel, in addition to qualified, successful
personnel in functional, non-revenue producing roles. Competitive pressures we experience with respect to
employees could have an adverse effect on our business, results of operations, financial condition and liquidity.
Turnover in the financial services industry is high. The cost of retaining skilled professionals in the financial
services industry has escalated considerably. Financial industry employers are increasingly offering guaranteed
contracts, upfront payments, and increased compensation. These can be important factors in a current employee’s
decision to leave us as well as in a prospective employee’s decision to join us. As competition for skilled
professionals in the industry remains intense, we may have to devote significant resources to attracting and
retaining qualified personnel.
If we were to lose the services of certain of our professionals, we may not be able to retain valuable relationships
and some of our clients could choose to use the services of a competitor instead of our services. If we are unable
to retain our professionals or recruit additional professionals, our reputation, business, results of operations and
financial condition will be adversely affected. Further, new business initiatives and efforts to expand existing
businesses frequently require that we incur compensation and benefits expense before generating additional
revenues.
Moreover, companies in our industry whose employees accept positions with competitors often claim that those
competitors have engaged in unfair hiring practices. We may be subject to such claims in the future as we seek
to hire qualified personnel who have worked for our competitors. Some of these claims may result in material
litigation. We could incur substantial costs in defending against these claims, regardless of their merits. Such
claims could also discourage potential employees who work for our competitors from joining us.
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Operational risks may disrupt our business, result in regulatory action against us or limit our growth.
Our businesses are highly dependent on our ability to process, on a daily basis, a large number of transactions
across numerous and diverse markets in many currencies, and the transactions we process have become
increasingly complex. If any of our financial, accounting or other data processing systems do not operate
properly, or are disabled, or if there are other shortcomings or failures in our internal processes, people or
systems, we could suffer an impairment to our liquidity, financial loss, a disruption of our businesses, liability to
clients, regulatory intervention or reputational damage. These systems may fail to operate properly or become
disabled as a result of events that are wholly or partially beyond our control, including a disruption of electrical
or communications services or our inability to occupy one or more of our buildings. The inability of our systems
to accommodate an increasing volume and complexity of transactions could also constrain our ability to expand
our businesses.
Certain of our financial and other data processing systems rely on access to and the functionality of operating
systems maintained by third-parties. If the accounting, trading or other data processing systems on which we are
dependent are unable to meet increasingly demanding standards for processing and security or, if they fail or
have other significant shortcomings, we could be adversely affected. Such consequences may include our
inability to effect transactions and manage our exposure to risk.
In addition, despite the contingency plans we have in place, our ability to conduct business may be adversely
impacted by a disruption in the infrastructure that supports our businesses and the communities in which they are
located. This may include a disruption involving electrical, communications, transportation or other services used
by us or third-parties with which we conduct business.
Any cyber attack, cybersecurity incident, or other information security breach of, or vulnerability in, our
technology systems, or those of our clients, partners, counterparties, or other third-party service providers we
rely on, could have operational impacts, subject us to significant liability and harm our reputation.
Our operations rely heavily on the secure processing, storage and transmission of financial, personal and other
information in our computer systems and networks. In recent years, there have been several highly publicized
incidents involving financial services companies reporting the unauthorized disclosure of client or other
confidential information, as well as cyber attacks involving theft, dissemination and destruction of corporate
information or other assets, which in some cases occurred as a result of failure to follow procedures by
employees or contractors or as a result of actions by third-parties. Cyber attacks can originate from a variety of
sources, including third-parties affiliated with foreign governments, organized crime or terrorist organizations,
and malicious individuals both outside and inside a targeted company. Retaliatory acts by Russia or its allies in
response to economic sanctions or other measures taken by the global community arising from the Russia-
Ukraine conflict could result in an increased number and/or severity of cyber attacks. Malicious actors may also
attempt to compromise or induce our employees, clients or other users of our systems to disclose sensitive
information or provide access to our data, and these types of risks may be difficult to detect or prevent.
Like other financial services firms, we and our third-party service providers have been the target of cyber attacks.
Although we and our service providers regularly defend against,
respond to and mitigate the risks of
cyberattacks, cybersecurity incidents among financial services firms and industry generally are on the rise. We
are not aware of any material losses we have incurred relating to cyber attacks or other information security
breaches. The techniques and malware used in these cyber attacks and cybersecurity incidents are increasingly
sophisticated, change frequently and are often not recognized until launched because they are novel. Although
we monitor the changing cybersecurity risk environment and seek to maintain reasonable security measures,
including a suite of authentication and layered information security controls, no security measures are infallible,
and we cannot guarantee that our safeguards will always work or that they will detect, mitigate or remediate
these risks in a timely manner. Despite our implementation of reasonable security measures and endeavoring to
modify them as circumstances warrant, our computer systems, software and networks may be vulnerable to spam
attacks, unauthorized access, distributed denial of service attacks, ransomware, computer viruses and other
malicious code, as well as human error, natural disaster, power loss, and other events that could damage our
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reputation, impact the security and stability of our operations, and expose us to class action lawsuits and
regulatory investigation, action, and penalties, and significant liability.
We also rely on numerous third-party service providers to conduct other aspects of our business operations, and
we face similar risks relating to them. While we evaluate the information security programs and defenses of
third-party vendors, we cannot be certain that our reviews and oversight will identify all potential information
security weaknesses, or that our vendors’ information security protocols are or will be sufficient to withstand or
adequately respond to a cyber attack, cybersecurity incident, or other information security breach. In addition, in
order to access our products and services, or trade with us, our customers and counterparties may use networks,
computers and other devices that are beyond our security control systems and processes.
Notwithstanding the precautions we take, if a cyber attack, cybersecurity incident, or other information security
breach were to occur, this could jeopardize the information we confidentially maintain, or otherwise cause
interruptions in our operations or those of our clients and counterparties, exposing us to liability. As attempted
attacks continue to evolve in scope and sophistication, we may be required to expend substantial additional
resources to modify or enhance our reasonable security measures, to investigate and remediate vulnerabilities or
other exposures or to communicate about cyber attacks, cybersecurity incidents, or other information security
breaches to our customers, partners, third-party service providers, and counterparties. Though we have insurance
against some cyber risks and attacks, we may be subject to litigation and financial losses that exceed our
insurance policy limits or are not covered under any of our current
insurance policies. A technological
breakdown could also interfere with our ability to comply with financial reporting and other regulatory
requirements, exposing us to potential disciplinary action by regulators. Successful cyber attacks, cybersecurity
incidents, or other information security breaches at other large financial institutions or other market participants,
whether or not we are affected, could lead to a general loss of customer confidence in financial institutions that
could negatively affect us, including harming the market perception of the effectiveness of our security measures
or the financial system in general, which could result in a loss of business.
Further, in light of the high volume of transactions we process, the large number of our clients, partners and
counterparties, and the increasing sophistication of malicious actors, a cyber attack, cybersecurity incident, or
other information security breach could occur and persist for an extended period of time without detection. We
expect that any investigation of a cyber attack, cybersecurity incident, or other information security breach would
take substantial amounts of time and resources, and that there may be extensive delays before we obtain full and
reliable information. During such time we would not necessarily know the extent of the harm caused by the
cyber attack, cybersecurity incident, or other information security breach or how best to remediate it, and certain
errors or actions could be repeated or compounded before they are discovered and remediated. All of these
factors could further increase the costs and consequences of such a cyber attack or cybersecurity incident. In
providing services to clients, we manage, utilize and store sensitive or confidential client or employee data,
including personal data. As a result, we are subject to numerous laws and regulations designed to protect this
information, such as U.S. and non-U.S. federal and state laws governing privacy and cybersecurity. If any
person, including any of our associates, negligently disregards or intentionally breaches our established controls
with respect to client or employee data, or otherwise mismanages or misappropriates such data, we could be
subject to significant monetary damages, regulatory enforcement actions, fines and/or criminal prosecution. In
addition, unauthorized disclosure of sensitive or confidential client or employee data, whether through system
compromise or failure, employee negligence, fraud or misappropriation, could damage our reputation and cause
us to lose clients and related revenue. Depending on the circumstances giving rise to the information security
breach, this liability may not be subject to a contractual limit or an exclusion of consequential or indirect
damages.
Employee misconduct could harm us by impairing our ability to attract and retain clients and subject us to
significant legal liability and reputational harm.
There is a risk that our employees could engage in misconduct that adversely affects our business. For example,
our business often requires that we deal with confidential matters of great significance to our clients. If our
employees were to improperly use or disclose confidential information provided by our clients, we could be
to regulatory sanctions and suffer serious harm to our reputation, financial position, current client
subject
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relationships and ability to attract future clients. We are also subject to a number of obligations and standards
arising from our asset management business and our authority over the assets managed by our asset management
business. In addition, our financial advisors may act in a fiduciary capacity, providing financial planning,
investment advice, and discretionary asset management. The violation of these obligations and standards by any
of our employees would adversely affect our clients and us. It
is not always possible to deter employee
misconduct, and the precautions we take to detect and prevent this activity may not be effective against certain
misconduct, including conduct which is difficult to detect. The occurrence of significant employee misconduct
could have a material adverse financial effect or cause us significant reputational harm and/or legal and
regulatory liability, which in turn could seriously harm our business and our prospects.
We may not be able to insure certain risks economically.
We cannot be certain that we will be able to insure all risks that we desire to insure economically or that all of
our insurers or reinsurers will be financially viable if we make a claim. If an uninsured loss or a loss in excess of
insured limits should occur, or if we are required to pay a deductible for an insured loss, results of operations
could be adversely affected.
Future acquisitions and dispositions of our businesses and investments are possible, changing the components
of our assets and liabilities, and if unsuccessful or unfavorable, could reduce the value of our securities.
Any future acquisitions or dispositions may result in significant changes in the composition of our assets and
liabilities, as well as our business mix and prospects. Consequently, our financial condition, results of operations
and the trading price of our securities may be affected by factors different from those affecting our financial
condition, results of operations and trading price at the present time.
Our investment in Jefferies Finance may not prove to be successful and may adversely affect our results of
operations or financial condition.
Many factors, most of which are outside of our control, can affect Jefferies Finance’s business, including adverse
investment banking and capital market conditions leading to a decline of syndicate loans, inability of borrowers
to repay commitments, adverse changes to a borrower’s credit worthiness, and other factors that directly and
indirectly effect the results of operations, and consequently may adversely affect our results of operations or
financial condition.
Our investment in Berkadia may not prove to be successful and may adversely affect our results of operations
or financial condition.
Many factors, most of which are outside of our control, can affect Berkadia’s business, including loan losses in
excess of reserves, a change in the relationships with U.S. Government-Sponsored Enterprises or federal
agencies, a significant loss of customers, and other factors that directly and indirectly effect the results of
operations, including the sales and profitability of Berkadia, and consequently may adversely affect our results of
operations or financial condition.
If Berkadia suffered significant losses and was unable to repay its commercial paper borrowings, we would be
exposed to loss pursuant to a reimbursement obligation to Berkshire Hathaway.
Berkadia obtains funds generated by commercial paper sales of an affiliate of Berkadia. All of the proceeds from
the commercial paper sales are used by Berkadia to fund new mortgage loans, servicer advances, investments
and other working capital requirements. Repayment of the commercial paper is supported by a $1.5 billion surety
policy issued by a Berkshire Hathaway insurance subsidiary and a Berkshire Hathaway corporate guaranty, and
we have agreed to reimburse Berkshire Hathaway for one-half of any losses incurred thereunder. If Berkadia
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suffers significant losses and is unable to repay its commercial paper borrowings, we would suffer losses to the
extent of our reimbursement obligation to Berkshire Hathaway.
Legal, Legislation and Regulation Risks
Legislation and regulation may significantly affect our business.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the ‘‘Dodd-Frank Act’’) and the rules and
regulations adopted by the CFTC and the SEC introduced a comprehensive regulatory regime for swaps and SBS
and parties that deal in such derivatives. One of our subsidiaries is registered as a swap dealer with the CFTC
and is a member of the NFA, is registered as a security-based swap dealer with the SEC and is registered with
the SEC as an OTC Derivatives Dealer. We have incurred significant compliance and operational costs as a result
of the swaps and SBS rules adopted by the CFTC and SEC pursuant to the Dodd-Frank Act, and we expect that
the complex regulatory framework will continue to require significant monitoring and compliance expenditures.
Negative effects could result from an expansive extraterritorial application of the Dodd-Frank Act and/or
insufficient international coordination with respect to adoption of rules for derivatives and other financial reforms
in other jurisdictions.
Similar types of swap regulation have been proposed or adopted in jurisdictions outside the U.S., including in
the EU, the U.K. and Japan. For example, the EU and the U.K. have established regulatory requirements relating
to portfolio reconciliation and reporting, clearing certain OTC derivatives and margining for uncleared
derivatives activities under the European Market Infrastructure Regulation (‘‘EMIR’’).
The Markets in Financial Instruments Regulation and a revision of the Market in Financial Instruments Directive
(collectively referred to as ‘‘MiFID II’’) imposes certain restrictions as to the trading of shares and derivatives
including market structure-related,
requirements,
requirements on pre- and post-trade transparency, requirements to use certain venues when trading financial
instruments (which includes shares and certain derivative instruments),
requirements affecting the way
investment managers can obtain research, powers of regulators to impose position limits and provisions on
regulatory sanctions.
investor protection-related and organizational
reporting,
The EU capital and liquidity legislation for banks implemented many of the finalized Basel III capital and
liquidity standards, including in relation to the leverage ratio, market risk capital, and a net stable funding ratio.
Certain of these changes began to be phased in from June 2021, and further changes will be required to be
implemented from 2023. In addition, new prudential regimes for investment firms are in the process of being
implemented in both the EU and the UK for MiFID authorized investment firms. The Investment Firms
Regulation (IFR) and the Investment Firms Directive (IFD), being applicable to the UK and Europe, whilst
simplifying the capital treatment for investments firms such as the UK entity, Jefferies International Limited, and,
its European subsidiary, Jefferies GmbH, will
that a certain amount of variable
risk takers be paid in non-cash instruments and have a deferral element.
remuneration for material
Implementation of this requirement is effective from the financial year commencing December 1, 2022 for
Jefferies International Limited and Jefferies GmbH. Consequently, we are adapting our remuneration structures
for those employees identified as material risk takers.
include a requirement
Significant new legislation and regulation affecting the financial services industry is regularly proposed and
sometimes adopted. These legislative and regulatory initiatives affect not only us, but also our competitors and
certain of our clients. These changes could have an effect on our revenue and profitability, limit our ability to
pursue certain business opportunities, impact the value of assets that we hold, require us to change certain
business practices, impose additional costs on us and otherwise adversely affect our business. Accordingly, we
cannot provide assurance that legislation and regulation will not eventually have an adverse effect on our
business, results of operations, cash flows and financial condition. In the U.S., such initiatives frequently arise in
the aftermath of elections that change the party of the president or the majority party in the House and/or Senate.
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Increasing regulatory focus on evolving privacy and security issues and expanding laws could impact our
businesses and investments and expose us to increased liability.
The EU General Data Protection Regulation (the ‘‘EU GDPR’’ or ‘‘GDPR’’) applies in all EU Member States
and also applies to entities established outside of the EU where such entity processes personal data in relation to:
(i) the offering of goods or services to data subjects in the EEA; or (ii) monitoring the behavior of data subjects
as far as that behavior takes place in the EEA. The UK has implemented the GDPR as part of its national law
(referred to as the ‘‘UK GDPR’’). The GDPR imposes a number of obligations on companies, including, without
limitation: accountability and transparency requirements; compliance with the data protection rights of data
subjects; and the prompt reporting of certain personal data breaches to both (1) the relevant data supervisory
authority without undue delay unless the personal data breach is unlikely to result in a risk to the data subject’s
rights and freedoms; and (2) impacted individuals where the personal data breach is likely to result in a high risk
with regard to their rights and freedoms.
The EU GDPR also includes restrictions on the transfers of personal data from the EEA to jurisdictions that are
not recognized as having ‘adequate data protection laws’. Obligations under the EU GDPR and implementing
Member State legislation continue to evolve through legislation and regulatory guidance, for example imposing
further restrictions on use of the standard contractual clauses (‘‘SCCs’’) to transfer data to third countries by
requiring companies to carry out a transfer privacy impact assessment.
The EU GDPR imposes significant fines for serious non-compliance of up to the higher of 4% of an
organization’s annual worldwide turnover or €20 million (or approximately £17.5 million under the UK GDPR).
The EU GDPR identifies a list of points to consider when determining the level of fines to impose (including the
nature, gravity and duration of the infringement). Data subjects also have a right to compensation as a result of
infringement of the EU GDPR for financial or non-financial losses.
The EU GDPR’s data protection obligations apply in the United Kingdom in substantially unvaried form under
‘‘UK GDPR’’. The UK GDPR exists alongside the UK Data Protection Act 2018 and its requirements are largely
aligned with those under the EU GDPR and as such, may lead to similar compliance and operational costs with
potential fines of up to £17.5 million or 4% of global turnover.
Other privacy laws at both federal and state levels are in effect in the U.S. and other regions, many of which
involve heightened compliance obligations similar to those under GDPR. The privacy and cybersecurity
legislative and regulatory landscape is evolving rapidly, and numerous proposals regarding privacy and
cybersecurity are pending before U.S. and non-U.S. legislative and regulatory bodies. The adopted form of such
developing legislation and regulation will determine the level of any resources which we will need to invest to
ensure compliance. In the event of non-compliance with privacy laws and regulations, we could face significant
administrative and monetary sanctions as well as reputational damage which may have a material adverse effect
on our operations, financial condition and prospects.
Extensive regulation of our business limits our activities, and, if we violate these regulations, we may be
subject to significant penalties.
We are subject to extensive laws, rules and regulations in the countries in which we operate. Firms that engage in
providing financial services must comply with the laws, rules and regulations imposed by national and state
governments and regulatory and self-regulatory bodies with jurisdiction over such activities. Such laws, rules and
regulations cover many aspects of providing financial services.
regulators supervise our business activities to monitor compliance with applicable laws,
rules and
Our
regulations. In addition, if there are instances in which our regulators question our compliance with laws, rules,
or regulations, they may investigate the facts and circumstances to determine whether we have complied. At any
moment in time, we may be subject to one or more such investigations or similar reviews. At this time, all such
investigations and similar reviews are insignificant in scope and immaterial to us. However, there can be no
assurance that, in the future, the operations of our businesses will not violate such laws, rules, or regulations, or
22
that such investigations and similar reviews will not result
requirements, regulatory enforcement actions, fines or other adverse impact to the operation of our business.
in significant or material adverse regulatory
Additionally, violations of laws, rules and regulations could subject us to one or more of the following events:
civil and criminal liability; sanctions, which could include the revocation of our subsidiaries’ registrations as
investment advisors or broker-dealers; the revocation of the licenses of our financial advisors; censures; fines; or
a temporary suspension or permanent bar from conducting business. The occurrence of any of these events could
have a material adverse effect on our business, financial condition and prospects.
Certain of our subsidiaries are subject to regulatory financial capital holding requirements that could impact
various capital allocation decisions or limit the operations of our broker-dealers. In particular, compliance with
the financial capital holding requirement may restrict our broker-dealers’ ability to engage in capital-intensive
activities such as underwriting and trading, and may also limit their ability to make loans, advances, dividends
and other payments and may restrict our swap dealers’ ability to execute certain derivative transactions.
Additional legislation, changes in rules, changes in the interpretation or enforcement of existing laws and rules,
conflicts and inconsistencies among rules and regulations, or the entering into businesses that subject us to new
rules and regulations may directly affect our business, results of operations and financial condition. We continue
to monitor the impact of new U.S. and international regulation on our businesses.
Legal liability may harm our business.
Many aspects of our business involve substantial risks of liability, and in the normal course of business, we have
been named as a defendant or codefendant in lawsuits involving primarily claims for damages. The risks
associated with potential legal liabilities often may be difficult to assess or quantify and their existence and
magnitude often remain unknown for substantial periods of time. The expansion of our business, including
increases in the number and size of investment banking transactions and our expansion into new areas impose
greater risks of liability. Substantial legal liability could have a material adverse financial effect or cause us
significant reputational harm, which in turn could seriously harm our business and our prospects.
A change in tax laws in key jurisdictions could materially increase our tax expense.
We are subject to tax in the U.S. and numerous international jurisdictions. Changes to income tax laws and
regulations in any of the jurisdictions in which we operate, or in the interpretation of such laws, or the
introduction of new taxes, could significantly increase our effective tax rate and ultimately reduce our cash flow
from operating activities and otherwise have an adverse effect on our financial condition or results of operations.
If our tax filing positions were to be challenged by federal, state and local, or foreign tax jurisdictions, we
may not be wholly successful in defending our tax filing positions.
We record reserves for unrecognized tax benefits based on our assessment of the probability of successfully
sustaining tax filing positions. Management exercises significant judgment when assessing the probability of
successfully sustaining tax filing positions, and in determining whether a contingent tax liability should be
recorded and, if so, estimating the amount. If our tax filing positions are successfully challenged, payments could
be required that are in excess of reserved amounts or we may be required to reduce the carrying amount of our
net deferred tax asset, either of which result could be significant
to our financial condition or results of
operations.
Item 1B. Unresolved Staff Comments
None.
23
Item 2. Properties
Our global headquarters and principal executive offices are located at 520 Madison Avenue, New York,
New York with our European and the Middle East headquarters in London and our Asia headquarters in Hong
Kong and other offices and operations located across the U.S. and around the world. In addition, we maintain
backup data center facilities with redundant technologies for each of our three main data center hubs in Jersey
City, London and Hong Kong. We lease all of our office space, or contract via service arrangement, which
management believes is adequate for our business.
Additionally, we lease other warehousing and office facilities and own and develop various real estate properties
in the U.S. The facilities vary in size and have leases expiring at various times, subject, in certain instances, to
renewal options. See Note 15 to our consolidated financial statements.
Item 3. Legal Proceedings
Many aspects of our business involve substantial risks of legal and regulatory liability. In the normal course of
business, we have been named as defendants or co-defendants in lawsuits involving primarily claims for
damages. We are also involved in a number of regulatory matters, including exams, investigations and similar
reviews, arising out of the conduct of our business. Based on currently available information, we do not believe
that any pending matter will have a material adverse effect on our consolidated financial statements.
Item 4. Mine Safety Disclosures
Not applicable.
24
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Our common shares are traded on the NYSE under the symbol JEF. As of January 19, 2023, there were
approximately 1,349 record holders of the common shares.
We paid quarterly cash dividends of $0.30 per share for each quarter of 2022. We paid quarterly cash dividends
of $0.20 per share for each of the first two quarters of 2021 and $0.25 per share for each of the last two quarters
of 2021. We paid quarterly cash dividends of $0.15 per share for each quarter of 2020. In January 2023, our
Board of Directors declared a quarterly cash dividend of $0.30 per share. The payment of dividends in the future
is subject to the discretion of our Board of Directors and will depend upon general business conditions, legal and
contractual restrictions on the payment of dividends and other factors that our Board of Directors may deem to
be relevant.
During the year ended November 30, 2022, we purchased a total of 25.6 million of our common shares for
$859.6 million, or an average price of $33.58 per share, including 22.2 million of our common shares in the
open market for $737.4 million under our Board of Director authorization, and 3.4 million shares of our common
stock for $122.2 million in connection with net-share settlements under our equity compensation plan. Our
equity compensation plan allows participants to surrender shares to satisfy certain tax liabilities arising from the
vesting of restricted shares and the distribution of restricted share units. Over the last five years, we returned $5.0
billion in total capital to shareholders, including 152.8 million shares repurchased at an average of $23.57 per
share.
At November 30, 2022, we had approximately $158.6 million available for future repurchases. In January 2023,
the Board of Directors increased the share repurchase authorization back up to $250.0 million.
There were no unregistered sales of equity securities during the period covered by this report.
The following table presents information on our purchases of our common shares during the three months ended
November 30, 2022 (dollars in thousands, except per share amounts):
(a) Total
Number of
Shares
Purchased
(b) Average
Price Paid
per Share
(c) Total Number of
Shares Purchased as
Part of Publicly
Announced Plans
or Programs (1)
(d) Approximate
Dollar Value
of Shares that May Yet
Be Purchased Under the
Plans or Programs (1)
September 1, 2022 to September 30, 2022 . . . . . . . . . . 1,160,000
October 1, 2022 to October 31, 2022 . . . . . . . . . . . . . . . 2,713,000
November 1, 2022 to November 30, 2022 . . . . . . . . . .
–
$29.58
$31.96
$ –
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,873,000
1,160,000
2,713,000
–
3,873,000
$245,271
$158,570
$158,570
(1) In September 2022, the Board of Directors increased the share repurchase authorization by $145.9 million to
$250.0 million. At November 30, 2022, $158.6 million remains available for future purchases. In January
2023, the Board of Directors increased the share repurchase authorization back up to $250.0 million.
Stockholder Return Performance Graph
Set forth below is a graph comparing the cumulative total stockholder return on our common shares against the
cumulative total return of the Standard & Poor’s 500 Stock Index and the Standard & Poor’s 500 Financials
Index for the period commencing December 31, 2017 to November 30, 2022. Index data was furnished by S&P
Global Market Intelligence. The graph assumes that $100 was invested on December 31, 2017 in each of our
common stock, the S&P 500 Index and the S&P 500 Financials Index and that all dividends were reinvested.
25
Comparison of Cumulative Five Year Total Return
$250
$200
$150
$100
$50
$0
12/31/17
11/30/18
11/30/19
11/30/20
11/30/21
11/30/22
Jefferies Financial Group Inc.
S&P 500 Index
S&P 500 Financials Index
Item 6. [Reserved]
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This report may contain or incorporate by reference certain ‘‘forward looking statements’’ within the meaning of
the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements
include statements about our future and statements that are not historical or current facts. These forward looking
statements are often preceded by the words ‘‘should,’’ ‘‘expect,’’ ‘‘believe,’’ ‘‘intend,’’ ‘‘may,’’ ‘‘will,’’ ‘‘would,’’
‘‘could’’ or similar expressions. Forward-looking statements may contain expectations regarding revenues,
earnings, operations and other results, and may include statements of future performance, plans and objectives.
Forward looking statements also include statements pertaining to our strategies for future development of our
business and products. Forward looking statements represent only our belief regarding future events, many of
which by their nature are inherently uncertain. It is possible that the actual results may differ, possibly materially,
from the anticipated results indicated in these forward-looking statements. Information regarding important
factors that could cause actual results to differ, perhaps materially, from those in our forward looking statements
is contained in this report and other documents we file. You should read and interpret any forward looking
statement together with these documents, including the following:
• the description of our business contained in this report under the caption ‘‘Business’’;
• the risk factors contained in this report under the caption ‘‘Risk Factors’’;
• the discussion of our analysis of financial condition and results of operations contained in this report
under the caption ‘‘Management’s Discussion and Analysis of Financial Condition and Results of
Operations’’ herein;
• the discussion of our risk management policies, procedures and methodologies contained in this report
under the caption ‘‘Management’s Discussion and Analysis of Financial Condition and Results of
Operations – Risk Management’’ herein;
26
• the consolidated financial statements and notes to the consolidated financial statements contained in this
report; and
• cautionary statements we make in our public documents, reports and announcements.
Any forward-looking statement speaks only as of the date on which that statement is made. We undertake no
obligation to update any forward-looking statement to reflect events or circumstances that occur after the date on
which the statement is made, except as required by applicable law.
Our business, by its nature, does not produce predictable or necessarily recurring earnings. Our results in any
given period can be materially affected by conditions in global financial markets, economic conditions generally
and our own activities and positions. For a further discussion of the factors that may affect our future operating
results, see the risk factors contained in this report under the caption ‘‘Risk Factors’’.
Our results of operations for the years ended November 30, 2022 (‘‘2022’’), November 30, 2021 (‘‘2021’’) and
November 30, 2020 (‘‘2020’’) are discussed below. Additionally, for a further discussion of our results of
operations for the year ended November 30, 2021 (‘‘2021’’) and our 2021 results of operations as compared with
our 2020 results of operations, see ‘‘Management’s Discussion and Analysis of Financial Condition and Results
of Operations’’ in Part II, Item 7 of our Annual Report Form 10-K for the year ended November 30, 2021, which
was filed with the Securities and Exchange Commission (‘‘SEC’’) on January 28, 2022, and Exhibit 99.1, Part II,
Item 7 of our Form 8-K, which was filed with the SEC on October 7, 2022.
Consolidated Results of Operations
Jefferies Group LLC Merger into Jefferies Financial Group Inc.
On November 1, 2022, we simplified our corporate structure by merging Jefferies Group LLC with and into
Jefferies Financial Group Inc. This merger eliminated the requirement for two sets of SEC filings and other
duplicative processes. In connection with the merger, we have reclassified the presentation of certain line items
within our Consolidated Statements of Earnings to streamline our financial statements and better align the
presentation of our firm with our strategy of building our investment banking and capital markets and asset
management businesses as we continue to reduce our legacy merchant banking portfolio. Prior year amounts
have been revised to conform to these reclassification and presentation changes to current year reporting. Refer
to Note 1, Organization and Basis of Presentation, in our consolidated financial statements included in this
Annual Report on Form 10-K for further details.
Overview
The following table provides an overview of our consolidated results of operations (dollars in thousands):
Net revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-interest expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings (loss) attributable to noncontrolling
interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss attributable to redeemable noncontrolling
interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Preferred stock dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings attributable to Jefferies Financial Group
Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effective Tax Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022
2021
2020
$5,978,838
4,923,276
1,055,562
273,852
781,710
$8,013,826
5,759,721
2,254,105
576,729
1,677,376
$5,850,521
4,783,438
1,067,083
298,673
768,410
% Change from
Prior Year
2022
2021
(25.4)% 37.0%
(14.5)% 20.4%
(53.2)% 111.2%
(52.5)% 93.1%
(53.4)% 118.3%
(2,397)
3,850
(5,271) N/M
N/M
(1,342)
8,281
(826)
6,949
(1,558)
5,634
62.5% (47.0)%
19.2% 23.3%
777,168
1,667,403
769,605
(53.4)% 116.7%
25.9%
25.6%
28.0%
N/M – Not Meaningful
27
Executive Summary
2022 Compared with 2021
Consolidated Results
• Net revenues for 2022 were $5.98 billion, compared with the prior year’s all-time record of $8.01 billion
for 2021. Results in 2022 reflect strong advisory revenues, offset by lower results in most of our other
businesses.
• Earnings before income taxes of $1.06 billion for 2022 were down 53.2% over the prior year’s record.
• Net earnings attributable to Jefferies Financial Group Inc. of $777 million for 2022 were down 53.4%
over the prior year.
Business Results
• Our investment banking net revenues were $2.90 billion for 2022, compared with a prior year record of
$4.66 billion for 2021, including strong advisory revenues of $1.78 billion, compared to a prior year
record of $1.87 billion. Our underwriting revenues for 2022 were $1.03 billion, down 58.7%, consistent
with the significant reduction in industry-wide deal activity while our market position continued to
improve. For 2022, we ranked as the seventh largest firm globally across our three core investment
banking businesses - mergers and acquisitions advisory services, equity underwriting and leveraged
finance underwriting.
• Our equities net revenues of $1.06 billion are 18.5% lower than 2021, as 2021 was an exceptional year
and 2022 presented a more difficult trading environment with significantly reduced new issue activity,
including substantially reduced Special Purpose Acquisition Companies (‘‘SPACs’’) activity. This was
partially offset by market share gains and ongoing momentum in our client franchise. This compares to
record results in predominately all of our equities businesses and across each of our regions during 2021.
• Our fixed income net revenues of $765.6 million were down 20.2% compared to 2021, primarily due to
reduced client activity across most products, increased inflation and interest rate concerns, mark-to-
market losses on certain mortgage inventory positions and a slowdown in securitized markets resulted in
fewer trading opportunities.
• Overall net revenues in our asset management business were $1.26 billion, compared with $1.09 billion
in 2021, reflecting revenues from sales of certain legacy merchant banking positions partially offset by
lower investment returns as compared to the prior year.
Non-interest Expenses
• Non-interest expenses for 2022 decreased $836.4 million, or 14.5%, to $4.92 billion, compared with
$5.76 billion for 2021. The decrease is due to lower compensation and benefits expense, consistent with
the decline in net revenues. Our pre-tax operating margin decreased to 17.7% in 2022 from 28.1% in
2021.
• Compensation and benefits expense for 2022 was $2.59 billion, a decrease of $965.7 million, or 27.2%,
from 2021. Compensation and benefits expense as a percentage of Net revenues was 43.3% for 2022,
compared with 44.4% for 2021. Refer to Note 13, Compensation Plans, included in this Annual Report
on Form 10-K, for further details.
• Non-interest expenses were also impacted by increases in Floor brokerage and clearing expenses,
technology and communications expenses and business and development expenses, partially offset by a
decline in underwriting expenses.
28
Headcount
• At November 30, 2022, we had 5,381 employees globally, a decrease of 175 employees from our
headcount of 5,556 at November 30, 2021. Our headcount decreased by 561 as a result of the sale of our
wholly-owned subsidiary, Idaho Timber, offset by growth in our investment banking headcount, as well
as additions in technology and other corporate services staff to support our growth and other strategic
priorities.
2021 Compared with 2020
Consolidated Results
• Net revenues for 2021 were $8.01 billion, compared with prior year net revenues of $5.85 billion for
2020, an increase of $2.16 billion, or 37.0%, reflecting then record net revenues in investment banking,
equities and asset management and solid results in fixed income.
• Earnings before income taxes of $2.25 billion for 2021 were up 111.2% over the prior year’s earnings
before income taxes.
• Net earnings attributable to Jefferies Financial Group Inc. of $1.67 billion for 2021 were up 116.7% over
the prior year net earnings attributable to Jefferies Financial Group Inc. of $769.6 million for 2020.
Business Results
• Our investment banking net revenues of $4.66 billion for 2021 were an increase of 81.9% from the prior
year, reflecting record advisory revenues of $1.87 billion, an increase of 77.8%, or $820.1 million,
compared to 2020, while our record underwriting revenues for 2021 were $2.49 billion, up $1.04 billion,
or 72.1%. The increase in net revenues is reflective of an increase in both the number and aggregate
value of transactions completed by our investment banking franchise.
• Our equities net revenues increased 15.2% compared to the prior year, reflecting record results that were
driven by strong client activity and trading performance as a result of meaningful growth across all of
our products and regions.
• Our fixed income net revenues were down 28.5% compared to the prior year, which was an all-time
record. Net revenues for 2021 are reflective of strong trading results under more normalized trading
conditions and reflect continued strength in certain of our credit-focused businesses and strong client
demand though this is in comparison to outsize trading volumes and extremely active markets and high
levels of volatility driving results in the prior year.
• Our asset management net revenues of $1.09 billion for 2021, were higher than the $814.6 million
recorded in the prior year, driven by a substantial increase in asset management fees and revenues.
Expenses
• Non-interest expenses for 2021 increased $976.3 million, or 20.9%, to $5.76 billion, compared with
$4.78 billion for 2020. This 20.4% increase, is largely due to higher compensation and benefits expense,
as well as higher transaction-related costs.
• Compensation and benefits expense for 2021 was $3.55 billion, an increase of $610.7 million, or 20.7%,
from 2020. The increase is primarily a result of the significant increase in our net revenues.
• Non-compensation expenses for 2021 increased $365.6 million, or 19.9%, to $2.20 billion, compared
with $1.84 billion for 2020. The increase in non-compensation expenses was largely due to higher Floor
brokerage and clearing fees related to increased trading volumes and a significant increase in volume of
investment banking transactions driving higher Underwriting costs. Technology and communication
expenses, Professional services expenses and Business development expenses were also higher for 2021
reflecting our growth and costs associated with our increased recruiting efforts.
29
• Other expenses also increased for 2021 primarily due to an increase in bad debt expense mostly related
to a specific default in our prime brokerage business and $64.0 million in costs related to the early
redemption of senior notes.
Headcount
• At November 30, 2021, we had 5,556 employees globally, an increase of 611 employees from our
headcount of 4,945 at November 30, 2020. Our headcount increased across all regions primarily as a
result in the growth of our investment banking business, as well as due to additions in technology and
other corporate services staff to support our increased regulatory requirements and overall growth.
Revenues by Source
Historically, our results of operations have been presented by summarized income statement line items by
business segments comprised as follows:
Investment Banking and Capital Markets, Asset Management,
Merchant Banking, Corporate and Parent Company Interest, including consolidation adjustments. During the
year ended November 30, 2022 and in connection with the merger of Jefferies Group LLC with and into
Jefferies Financial Group Inc., we transferred significantly all of our legacy merchant banking investments to our
Asset Management reportable segment. Certain publicly traded equity investments that are related to investment
banking relationships were transferred from our Merchant Banking reportable segment
to our Investment
Banking and Capital Markets reportable segment. In addition, there were certain investments that were held
within the Investment Banking and Capital Markets reportable segment, which have been transferred to the Asset
Management reportable segment. These investments are now managed by the respective segment managers and
we have revised our reportable business segment presentation accordingly. Prior period amounts have been
revised to conform to the current segment reporting.
We now present our results as two reportable business segments as follows: Investment Banking and Capital
Markets and Asset Management. Additionally, corporate activities are now fully allocated to each of these
reportable business segments. We believe that this reorganization of our segments better aligns the manner in
which we manage our business activities and is in keeping with our fundamental
long-term strategy of
continuing to build out our investment banking effort, enhancing our capital markets businesses and further
developing our Leucadia Asset Management alternative asset management platform as we continue to divest of
significant portions of our legacy merchant banking portfolio.
The remainder of our ‘‘Consolidated Results of Operations’’ is presented on a detailed product and expense
basis. Our ‘‘Revenues by Source’’ is reported along the following business lines: investment banking, equities,
fixed income and asset management. Additionally, the results of the asset management business include a new
subcategory ‘‘merchant banking.’’
The following is a description of the changes that have been made:
• Revenues from certain publicly traded equity securities that were historically presented within our
Merchant Banking segment and are related to investment banking relationships are now presented within
Other investment banking revenues. Other investment banking also includes revenues from our share of
net earnings from our Jefferies Finance joint venture, our share of net earnings from our Berkadia
commercial real estate joint venture, revenues from our lending and servicing of automobile loans as
well as any revenues from securities and loans received or acquired in connection with our investment
banking activities that have also been previously presented within Other investment banking in prior
financial statement filings.
• Within Asset Management, investment return represents revenue related to our capital invested in asset
management funds that are managed by us or our affiliated asset managers. Historically, revenues from
principal investments in private equity and hedge funds managed by third-parties that are not part of our
Leucadia Asset Management platform and revenues from other investment positions were also reported
within investment return and have now been disaggregated and are presented as part of the new
merchant banking subcategory.
30
• Revenues from legacy merchant banking investments, including results from our real estate development,
oil and gas and other manufacturing activities are now presented in the new Asset Management
subcategory, ‘‘merchant banking.’’
Foreign currency transaction gains or losses, fair value debt valuation adjustments on derivative contracts, gains
and losses on investments held in deferred compensation or certain other immaterial corporate income items are
not considered by management in assessing the financial performance of our operating businesses and are,
therefore, not reported as part of our business segment results.
The changes to the manner in which we describe and disclose the performance of our business activities has no
effect on our historical consolidated results of operation. Previously reported results are presented on a
comparable basis in the tables below.
The following provides a summary of ‘‘Net Revenues by Source’’ (dollars in thousands):
2022
2021
2020
Amount
% of Net
Revenues
Amount
% of Net
Revenues
Amount
% of Net
Revenues
% Change from
Prior Year
2022
2021
Advisory . . . . . . . . . . . . . . . . . . . . . . . $1,778,003
538,946
Equity underwriting . . . . . . . . . . . . .
490,873
Debt underwriting. . . . . . . . . . . . . . .
29.7% $1,873,204
1,557,364
9.0
935,131
8.2
23.4% $1,053,500
902,016
19.4
545,978
11.7
18.0% (5.1)% 77.8%
(65.4)% 72.7%
15.4
(47.5)% 71.3%
9.3
Total underwriting . . . . . . . . . . . .
Other investment banking . . . . . . .
1,029,819
92,170
Total Investment Banking . . . . .
2,899,992
Equities . . . . . . . . . . . . . . . . . . . . . . . .
Fixed income . . . . . . . . . . . . . . . . . . .
1,060,582
765,576
Total Capital Markets . . . . . . . . .
1,826,158
17.2
1.6
48.5
17.7
12.8
30.5
2,492,495
291,423
4,657,122
1,301,530
959,122
2,260,652
31.1
3.6
58.1
16.2
12.0
28.2
1,447,994
58,286
2,559,780
1,128,910
1,340,792
2,469,702
24.7
1.1
43.8
19.3
22.9
42.2
(58.7)% 72.1%
(68.4)% 400.0%
(37.7)% 81.9%
(18.5)% 15.3%
(20.2)% (28.5)%
(19.2)% (8.5)%
Total Investment Banking and
Capital Markets (1) . . . . . . . . .
4,726,150
79.0
6,917,774
86.3
5,029,482
86.0
(31.7)% 37.5%
Asset management fees and
revenues . . . . . . . . . . . . . . . . . . . . .
Investment return (2) . . . . . . . . . . . .
Merchant banking (1) . . . . . . . . . . .
Allocated net interest (2) . . . . . . . .
89,127
156,594
1,053,031
(41,059)
Total Asset Management . . . . . .
1,257,693
1.5
2.6
17.6
(0.7)
21.0
120,733
260,316
756,482
(44,907)
1,092,624
Other . . . . . . . . . . . . . . . . . . . . . . . . . .
(5,005)
–
3,428
1.5
3.2
9.5
(0.6)
13.6
0.1
26,540
256,090
580,411
(48,484)
0.5
4.4
9.9
(0.8)
(26.2)% 354.9%
(39.8)% 1.7%
39.2% 30.3%
(8.6)% (7.4)%
814,557
14.0
15.1% 34.1%
6,482
–
N/M
(47.1)%
Net Revenues. . . . . . . . . . . . . . . . . . . $5,978,838
100.0% $8,013,826
100.0% $5,850,521
100.0% (25.4)% 37.0%
N/M – Not Meaningful
(1) Net revenues presented for our Investment Banking and Capital Markets businesses and the merchant
banking activities within our Asset Management business include allocations of interest income and interest
expense as we assess the profitability of these businesses inclusive of the net interest revenue or expense
associated with the respective activities, including the net interest cost of allocated long-term debt, which is a
function of the mix of each business’s associated assets and liabilities and the related funding costs.
(2) Allocated net interest represents an allocation to Asset Management of our long-term debt interest expense,
net of interest income on our Cash and cash equivalents and other sources of liquidity. Allocated net interest
has been disaggregated to increase transparency and to make clearer actual Investment return. We believe
that aggregating Investment return and Allocated net
interest would obscure the Investment return by
including an amount that is unique to our credit spreads, debt maturity profile, capital structure, liquidity
risks and allocation methods.
31
Investment Banking Revenues
Investment banking is composed of revenues from:
• advisory services with respect to mergers/acquisitions, restructurings/recapitalizations and private capital
advisory transactions;
• underwriting services, which include underwriting and placement services related to corporate debt,
municipal bonds, mortgage-backed and asset-backed securities and equity and equity-linked securities
and loan syndication;
• our 50% share of net earnings from our corporate lending joint venture, Jefferies Finance;
• our 45% share of net earnings from our commercial real estate finance joint venture, Berkadia;
• the revenues of Foursight, our wholly-owned subsidiary engaged in the lending and servicing of
automobile loans; and
• securities and loans received or acquired in connection with our investment banking activities.
The following table sets forth our investment banking revenues (dollars in thousands):
2022
2021
2020
% Change from
Prior Year
2022
2021
Advisory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity underwriting . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt underwriting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total underwriting . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other investment banking. . . . . . . . . . . . . . . . . . . . . . . .
$1,778,003
538,946
490,873
1,029,819
92,170
$1,873,204
1,557,364
935,131
2,492,495
291,423
$1,053,500
902,016
545,978
1,447,994
58,286
(5.1)% 77.8%
(65.4)% 72.7%
(47.5)% 71.3%
(58.7)% 72.1%
(68.4)% 400.0%
Total investment banking . . . . . . . . . . . . . . . . . . . . . .
$2,899,992
$4,657,122
$2,559,780
(37.7)% 81.9%
The following table sets forth our investment banking activities (dollars in billions):
Deals Completed
2021
2022
2020
Aggregate Value
2021
2020
2022
Advisory transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Public and private equity and convertible offerings . . . . . . . . . .
Public and private debt financings. . . . . . . . . . . . . . . . . . . . . . . . . .
364
166
653
315
426
812
228
286
639
$336.7
37.8
250.6
$380.4
145.6
390.9
$217.5
103.5
255.8
2022 Compared with 2021
• Investment banking revenues for 2022 were $2.90 billion, compared with an annual record $4.66 billion
for 2021, reflecting near record advisory revenues, offset by much lower revenues in debt and equity
underwriting.
• Our 2022 advisory revenues were $1.78 billion, down $95.2 million, or 5.1%, from 2021’s record year.
Activity in the mergers and acquisitions markets remained strong and the market share of our completed
transactions continued to increase.
• Our underwriting revenues for 2022 were $1.03 billion, a decrease of $1.46 billion, or 58.7%, from
2021, reflecting lower net revenues in both equity and debt underwriting of $539 million and $491
million, respectively. The decline in our debt and equity underwriting net revenues was consistent with
the substantial reduction in industry-wide deal activity. The prior year results reflect an exceptionally
active period in which clients took advantage of the strong equity environment to raise equity capital and
the low rate environment to access the debt capital markets, with high levels of activity in the leveraged
loan new issuance markets and record levels of high yield bond refinancing activity.
• Other investment banking revenues were $92.2 million for 2022, compared with $291.4 million for
2021. Other investment banking revenues during 2022 include $124.4 million from our share of
32
Berkadia net earnings as compared with $130.6 million in 2021, primarily due to a shift in sales to a
lower margin product mix as well as higher borrowing costs, partially offset by increased income from
higher interest rates and increased servicing revenues. This was offset by our share of the net loss of our
Jefferies Finance joint venture in 2022, reflecting reduced market activity and higher reserves recorded
on its loan portfolio and outstanding commitments due to company-specific developments and difficult
conditions in the leveraged finance market compared with our share of JFIN’s net earnings in 2021.
Revenues from Foursight were relatively consistent in 2022 as compared to 2021 as declines in revenue
from originations and sales were offset by increases in servicing fee revenues. Other investment banking
revenues for 2022 were also impacted by net unrealized losses on various investments,
including
publicly traded equity securities related to investment banking relationships, as compared to net
unrealized gains in 2021.
• Our three-month forward investment banking backlog as of November 30, 2022 is consistent with the
levels as of August 31, 2022, but execution remains dependent on market conditions. As an indicator of
net revenues in a given future period, backlog snapshots are subject to limitations. The time frame for
the realization of revenues from these expected transactions varies and is influenced by factors we do not
control. Transactions not included in the estimate may occur, and expected transactions may also be
modified or cancelled.
2021 Compared with 2020
• Total Investment banking revenues for 2021 were a record of $4.66 billion, compared with $2.56 billion
for 2020, reflecting record advisory and underwriting revenues.
• Our 2021 advisory revenues were a record $1.87 billion, up $820.1 million, or 77.8%, from 2020,
primarily due to a significant
increase in the number and values of transactions, and including a
significant contribution from Special Purpose Acquisition Companies (‘‘SPACs’’) advisory transactions
in 2021.
• Our underwriting revenues for 2021 were a record $2.49 billion, an increase of $1.04 billion, or 72.1%,
from 2020, with record net revenues in equity underwriting of $1.56 billion and record net revenues of
$935.1 million in debt underwriting, as clients took advantage of the strong equity environment and the
low interest rate environment. Our equity underwriting results also include increased revenues from
SPAC offerings, as well as strong revenues from at-the-money offerings.
• Other investment banking revenues were $291.4 million for 2021, compared with $58.3 million for
2020. Other investment banking revenues include our share of the net earnings (loss) of the Jefferies
Finance joint venture. In 2021, Jefferies Finance achieved record underwriting volumes on the back of
the strength of the leveraged loan market and an active private-equity backed mergers and acquisitions
environment. The results in 2021 were partially offset by a $56.0 million one-time charge incurred by
Jefferies Finance related to refinancing outstanding debt. Results of Jefferies Finance in 2020 were
impacted by unrealized losses related to the write-down of commitments and loans held-for-sale,
primarily due to the impact of the COVID-19 pandemic on the markets and the economy. Additionally,
results for 2021 include higher net revenues of from our share of earnings from Berkadia. The higher net
revenues for 2021 are due to significant increases in debt and investment sales volumes. The net
revenues for 2020 were impacted by the impairment of mortgage servicing rights as a result of lower
interest rates, higher loan loss provisions and a decline in loan originations due to the impact of
COVID-19. The prior year results were also impacted by unrealized write-downs of private equity
investments received or acquired in connection with our investment banking activities.
Equities Net Revenues
Equities is composed of net revenues from:
• services provided to our clients from which we earn commissions or spread revenue by executing,
settling and clearing transactions for clients;
• advisory services offered to clients;
33
• financing, securities lending and other prime brokerage services offered to clients, including capital
introductions and outsourced trading; and
• wealth management services.
2022 Compared with 2021
• Total equities net revenues were $1.06 billion for 2022, a decrease of 18.5%, compared with an
exceptional $1.30 billion in 2021. The results for 2022 were impacted by a more difficult trading
environment than 2021 with significantly reduced new issue activity, including reduced SPAC activity.
This was partially offset by market share gains and ongoing momentum in our client franchise with
strong client activity on market volatility. This compares to record results in predominately all of our
equities businesses and across each of our regions during 2021.
• Results in our global cash equities business were lower across regions driven by lower trading revenues
versus record results globally and across each region on strong market volumes in 2021. The prior year
also benefited from trading opportunities related to SPACs. Our global convertibles business also had
lower revenues, primarily driven by weaker primary equity markets and widening credit spreads
compared to a strong new issue market in 2021. In addition, our equity derivatives business results
declined as a difficult and challenging trading environment put pressure on trading activity during 2022.
• The lower results were offset by record 2022 results in our electronic trading and prime services
trading volumes driving strong commission revenues and by
businesses, reflecting increased client
continued growth and momentum in our outsourced trading business.
2021 Compared with 2020
• Total equities net revenues were a record $1.30 billion for 2021, an increase of 15.3% over the previous
year record of $1.13 billion in 2020. Overall, our record results were driven by strong client activity and
trading performance across all regions.
• Our global cash equities business had record results driven by significant client activity and strong
trading revenue, including trading gains from SPAC-related activity, and our electronic trading platform
continued to expand and achieve record results. Our derivatives business achieved record results, driven
by strong client activity and trading revenues. Our prime services franchise had record results driven by
higher balances and increased client activity, as well as higher financing revenues in our securities
finance business. Our results were slightly offset by lower revenues in our global convertibles businesses
primarily driven by lower trading volumes and volatility.
Fixed Income Net Revenues
Fixed income is composed of net revenues from:
• executing transactions for clients and making markets in securitized products, investment grade, high-
yield, distressed, emerging markets, municipal and sovereign securities and bank loans, as well as
foreign exchange execution on behalf of clients;
• interest rate derivatives and credit derivatives; and
• financing services offered to clients.
2022 Compared with 2021
• Our fixed income net revenues of $765.6 million for 2022 were down 20.2% compared to 2021,
primarily due to reduced client activity across most products, mark-to-market losses on certain mortgage
34
inventory positions and a slowdown in securitized markets resulting in fewer trading opportunities. The
prior year results were reflective of particularly strong client activity and robust trading activity.
• Results in certain U.S. securitized markets products were significantly impacted by high levels of
volatility, less liquidity, widening spreads and uncertainty in respect of increased inflation and interest
rate concerns, leading to mark-to-market losses on these products and a significant decline in demand for
securitized products.
• We achieved higher revenues in emerging markets and our electronic execution businesses as increased
volatility due to geopolitical concerns drove an increase in trading volumes. This was offset by lower
results across most of our other credit businesses as a result of a decline in trading opportunities as
compared to the prior year comparable period that reflected robust revenues across regions and products.
2021 Compared with 2020
• Fixed income net revenues totaled $959.1 million for 2021, a decrease of 28.5% compared with record
net revenues of $1.34 billion for 2020, driven by reduced global
trading volumes across several
products. While 2021 revenues decreased from 2020, our fixed income franchise produced solid overall
trading results across most of our businesses, reflecting continued strength in certain of our credit-
focused businesses and strong client demand in structuring and financing credit products and for trading
securitized products. The results in 2020 significantly benefited from strong trading volumes due to
extremely active markets and high levels of volatility.
• Net revenues for 2021 were higher in our securitized markets groups and distressed trading business, as
compared with the prior year. In addition, 2021 results benefited from trading gains in our municipal
securities business compared to 2020 when markets experienced a significant sell-off due to the impact
of COVID-19. Our revenues also benefited from ongoing investments across our European credit
franchise.
• Our 2021 results also include lower revenues in our U.S. and international rates businesses due to a
decline in trading opportunities, as a result of lower volatility, as the prior year benefited from significant
client activity and wider bid-offer spreads. Lower results across our investment grade corporates and
emerging markets businesses, as well as our high yield and loan trading businesses, were driven by
reduced client activity and lower levels of volatility in 2021.
Asset Management
We operate a diversified alternative asset management platform offering institutional clients an innovative range
of investment strategies directly and through our affiliated asset managers. We provide certain of our affiliated
asset managers access to our fully integrated global operational infrastructure and support. This may include
strategy and product development, daily operations and finance-related activities, compliance, legal and human
resources support, as well as marketing and business development.
Asset management revenues include the following:
• management and performance fees from funds and accounts managed by us;
• revenue from affiliated asset managers where we are entitled to portions of their revenues and/or profits,
as well as earnings on our ownership interests in our affiliated asset managers;
• investment income from our capital invested in and managed by us and our affiliated asset managers;
and
• revenues from investments held in our legacy merchant banking portfolio,
including consolidated
operations from real estate development activities, oil and gas activities and timber manufacturing (until
the sale of Idaho Timber during the third quarter of 2022).
Asset management fees and revenues are impacted by the level of assets under management and the performance
return of those assets, for the most part on an absolute basis, and, in certain cases, relative to a benchmark or
35
hurdle. These components can be affected by financial markets, profits and losses in the applicable investment
portfolios and client capital activity. Further, asset management fees vary with the nature of investment
management services. The terms under which clients may terminate our investment management authority, and
the requisite notice period for such termination, varies depending on the nature of the investment vehicle and the
liquidity of the portfolio assets. In some instances, performance fees and similar revenues are recognized once a
year, when they become fixed and determinable and are not probable of being significantly reversed, typically in
December. As a result, a significant portion of our performance fees and similar revenues generated from
investment returns in a calendar year are recognized in our following fiscal year.
The following summarizes the results of our Asset Management businesses (dollars in thousands):
2022
2021
2020
2022
2021
% Change from
Prior Year
Asset management fees:
Equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Multi-asset. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total asset management fees. . . . . . . . . . . . . . . . . .
Revenue from strategic affiliates (1) . . . . . . . . . . . . .
Total asset management fees and revenues. . . . .
Investment return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Merchant banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Allocated net interest . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Asset Management . . . . . . . . . . . . . . . . . . . . .
$
7,198
16,327
23,525
65,602
89,127
156,594
1,053,031
(41,059)
$1,257,693
$
6,927
7,909
14,836
105,897
120,733
260,316
756,482
(44,907)
$1,092,624
$ 6,158
8,544
14,702
11,838
26,540
256,090
580,411
(48,484)
$814,557
3.9% 12.5%
106.4% (7.4)%
58.6%
0.9%
(38.1)% 794.6%
(26.2)% 354.9%
(39.8)% 1.7%
39.2% 30.3%
(8.6)% (7.4)%
15.1% 34.1%
(1) These amounts include our share of fees received by affiliated asset management companies with which we
have revenue and/or profit share arrangements.
2022 Compared with 2021
• Asset management net revenues for 2022 were $1.26 billion, higher than the $1.09 billion for 2021,
reflecting increased revenues on certain legacy merchant banking positions as well as sales of certain
positions, partially offset by lower investment returns as compared to the prior year. Asset management
fees and revenues in 2022 of $89.1 million, as compared with $120.7 million in 2021, were primarily
due to modestly higher asset management fees on funds managed by us and a decline in the performance
and similar fees and revenues earned through our strategic affiliates.
• Asset management investment return was $156.6 million for 2022, a decline from investment return of
$260.3 million for 2021. During 2022, we sold our interests in Oak Hill and recognized revenues of
$175.1 million. The gain on sale from our interests in Oak Hill was offset by mark-to-market losses from
capital invested by us in certain asset management funds.
• Revenues from merchant banking assets managed within our Asset Management business were $1.05
billion for 2022 as compared to revenues of $756.5 million for 2021. During 2022, we recognized
revenues from the sale of Idaho Timber and the sale of a completed multi-family real estate project.
Merchant banking activity revenues were also higher in 2022 on higher oil and gas revenues given the
increase in underlying commodity prices. The increase in revenues for the year ended November 30,
2022 as compared to the year ended November 30, 2021 was partially offset by unrealized losses on
capital invested by us in various public and private companies that are now managed as part of our asset
management strategy.
2021 Compared with 2020
• Asset management net revenues for 2021 were $1.09 billion, higher than the $814.6 million for 2020,
driven by a substantial increase in asset management fees and revenues. Asset management fees and
36
revenues in 2021 of $120.7 million, as compared with $26.5 million in the prior year, were driven by
significant increases in management, performance and similar fees and revenues from our strategic
affiliates.
• Revenues from merchant banking assets managed within our Asset Management business were $756.5
million for 2022 as compared to revenues of $580.4 million in 2021. During 2021, revenues from Idaho
increased given the high demand for wood and an increase in average selling prices.
Timber
Additionally, we recognized increased revenues in 2021 from the sale of real estate properties as
compared to recognizing impairment losses in 2020 due to the softening of certain real estate markets.
The increase in revenues for the year ended November 30, 2021 as compared to the year ended
November 30, 2020 was partially offset by unrealized losses on capital invested by us in various public
and private companies that are now managed as part of our asset management strategy.
Assets Under Management
We and our affiliated asset managers have aggregate net asset values or net asset value equivalent assets under
management of approximately $29.0 billion and $23.5 billion at November 30, 2022 and 2021, respectively. Net
asset values or net asset value equivalent assets under management are composed of the fair value of the net
assets of a fund or the net capital invested in a separately managed account. These include the following:
• Net asset values of investments made by us in funds or separately managed accounts were $2.6 billion
and $2.6 billion at November 30, 2022 and 2021, respectively. We invest in certain strategies using our
own capital, often before opening a strategy to outside capital. The net asset values include our capital of
$1.5 billion and $1.6 billion at November 30, 2022 and 2021, respectively, plus amounts financed of
$0.9 billion and $1.0 billion at November 30, 2022 and 2021, respectively. Revenues related to the
investments made by us are presented in Investment return within the results of our asset management
businesses.
• The assets under management by affiliated asset managers with whom we have profit or revenue sharing
arrangements were $25.2 billion and $20.1 billion at November 30, 2022 and 2021, respectively. In
some instances, due to the timing of payments and crystallization of underlying profits or revenue, the
revenue related to these relationships will generally be realized and recognized once per year at the
calendar year-end (during our first fiscal quarter). Revenues from our share of fees received by affiliated
asset managers are presented in Revenue from strategic affiliates within the results of our asset
management businesses.
• Third-party investments actively managed by our wholly-owned managers were $1.2 billion and $0.8
billion at November 30, 2022 and 2021, respectively. We earn asset management fees as a result of the
third-party investments, which are presented in Asset management fees and revenues within the results
of our asset management businesses.
The tables below include only third-party assets under management by us, excluding those of our affiliated asset
managers.
Period end assets under management by predominant asset class were as follows (in millions):
Assets under management:
Equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Multi-asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 274
974
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,248
$349
482
$831
November 30,
2022
2021
37
Change in assets under management were as follows (in millions):
Year Ended
November 30,
2022
2021
Assets under management:
Balance, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash flow in (out) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net market appreciation (depreciation) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 831
434
(17)
Balance, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,248
$774
21
36
$831
The net cash flow in during 2022 is primarily due to new subscriptions and investments from third-parties. The
net cash flow in 2021 is primarily due to new subscriptions and investments from third-parties and net market
appreciation, partially offset by redemptions from and liquidations of certain funds.
Our definition of assets under management is not based on any definition contained in any of our investment
management agreements and differs from the manner in which ‘‘Regulatory Assets Under Management’’ is
reported to the SEC on Form ADV.
Asset Management Investments
Our asset management business makes seed and additional strategic investments directly in alternative asset
management separately managed accounts and co-mingled funds where we act as the asset manager or in
affiliated asset managers where we have strategic relationships and participate in the revenues or profits of the
affiliated manager. The following table represents our investments by type of asset manager (in thousands):
November 30,
2022
2021
Jefferies Financial Group Inc.; as manager:
Fund investments (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Separately managed accounts (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 182,792
129,430
$ 221,359
251,665
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 312,222
$ 473,024
Strategic affiliates; as asset manager:
Fund investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Separately managed accounts (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in asset managers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total asset management investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,022,029
214,387
52,357
$1,288,773
$1,600,995
$ 831,508
368,377
222,661
$1,422,546
$1,895,570
(1) Due to the level or nature of an investment in a fund, we may consolidate that fund; and accordingly, the
assets and liabilities of the fund are included in the representative line items in our consolidated financial
statements. At November 30, 2022 and 2021, $9.7 million and $76.5 million, respectively, represents net
investments in funds that have been consolidated in our financial statements.
(2) Where we have investments in a separately managed account, the assets and liabilities of such account are
presented in our consolidated financial statements within each respective line item.
Other
Other revenues include foreign currency transaction gains or losses, fair value debt valuation adjustments on
derivative contracts, gains and losses on investments held in deferred compensation or certain other immaterial
corporate income items that are not attributed to business segments as management does not consider such
amounts in assessing the financial performance of our operating businesses.
38
Non-interest Expenses
Non-interest expenses were as follows (dollars in thousands):
2022
2021
2020
Compensation and benefits. . . . . . . . . . . . . . . . . . . . . . . .
Floor brokerage and clearing fees . . . . . . . . . . . . . . . . .
Underwriting costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Technology and communications . . . . . . . . . . . . . . . . . .
Occupancy and equipment rental . . . . . . . . . . . . . . . . . .
Business development . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Professional services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . .
Cost of sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,589,044
347,805
42,067
444,011
108,001
150,500
240,978
172,902
440,837
387,131
$3,554,760
301,860
117,572
388,134
106,254
109,772
215,761
157,420
470,870
337,318
$2,944,071
266,592
95,636
335,065
95,754
70,797
176,280
158,439
338,588
302,216
% Change from
Prior Year
2022
2021
(27.2)% 20.7%
15.2% 13.2%
(64.2)% 22.9%
14.4% 15.8%
1.6% 11.0%
37.1% 55.1%
11.7% 22.4%
9.8% (0.6)%
(6.4)% 39.1%
14.8% 11.6%
Total non-interest expenses . . . . . . . . . . . . . . . . . . . . .
$4,923,276
$5,759,721
$4,783,438
(14.5)% 20.4%
Total Non-Interest Expenses
2022 Compared with 2021
• Non-interest expenses were $4.92 billion for 2022, a decrease of $836.4 million, or 14.5%, compared
with $5.76 billion for 2021. The decrease is primarily due to lower compensation and benefits expense,
consistent with the decline in net revenues as well as reduced underwriting costs consistent with the
overall industry-wide decline in underwriting activity.
Compensation and Benefits
• Compensation and benefits expense consists of
salaries, benefits, commissions, annual cash
compensation and share-based awards and the amortization of share-based and cash compensation
awards to employees.
• Cash and share-based awards and a portion of cash awards granted to employees as part of year end
compensation generally contain provisions such that employees who terminate their employment or are
terminated without cause may continue to vest in their awards, so long as those awards are not forfeited
as a result of other forfeiture provisions (primarily non-compete clauses) of those awards. Accordingly,
the compensation expense for a portion of awards granted at year end as part of annual compensation is
recorded during the year of the award. Compensation and benefits expense includes amortization
expense associated with these awards to the extent vesting is contingent on future service. In addition,
certain awards to our Chief Executive Officer and our President and contain market and performance
conditions and the awards are amortized over their service periods.
• Compensation and benefits expense was $2.59 billion for 2022 compared with $3.55 billion for 2021. A
significant portion of our compensation expense is highly variable with net revenues. Compensation and
benefits expense as a percentage of Net revenues was 43.3% for 2022 and 44.4% for 2021.
• Compensation expense related to the amortization of share- and cash-based awards amounted to $240.5
million for 2022 compared with $405.0 million for 2021. Compensation expense in 2021 includes
accelerated amortization of certain cash-based awards, which were amended to remove service
requirements for vesting in the awards, amounted to $188.3 million for 2021.
• Employee headcount was 5,381 globally at November 30, 2022, a decrease of 175 employees from our
headcount of 5,556 at November 30, 2021. Our headcount decreased by 561 as a result of the sale of our
wholly-owned subsidiary, Idaho Timber, offset by growth in our investment banking headcount, as well
39
as additions in technology and other corporate services staff to support our growth and other strategic
priorities.
• Refer to Note 13, Compensation Plans, included in this Annual Report on Form 10-K, for further details
on compensation and benefits.
Non-Interest Expenses (Excluding Compensation and Benefits)
• Non-interest expenses, excluding Compensation and benefits, as a percentage of Net revenues was
39.0% and 27.5% for 2022 and 2021, respectively, demonstrating the operating leverage inherent in our
business and was impacted by the following:
(cid:4) Floor brokerage and clearing fees were higher commensurate with strong equity commission
revenues.
(cid:4) Underwriting costs were lower due to a decrease in the volume of equity and debt underwriting
transactions.
(cid:4) Technology and communication expenses were higher related to the development of various trading
and management systems and increased market data costs.
(cid:4) Business development expenses were higher as business travel, conferences and other events
increased from the prior year, which was substantially curtailed due to COVID-19.
(cid:4) Cost of sales were lower reflecting only three quarters of cost of sales in 2022 from Idaho Timber
as compared to a full year of cost of sales in 2021 due to its sale during the third quarter of 2022,
partially offset by cost of sales arising from the sale of a multi-family real estate project during the
fourth quarter of 2022.
(cid:4) Other expenses were higher and included an $80.0 million combined regulatory settlement with the
SEC and the CFTC as well as our charitable donations of $13.5 million from our Ukrainian Doing
Good Global Trading Day. Other expenses in the prior year comparable period included bad debt
expenses related to our prime brokerage business, other charitable donations of $13.2 million as
well costs related to the early redemption of senior notes.
2021 Compared with 2020
• Non-compensation expenses for 2021 increased $365.6 million, or 19.9%, to $2.20 billion, compared
with $1.84 billion for 2020.
• The increase in non-compensation expenses was largely due to higher Floor brokerage and clearing fees
on increased trading volumes in equities and higher Underwriting costs and Business Development
expenses as investment banking activity increased and higher costs associated with our increased
recruiting efforts. The increase also included higher Technology and communication expenses primarily
related to the development of various trading and management systems and increased market data costs.
Professional services expenses were also higher primarily due to legal and agency fees to support
growing activity across our businesses.
• Results for 2021 also included higher Other expenses primarily due to an increase in bad debt expense
mostly related to a specific default in our prime brokerage business and $64.0 million in costs related to
the early redemption of senior notes, partially offset by a reduction in the loss provision for investment
banking receivables.
Income Taxes
• For 2022, the provision for income taxes was $273.9 million, equating to an effective tax rate of 25.9%,
compared with a provision for income taxes of $576.7 million, equating to an effective tax rate of 25.6%
for 2021.
• Refer to Note 21, Income Taxes, in our consolidated financial statements included in this Annual Report
on Form 10-K, for further details on income taxes.
40
Accounting Developments
For a discussion of recently issued accounting developments and their impact on our consolidated financial
statements, see Note 3, Accounting Developments, in our consolidated financial statements included in this
Annual Report on Form 10-K.
Critical Accounting Estimates
Our consolidated financial statements are prepared in conformity with U.S. generally accepted accounting
principles (‘‘U.S. GAAP’’), which requires management to make estimates and assumptions that affect the
amounts reported in our consolidated financial statements and related notes. Actual results can and may differ
from estimates. These differences could be material to our consolidated financial statements.
We believe our application of U.S. GAAP and the associated estimates are reasonable. Our accounting estimates
are reevaluated, and adjustments are made when facts and circumstances dictate a change. Historically, we have
found our application of accounting policies to be appropriate, and actual results have not differed materially
from those determined using necessary estimates.
For further discussions of the following significant accounting policies and other significant accounting policies,
see Note 2, Summary of Significant Accounting Policies, in our consolidated financial statements included in
this Annual Report on Form 10-K.
Valuation of Financial Instruments
Financial instruments owned and Financial instruments sold, not yet purchased are recorded at fair value. The
fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a
the measurement date (the exit price).
liability in an orderly transaction between market participants at
Unrealized gains or losses are generally recognized in Principal transactions revenues in our Consolidated
Statements of Earnings.
For information on the composition of our Financial instruments owned and Financial instruments sold, not yet
purchased recorded at fair value, see Note 4, Fair Value Disclosures, in our consolidated financial statements
included in this Annual Report on Form 10-K.
Fair Value Hierarchy – In determining fair value, we maximize the use of observable inputs and minimize the
use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are
inputs that market participants would use in pricing the asset or liability based on market data obtained from
independent sources. Unobservable inputs reflect our assumptions that market participants would use in pricing
the asset or liability developed based on the best information available in the circumstances. We apply a
hierarchy to categorize our fair value measurements broken down into three levels based on the transparency of
inputs, where Level 1 uses observable prices in active markets and Level 3 uses valuation techniques that
incorporate significant unobservable inputs. Greater use of management judgment is required in determining fair
value when inputs are less observable or unobservable in the marketplace, such as when the volume or level of
that observed
trading activity for a financial
transactions may not be reflective of orderly market transactions. Judgment must be applied in determining the
appropriateness of available prices, particularly in assessing whether available data reflects current prices and/or
reflects the results of recent market transactions. Prices or quotes are weighed when estimating fair value with
greater reliability placed on information from transactions that are considered to be representative of orderly
market transactions.
instrument has decreased and when certain factors suggest
Fair value is a market-based measure; therefore, when market observable inputs are not available, our judgment
is applied to reflect those judgments that a market participant would use in valuing the same asset or liability.
The availability of observable inputs can vary for different products. We use prices and inputs that are current as
of the measurement date even in periods of market disruption or illiquidity. The valuation of financial
instruments categorized within Level 3 of the fair value hierarchy involves the greatest extent of management
41
judgment. (See Note 2, Summary of Significant Accounting Policies, and Note 4, Fair Value Disclosures, in our
consolidated financial statements included in this Annual Report on Form 10-K for further information on the
definitions of fair value, Level 1, Level 2 and Level 3 and related valuation techniques.)
Level 3 Assets and Liabilities – For information on the composition and activity of our Level 3 assets and
Level 3 liabilities, see Note 4, Fair Value Disclosures, in our consolidated financial statements included in this
Annual Report on Form 10-K.
Controls Over the Valuation Process for Financial Instruments – Our Independent Price Verification Group,
independent of the trading function, plays an important role in determining that our financial instruments are
appropriately valued and that fair value measurements are reliable. This is particularly important where prices or
valuations that require inputs are less observable. In the event that observable inputs are not available, the control
processes are designed to assure that the valuation approach utilized is appropriate and consistently applied and
that the assumptions are reasonable. Where a pricing model is used to determine fair value, these control
processes include reviews of the pricing model’s theoretical soundness and appropriateness by risk management
personnel with relevant expertise who are independent from the trading desks. In addition, recently executed
comparable transactions and other observable market data are considered for purposes of validating assumptions
underlying the model.
Income Taxes
Significant judgment is required in estimating our provision for income taxes, our deferred tax assets and
liabilities and any valuation allowance recorded against our net deferred tax assets. In determining the provision
for income taxes, we must make judgments and interpretations about how to apply inherently complex tax laws
to numerous transactions and business events. In addition, we must make estimates about the amount, timing and
geographic mix of future taxable income, which includes various tax planning strategies to utilize tax attributes
of deferred tax assets before they expire.
We record a valuation allowance to reduce our net deferred tax asset to the amount that is more likely than not to
be realized. We are required to consider all available evidence, both positive and negative, and to weigh the
evidence when determining whether a valuation allowance is required and the amount of such valuation
allowance. Generally, greater weight is required to be placed on objectively verifiable evidence when making this
assessment, in particular on recent historical operating results.
We also record reserves for unrecognized tax benefits based on our assessment of the probability of successfully
sustaining tax filing positions. Management exercises significant judgment when assessing the probability of
successfully sustaining tax filing positions, and in determining whether a contingent tax liability should be
recorded and if so, estimating the amount. If our tax filing positions are successfully challenged, payments could
be required that are in excess of reserved amounts or we may be required to reduce the carrying amount of our
net deferred tax asset, either of which could be significant to our financial condition or results of operations.
Impairment of Long-Lived Assets
We evaluate our long-lived assets for impairment whenever events or changes in circumstances indicate, in
management’s judgment, that the carrying value of such assets may not be recoverable. When testing for
impairment, we group our long-lived assets with other assets and liabilities at the lowest level for which
identifiable cash flows are largely independent of the cash flows of other assets and liabilities (or asset group).
The determination of whether an asset group is recoverable is based on management’s estimate of undiscounted
future cash flows directly attributable to the asset group as compared to its carrying value. If the carrying amount
of the asset group is greater than the undiscounted cash flows, an impairment loss would be recognized for the
amount by which the carrying amount of the asset group exceeds its estimated fair value.
Due to a decline in oil and gas prices during the second quarter of 2020, we performed an impairment analyses
on certain of our proven oil and gas properties in the DJ Basin of Wyoming and Colorado, the Williston Basin in
42
North Dakota and Montana and oil and gas properties in the East Eagle Ford. Estimated undiscounted cash flows
were determined based on reserves and costs and updated those based on strip pricing as of May 31, 2020 for
the DJ Basin and Williston Basin properties and as of February 29, 2020 for the East Eagle Ford properties. The
expected undiscounted future net cash flows were then compared to the end of quarter net carrying value of the
oil and gas properties. No impairment of the Williston Basin assets was necessary as the undiscounted future net
cash flows significantly exceeded the carrying value of these assets. Undiscounted future net cash flows were
lower than the carrying value of the DJ Basin properties and the East Eagle Ford properties, and accordingly, the
fair value of such proven properties was estimated using a 10.0% discount rate and estimated future cash flows
from the properties’ reserve report. The estimated fair value of the proven oil and gas properties in the DJ Basin
totaled $26.8 million, which was $13.2 million lower than the carrying value as of the end of the second quarter
of 2020 and the estimated fair value of the proven oil and gas properties in the East Eagle Ford totaled
$9.6 million, which was $33.0 million lower than the carrying value as of the end of first quarter of 2020. As a
result, impairment charges of $46.2 million were recorded in Other expenses during 2020.
Impairment of Equity Method Investments
We evaluate equity method investments for impairment when operating losses or other factors may indicate a
decrease in value which is other than temporary. We consider a variety of factors including economic conditions
nationally and in their geographic areas of operation, adverse changes in the industry in which they operate,
declines in business prospects, deterioration in earnings, increasing costs of operations and other relevant factors
specific to the investee. Whenever we believe conditions or events indicate that one of these investments might
be significantly impaired, we obtain from such investee updated cash flow projections. We use this information
together with discussions with the investee’s management and comparable public company analysis,
and,
evaluate if the book value of its investment exceeds its fair value, and if so and the situation is deemed other
than temporary, record an impairment charge.
We have an equity method interest in FXCM with rights to a majority of all distributions in respect of FXCM. In
the fourth quarter of 2022, we had a triggering event to test our investment in FXCM for impairment. We
estimated the fair value of our equity interest in FXCM based primarily on a discounted cash flow valuation
model. The discounted cash flow valuation model used inputs including management’s projections of future
FXCM cash flows and a discount rate of 23.0%. The estimated fair value of our equity investment in FXCM was
$61.7 million as of the date of our impairment evaluation, which was $25.3 million lower than our prior carrying
value. We concluded that
incurred a
$25.3 million impairment charge.
the decline in fair value was other than temporary and as result
We have a 49% membership interest in the RedSky JZ Fulton Mall joint venture, which owns a property in
Brooklyn, New York. During the first quarter of 2020, difficulties were encountered with attempts to refinance
debt within the investment. We viewed this, combined with a softening of the Brooklyn, New York real estate
market during the quarter, as a triggering event and evaluated our equity method investment in RedSky JZ
Fulton Mall to determine if there was an impairment. In connection with this evaluation, we obtained an
appraisal which reflected a reduction in the value of the investment in comparison to an earlier appraisal obtained
shortly before the beginning of the quarter. The appraisal was based off of Level 3 inputs consisting of prices of
comparable properties and the appraisal indicated that the value of the property was worth less than the debt
outstanding. We recorded an impairment charge of $55.6 million during 2020, which represented all of its
carrying value in the joint venture.
Goodwill
At November 30, 2022, Goodwill recorded in our Consolidated Statement of Financial Condition is $1.74 billion
(3.4% of total assets). The nature and accounting for goodwill is discussed in Note 2, Summary of Significant
Accounting Policies, and Note 11, Goodwill and Intangible Assets, in our consolidated financial statements
included in this Annual Report on Form 10-K. Goodwill must be allocated to reporting units and tested for
impairment at least annually, or when circumstances or events make it more likely than not that an impairment
occurred. Goodwill is tested by comparing the estimated fair value of each reporting unit with its carrying value.
43
Our annual goodwill impairment testing date for a substantial portion of our reporting units is August 1 and
November 30 for other identified reporting units. The results of our annual tests did not indicate any goodwill
impairment.
We use allocated tangible equity plus allocated goodwill and intangible assets for the carrying amount of each
reporting unit. The amount of tangible equity allocated to a reporting unit is based on our cash capital model
deployed in managing our businesses, which seeks to approximate the capital a business would require if it were
operating independently. For further information on our Cash Capital Policy, refer to the Liquidity, Financial
Condition and Capital Resources section herein. Intangible assets are allocated to a reporting unit based on either
specifically identifying a particular intangible asset as pertaining to a reporting unit or, if shared among reporting
units, based on an assessment of the reporting unit’s benefit from the intangible asset in order to generate results.
Estimating the fair value of a reporting unit requires management judgment and often involves the use of
estimates and assumptions that could have a significant effect on whether or not an impairment charge is
recorded and the magnitude of such a charge. Estimated fair values for our reporting units utilize market
valuation methods that
incorporate price-to-earnings and price-to-book multiples of comparable public
companies and/or projected cash flows. Under the market valuation approach, the key assumptions are the
selected multiples and our internally developed projections of future profitability, growth and return on equity for
each reporting unit. The weight assigned to the multiples requires judgment in qualitatively and quantitatively
evaluating the size, profitability and the nature of the business activities of the reporting units as compared to the
comparable publicly-traded companies. In addition, as the fair values determined under the market valuation
approach represent a noncontrolling interest, we apply a control premium to arrive at the estimate fair value of
each reporting unit on a controlling basis.
Historically, we have performed our annual goodwill impairment testing within the Investment Banking and
Capital Markets, Asset Management and Merchant Banking reportable business segments. On November 1, 2022
in connection with the merger of Jefferies Group LLC into Jefferies Financial Group Inc., we reassessed our
reporting units based on the discrete financial information to be made available to segment management as of
and subsequent to the merger. As a result, we identified each of the Investment Banking, Equities and Wealth
Management and Fixed Income businesses to be reporting units within the Investment Banking and Capital
Markets reportable business segment. Goodwill previously attributable to our Merchant Banking reportable
segment is now included within our Asset Management reportable business segment.
The total goodwill of $1.55 billion attributed to the Investment Banking and Capital Markets reportable business
segment has been assigned to each of the Investment Banking, Equities and Wealth Management and Fixed
Income reporting units as of November 1, 2022, based on the relative fair value of each of the reporting units as
of November 1, 2022. The relative fair value estimate of each of the reporting units as of November 1, 2022,
was based on methodologies consistent with the market valuation approach used in our annual impairment test,
which are consistent with valuation techniques market participants would use. The results of our reassessment of
the reporting units indicated that all of the reporting units had a fair value in excess of their carrying amounts
based on current projections as of November 1, 2022. The valuation methodology for our reporting units are
sensitive to management’s forecasts of future profitability, which are a significant component of the valuation
and come with a level of uncertainty regarding trading volumes and capital market transaction levels.
The carrying values of goodwill by reporting unit at November 30, 2022 are as follows: $722.5 million in
Investment Banking, $254.8 million in Equities and Wealth Management, $575.6 million in Fixed Income,
$143.0 million in Asset Management and $40.2 million attributed to various individual legacy merchant banking
investments.
Refer to Note 11, Goodwill and Intangible Assets, in our consolidated financial statements included in this
Annual Report on Form 10-K, for further details on goodwill.
44
Liquidity, Financial Condition and Capital Resources
Our CFO and Global Treasurer are responsible for developing and implementing our liquidity, funding and
capital management strategies. These policies are determined by the nature and needs of our day to day business
operations, business opportunities, regulatory obligations, and liquidity requirements.
Our actual levels of capital, total assets and financial leverage are a function of a number of factors, including
asset composition, business initiatives and opportunities, regulatory requirements and cost and availability of
both long term and short term funding. We have historically maintained a balance sheet consisting of a large
portion of our total assets in cash and liquid marketable securities. The liquid nature of these assets provides us
with flexibility in financing and managing our business.
We also own a legacy portfolio of businesses and investments that are reflected as consolidated subsidiaries,
equity investments or securities. We are in the process of liquidating a substantial portion of this portfolio with
the intention of selling to third parties or distributing to shareholders this portfolio over the next few years.
During the year ended November 30, 2022, we sold our wholly-owned manufacturing subsidiary, Idaho Timber,
at a combined sales price of $239.3 million, resulting in a pre-tax gain of $138.7 million recognized in Other
revenue and also sold a multi-family real estate property recognizing revenues of $122.5 million in Other
revenue and Cost of sales of $70.2 million.
In keeping with our strategy of returning excess liquidity to shareholders, during the year ended November 30,
2022, we returned an aggregate of $1.14 billion to shareholders in the form of $280.1 million dividends and the
repurchase of 25.6 million shares for a total of $859.6 million of $33.58 per share. On January 13, 2023, we
distributed our ownership interests in Vitesse Energy on a tax-free pro rata basis to all shareholders, resulting in a
distribution of capital of over $500.0 million.
We maintain modest leverage to support our investment grade ratings. The growth of our balance sheet is
supported by our equity and we have quantitative metrics in place to monitor leverage and double leverage. Our
capital plan is robust, in order to sustain our operating model through stressed conditions. We maintain adequate
financial resources to support business activities in both normal and stressed market conditions, including a
buffer in excess of our regulatory, or other internal or external, requirements. Our access to funding and liquidity
is stable and efficient to ensure that there is sufficient liquidity to meet our financial obligations in normal and
stressed market conditions.
Our Balance Sheet
A business unit level balance sheet and cash capital analysis are prepared and reviewed with senior management
on a weekly basis. As a part of this balance sheet review process, capital is allocated to all assets and gross
balance sheet limits are adjusted, as necessary. This process ensures that the allocation of capital and costs of
capital are incorporated into business decisions. The goals of this process are to protect the firm’s platform,
enable our businesses to remain competitive, maintain the ability to manage capital proactively and hold
businesses accountable for both balance sheet and capital usage.
We actively monitor and evaluate our financial condition and the composition of our assets and liabilities. We
continually monitor our overall securities inventory, including the inventory turnover rate, which confirms the
liquidity of our overall assets. A significant portion of our financial instruments are valued on a daily basis and
we monitor and employ balance sheet limits for our various businesses.
45
The following table provides detail on selected balance sheet items (dollars in millions):
November 30,
2022
2021
% Change
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and securities segregated and on deposit for regulatory purposes or
deposited with clearing and depository organizations . . . . . . . . . . . . . . . . .
Financial instruments owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial instruments sold, not yet purchased . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Level 3 assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$51,057.7
9,703.1
$56,107.3
10,755.1
957.3
18,666.3
11,056.5
791.5
1,015.1
18,024.6
9,267.1
602.6
(9.0)%
(9.8)%
(5.7)%
3.6%
19.3%
31.3%
Securities borrowed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities purchased under agreements to resell . . . . . . . . . . . . . . . . . . . . . . . .
Total securities borrowed and securities purchased under agreements
$ 5,831.1
4,546.7
$ 6,409.4
7,642.5
(9.0)%
(40.5)%
to resell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$10,377.8
$14,051.9
(26.1)%
Securities loaned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities sold under agreements to repurchase . . . . . . . . . . . . . . . . . . . . . . . . .
$ 1,366.0
7,452.3
$ 1,525.7
8,446.1
(10.5)%
(11.8)%
Total securities loaned and securities sold under agreements to
repurchase. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 8,818.3
$ 9,971.8
(11.6)%
Total assets at November 30, 2022 and 2021 were $51.06 billion and $56.11 billion, respectively, a decrease of
9.0%. During 2022, average total assets were approximately 21.7% higher than total assets at November 30,
2022.
Our total Financial instruments owned inventory was $18.67 billion and $18.02 billion at November 30, 2022
and 2021, respectively. During the year ended November 30, 2022, our total Financial instruments owned
increased primarily due to increases in corporate equity securities, government and federal agency securities,
investments at fair value and sovereign obligations, partially offset by decreases in loans and derivative contracts.
Financial instruments sold, not yet purchased inventory was $11.06 billion at November 30, 2022, an increase of
19.3% from $9.27 billion at November 30, 2021, with the increase primarily driven by government and federal
agency securities, corporate equity securities and corporate debt securities. Our overall net inventory position
was $7.61 billion and $8.76 billion at November 30, 2022 and 2021, respectively, with the decrease primarily
due to decreases in loans, government and federal agency securities and derivative contracts, partially offset by
an increase in investments at fair value. Our Level 3 financial instruments owned as a percentage of total
Financial instruments owned increased to 4.2% at November 30, 2022 from 3.3% at November 30, 2021
primarily due to mark-to-market gains on certain securities held in connection with our investment banking
activities.
Securities financing assets and liabilities include financing for our financial instruments trading activity, matched
book transactions and mortgage finance transactions. Matched book transactions accommodate customers, as
well as obtain securities for the settlement and financing of inventory positions. The aggregate outstanding
balance of our securities financing assets and liabilities increase or decrease from period to period depending on
fluctuations in the level of our client activity and the level of our own trading activity. Our average month end
balance of total reverse repos and stock borrows during 2022 were 45.2% higher than the November 30, 2022
balance. Our average month end balance of total repos and stock loans during 2022 were 47.7% higher than the
November 30, 2022 balance.
46
The following table presents our period end balance, average balance and maximum balance at any month end
within the periods presented for Securities purchased under agreements to resell and Securities sold under
agreements to repurchase (dollars in millions):
Year Ended
2022
2021
Securities Purchased Under Agreements to Resell:
Year end . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Month end average . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maximum month end . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 4,547
7,489
10,428
$ 7,642
9,425
12,321
Securities Sold Under Agreements to Repurchase:
Year end . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Month end average . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maximum month end . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 7,452
11,738
17,417
$ 8,446
11,515
19,207
Fluctuations in the balance of our repurchase agreements from period to period and intraperiod are dependent on
business activity in those periods. Additionally, the fluctuations in the balances of our securities purchased under
agreements to resell are influenced in any given period by our clients’ balances and our clients’ desires to
execute collateralized financing arrangements via the repurchase market or via other financing products. Average
balances and period end balances will fluctuate based on market and liquidity conditions and we consider the
fluctuations intraperiod to be typical for the repurchase market.
Leverage Ratios
The following table presents total assets, total equity, total Jefferies Financial Group Inc. common shareholders’
equity and tangible Jefferies Financial Group Inc. common shareholders’ equity with the resulting leverage ratios
(dollars in thousands):
November 30,
2022
2021
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$51,057,683
$10,295,479
$56,107,311
$10,579,640
Total Jefferies Financial Group Inc. common shareholders’ equity . . . . . . . . . . . . . .
Deduct: Goodwill and intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tangible Jefferies Financial Group Inc. common shareholders’ equity . . . . . . . .
$10,232,846
(1,875,576)
$ 8,357,270
$10,553,755
(1,897,500)
$ 8,656,255
Leverage ratio (1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tangible gross leverage ratio (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.0
5.9
5.3
6.3
(1) Leverage ratio equals total assets divided by total equity.
(2) Tangible gross leverage ratio (a non-GAAP financial measure) equals total assets less goodwill and
identifiable intangible assets divided by tangible Jefferies Financial Group Inc. common shareholders’ equity.
The tangible gross leverage ratio is used by rating agencies in assessing our leverage ratio.
Liquidity Management
The key objectives of the liquidity management framework are to support the successful execution of our
business strategies while ensuring sufficient liquidity through the business cycle and during periods of financial
distress. Our liquidity management policies are designed to mitigate the potential risk that we may be unable to
access adequate financing to service our financial obligations without material franchise or business impact.
The principal elements of our liquidity management framework are our Contingency Funding Plan, our Cash
Capital Policy and our assessment of Modeled Liquidity Outflow (‘‘MLO’’).
47
Contingency Funding Plan. Our Contingency Funding Plan is based on a model of a potential
liquidity
contraction over a one year time period. This incorporates potential cash outflows during a market or our
idiosyncratic liquidity stress event, including, but not limited to, the following:
• Repayment of all unsecured debt maturing within one year and no incremental unsecured debt issuance;
• Maturity rolloff of outstanding letters of credit with no further issuance and replacement with cash
collateral;
• Higher margin requirements than currently exist on assets on securities financing activity, including
repurchase agreements and other secured funding;
• Liquidity outflows related to possible credit downgrade;
• Lower availability of secured funding;
• Client cash withdrawals;
• The anticipated funding of outstanding investment and loan commitments; and
• Certain accrued expenses and other liabilities and fixed costs.
Cash Capital Policy. We maintain a cash capital model
that measures long-term funding sources against
requirements. Sources of cash capital include our equity, mezzanine equity and the noncurrent portion of long-
term borrowings. Uses of cash capital include the following:
• Illiquid assets such as equipment, goodwill, net intangible assets, exchange memberships, deferred tax
assets and certain investments;
• A portion of securities inventory and other assets not expected to be financed on a secured basis in a
credit stressed environment (i.e., margin requirements); and
• Drawdowns of unfunded commitments.
To ensure that we do not need to liquidate inventory in the event of a funding stress, we seek to maintain surplus
cash capital. Our total long-term capital of $17.49 billion at November 30, 2022 exceeded our cash capital
requirements.
MLO. Our businesses are diverse, and our liquidity needs are determined by many factors, including market
movements, collateral requirements and client commitments, all of which can change dramatically in a difficult
funding environment. During a liquidity stress, credit-sensitive funding, including unsecured debt and some
types of secured financing agreements, may be unavailable, and the terms (e.g.,
interest rates, collateral
provisions and tenor) or availability of other types of secured financing may change. As a result of our policy to
ensure we have sufficient funds to cover what we estimate may be needed in a liquidity stress, we hold more
cash and unencumbered securities and have greater long-term debt balances than our businesses would otherwise
require. As part of this estimation process, we calculate an MLO that could be experienced in a liquidity stress.
MLO is based on a scenario that includes both a market-wide stress and firm-specific stress, characterized by
some or all of the following elements:
• Global recession, default by a medium-sized sovereign, low consumer and corporate confidence, and
general financial instability.
• Severely challenged market environment with material declines in equity markets and widening of credit
spreads.
• Damaging follow-on impacts to financial institutions leading to the failure of a large bank.
• A firm-specific crisis potentially triggered by material losses, reputational damage, litigation, executive
departure, and/or a ratings downgrade.
The following are the critical modeling parameters of the MLO:
• Liquidity needs over a 30-day scenario.
• A two-notch downgrade of our long-term senior unsecured credit ratings.
48
• No support from government funding facilities.
• A combination of contractual outflows, such as upcoming maturities of unsecured debt, and contingent
outflows (e.g., actions though not contractually required, we may deem necessary in a crisis). We assume
that most contingent outflows will occur within the initial days and weeks of a stress.
• No diversification benefit across liquidity risks. We assume that liquidity risks are additive.
The calculation of our MLO under the above stresses and modeling parameters considers the following potential
contractual and contingent cash and collateral outflows:
• All upcoming maturities of unsecured long-term debt, commercial paper, promissory notes and other
unsecured funding products assuming we will be unable to issue new unsecured debt or rollover any
maturing debt.
• Repurchases of our outstanding long-term debt in the ordinary course of business as a market maker.
• A portion of upcoming contractual maturities of secured funding activity due to either the inability to
refinance or the ability to refinance only at wider haircuts (i.e., on terms which require us to post
additional collateral). Our assumptions reflect, among other factors,
the quality of the underlying
collateral and counterparty concentration.
• Collateral postings to counterparties due to adverse changes in the value of our over-the-counter
(‘‘OTC’’) derivatives and other outflows due to trade terminations, collateral substitutions, collateral
disputes, collateral calls or termination payments required by a two-notch downgrade in our credit
ratings.
• Variation margin postings required due to adverse changes in the value of our outstanding exchange-
traded derivatives and any increase in initial margin and guarantee fund requirements by derivative
clearing houses.
• Liquidity outflows associated with our prime services business, including withdrawals of customer credit
balances, and a reduction in customer short positions.
• Liquidity outflows to clearing banks to ensure timely settlements of cash and securities transactions.
• Draws on our unfunded commitments considering, among other things, the type of commitment and
counterparty.
• Other upcoming large cash outflows, such as employee compensation, tax and dividend payments, with
no expectation of future dividends from any subsidiaries.
Based on the sources and uses of liquidity calculated under the MLO scenarios, we determine, based on a
calculated surplus or deficit, additional long-term funding that may be needed versus funding through the
repurchase financing market and consider any adjustments that may be necessary to our inventory balances and
cash holdings. At November 30, 2022, we had sufficient excess liquidity to meet all contingent cash outflows
detailed in the MLO. We regularly refine our model to reflect changes in market or economic conditions and our
business mix.
49
Sources of Liquidity
The following are financial instruments that are cash and cash equivalents or are deemed by management to be
generally readily convertible into cash, marginable or accessible for liquidity purposes within a relatively short
period of time (dollars in thousands):
November 30,
2022
Average Balance
Quarter ended
November 30,
2022 (1)
November 30,
2021
Cash and cash equivalents:
Cash in banks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,541,021
7,162,088
Money market investments (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,703,109
Total cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 3,338,342
5,733,232
9,071,574
$ 2,266,519
8,488,614
10,755,133
Other sources of liquidity:
Debt securities owned and securities purchased under
agreements to resell (3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,417,177
520,714
Total other sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,937,891
1,295,746
559,172
1,854,918
1,621,118
311,641
1,932,759
Total cash and cash equivalents and other liquidity sources . $11,641,000
$10,926,492
$12,687,892
Total cash and cash equivalents and other liquidity sources as %
of Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total cash and cash equivalents and other liquidity sources as %
of Total assets less goodwill and intangible assets . . . . . . . . . . . .
22.8%
23.7%
22.6%
23.4%
(1) Average balances are calculated based on weekly balances.
(2) At November 30, 2022 and 2021, $7.14 billion and $8.47 billion, respectively, was invested in U.S.
government money funds that invest at least 99.5% of its total assets in cash, securities issued by the U.S.
government and U.S. government-sponsored entities, and repurchase agreements that are fully collateralized
by cash or government securities. The remaining $23.1 million and $14.9 million at November 30, 2022 and
2021 are invested in AAA-rated prime money funds. The average balance of U.S. government money funds
for the quarter ended November 30, 2022 was $5.71 billion.
(3) Consists of high quality sovereign government securities and reverse repurchase agreements collateralized by
U.S. government securities and other high quality sovereign government securities; deposits with a central
bank within the European Economic Area, United Kingdom, Canada, Australia, Japan, Switzerland or the
U.S.; and securities issued by a designated multilateral development bank and reverse repurchase agreements
with underlying collateral composed of these securities.
(4) Other includes unencumbered inventory representing an estimate of the amount of additional secured
financing that could be reasonably expected to be obtained from our Financial instruments owned that are
currently not pledged after considering reasonable financing haircuts.
In addition to the cash balances and liquidity pool presented above, the majority of financial instruments (both
long and short) in our trading accounts are actively traded and readily marketable. At November 30, 2022, we
had the ability to readily obtain repurchase financing for 78.2% of our inventory at haircuts of 10% or less,
which reflects the liquidity of our inventory. In addition, as a matter of our policy, all of these assets have
internal capital assessed, which is in addition to the funding haircuts provided in the securities finance markets.
Additionally, certain of our Financial instruments owned primarily consisting of bank loans, consumer loans and
investments are predominantly funded by long term capital. Under our cash capital policy, we model capital
allocation levels that are more stringent than the haircuts used in the market for secured funding; and we
maintain surplus capital at these more stringent levels. We continually assess the liquidity of our inventory based
on the level at which we could obtain financing in the marketplace for a given asset. Assets are considered to be
liquid if financing can be obtained in the repurchase market or the securities lending market at collateral haircut
levels of 10% or less. The following summarizes our financial instruments by asset class that we consider to be
50
of a liquid nature and the amount of such assets that have not been pledged as collateral at November 30, 2022
and 2021 (in thousands):
Corporate equity securities . . . . . . . . . . . . . . . . . . . .
Corporate debt securities. . . . . . . . . . . . . . . . . . . . . .
U.S. government, agency and municipal
securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other sovereign obligations . . . . . . . . . . . . . . . . . . .
Agency mortgage-backed securities (1) . . . . . . . .
Loans and other receivables. . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
November 30,
2022
2021
Liquid
Financial
Instruments
Unencumbered
Liquid Financial
Instruments (2)
Liquid
Financial
Instruments
Unencumbered
Liquid Financial
Instruments (2)
$ 3,040,844
3,215,807
$ 846,520
34,405
$ 2,635,956
2,943,135
$ 347,157
31,935
4,032,215
1,679,573
2,514,773
111,681
$14,594,893
59,909
803,738
–
–
$1,744,572
3,610,885
1,528,100
1,487,165
132,989
$12,338,230
109,325
1,463,968
–
–
$1,952,385
(1) Consists solely of agency mortgage-backed securities issued by the Federal Home Loan Mortgage
the Federal National Mortgage Association (‘‘Fannie Mae’’) and the
Corporation (‘‘Freddie Mac’’),
Government National Mortgage Association (‘‘Ginnie Mae’’).
(2) Unencumbered liquid balances represent assets that can be sold or used as collateral for a loan, but have not
been.
In addition to being able to be readily financed at reasonable haircut levels, we estimate that each of the
individual securities within each asset class above could be sold into the market and converted into cash within
three business days under normal market conditions, assuming that the entire portfolio of a given asset class was
not simultaneously liquidated. There are no restrictions on the unencumbered liquid securities, nor have they
been pledged as collateral.
Sources of Funding and Capital Resources
Our assets are funded by equity capital, senior debt, securities loaned, securities sold under agreements to
repurchase, customer free credit balances, bank loans and other payables.
Secured Financing
We rely principally on readily available secured funding to finance our inventory of financial instruments owned
and financial instruments sold. Our ability to support increases in total assets is largely a function of our ability
to obtain short and intermediate-term secured funding, primarily through securities financing transactions. We
finance a portion of our long inventory and cover some of our short inventory by pledging and borrowing
securities in the form of repurchase or reverse repurchase agreements (collectively ‘‘repos’’), respectively. At
November 30, 2022, approximately 61.0% of our cash and noncash repurchase financing activities use collateral
that is considered eligible collateral by central clearing corporations. During 2022, an average of approximately
75.9% of our cash and noncash repurchase financing activities used collateral that was considered eligible
collateral by central clearing corporations. Central clearing corporations are situated between participating
members who borrow cash and lend securities (or vice versa); accordingly, repo participants contract with the
central clearing corporation and not one another individually. Therefore, counterparty credit risk is borne by the
central clearing corporation which mitigates the risk through initial margin demands and variation margin calls
from repo participants. The comparatively large proportion of our total repo activity that is eligible for central
clearing reflects the high quality and liquid composition of the inventory we carry in our trading books. For
those asset classes not eligible for central clearing house financing, we seek to execute our bi-lateral financings
on an extended term basis and the tenor of our repurchase and reverse repurchase agreements generally exceeds
the expected holding period of the assets we are financing. The weighted average maturity of cash and noncash
51
repurchase agreements for non-clearing corporation eligible funded inventory is approximately six months at
November 30, 2022.
Our ability to finance our inventory via central clearinghouses and bi-lateral arrangements is augmented by our
ability to draw bank loans on an uncommitted basis under our various banking arrangements. At November 30,
2022, short-term borrowings, which must be repaid within one year or less and include bank loans and
overdrafts, borrowings under revolving credit facilities and floating rate puttable notes totaled $528.4 million.
Interest under the bank lines is generally at a spread over the federal funds rate. Letters of credit are used in the
normal course of business mostly to satisfy various collateral requirements in favor of exchanges in lieu of
depositing cash or securities. Average daily short-term borrowings outstanding were $432.0 million for 2022.
At November 30, 2022 and 2021, our borrowings under credit facilities classified within bank loans in Short-
term borrowings in our Consolidated Statements of Financial Condition were $517.0 million and $200.0 million,
respectively. Our borrowings include credit facilities that contain certain covenants that, among other things,
require us to maintain a specified level of tangible net worth, require a minimum regulatory net capital
requirement for our U.S. broker-dealer, Jefferies LLC, and impose certain restrictions on the future indebtedness
of certain of our subsidiaries that are borrowers. Interest is based on rates at spreads over the federal funds rate
or other adjusted rates, as defined in the various credit agreements, or at a rate as agreed between the bank and
us in reference to the bank’s cost of funding. At November 30, 2022, we were in compliance with all covenants
under these credit facilities.
For additional details on our short-term borrowings,
consolidated financial statements included in this Annual Report on Form 10-K.
refer
to Note 16, Short-Term Borrowings,
in our
In addition to the above financing arrangements, we issue notes backed by eligible collateral under master
repurchase agreements, which provides an additional financing source for our inventory (our ‘‘repurchase
agreement financing program’’). The notes issued under the program are presented within Other secured
financings in our Consolidated Statements of Financial Condition. At November 30, 2022, the outstanding notes
were $1.31 billion, bear interest at a spread over the London Interbank Offered Rate (‘‘LIBOR’’) and mature
from September 2022 to July 2025.
For additional details on our repurchase agreement financing program, refer to Note 8, Variable Interest Entities,
in our consolidated financial statements included in this Annual Report on Form 10-K.
Total Long-Term Capital
At November 30, 2022 and 2021, we had total
long-term capital of $17.49 billion and $18.72 billion,
respectively, resulting in a long-term debt to equity capital ratio of 0.68:1 and 0.74:1, respectively. See ‘‘Equity
Capital’’ herein for further information on our change in total equity. Our total
long-term capital base at
November 30, 2022 and 2021 was as follows (in thousands):
Unsecured Long-Term Debt (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Mezzanine Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 7,065,663
131,461
10,295,479
$ 7,990,874
150,400
10,579,640
Total Long-Term Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$17,492,603
$18,720,914
November 30,
2022
2021
(1) The amounts at November 30, 2022 and 2021, exclude our secured long-term debt. The amount at
November 30, 2022 excludes $392.4 million of our 5.500% Senior Notes, as these notes mature on October
18, 2023. The amount at November 30, 2022 and 2021, also excludes $13.2 million and $12.0 million,
respectively, of structured notes that will mature within one year.
52
Long-Term Debt
During 2022, long-term debt decreased by $351.7 million to $8.77 billion at November 30, 2022, as presented in
our Consolidated Statements of Financial Condition. This decrease is primarily due to fair value changes in our
structured notes and gains on certain of our senior notes associated with interest rate swaps based on their
designation as fair value hedges, partially offset by structured notes issuances, net of
retirements, of
approximately $209.4 million and net issuances of approximately $176.7 million related to our secured credit
facilities.
At November 30, 2022, all of our structured notes contain various interest rate payment terms and are accounted
for at fair value, with changes in fair value resulting from a change in the instrument-specific credit risk
presented in other comprehensive income and changes in fair value resulting from non-credit components
recognized in Principal transactions revenues. The fair value of all of our structured notes at November 30, 2022
was $1.58 billion.
At November 30, 2022 and 2021, our borrowings under several credit facilities classified within Long-term debt
in our Consolidated Statements of Financial Condition amounted to $933.5 million and $774.1 million,
respectively. Interest on these credit facilities are based on adjusted London Interbank Offered Rate (‘‘LIBOR’’)
rates, Secured Overnight Financing Rate (‘‘SOFR’’) plus a spread or other adjusted rates, as defined in the
various credit agreements. The credit facility agreements contain certain covenants that, among other things,
require us to maintain specified levels of tangible net worth and liquidity amounts, and impose certain
restrictions on future indebtedness of and require specified levels of regulated capital and cash reserves for
certain of our subsidiaries. At November 30, 2022, we were in compliance with all covenants under theses credit
facilities, except for certain facilities secured by automobile loans with an amount outstanding of $112.9 million
for which technical covenant violations have occurred that are in the process of being resolved with the lenders.
In addition, one of our subsidiaries has a Loan and Security Agreement with a bank for a term loan (‘‘Secured
Bank Loan’’). At November 30, 2022, borrowings under the Secured Bank Loan amounted to $100.0 million
and are also classified within Long-term debt in our Consolidated Statements of Financial Condition. The
Secured Bank Loan matures on September 13, 2024 and is collateralized by certain trading securities with an
interest rate of 1.25% plus LIBOR. The agreement contains certain covenants that, among other things, restricts
lien or encumbrance upon any of the pledged collateral. At November 30, 2022, we were in compliance with all
covenants under the Secured Bank Loan.
HomeFed funds certain of its real estate projects in part by raising funds under the Immigrant Investor Program
administered by the U.S. Citizenship and Immigration Services pursuant to the Immigration and Nationality Act
(‘‘EB-5 Program’’). This debt is secured by certain real estate of HomeFed. At November 30, 2022, HomeFed
was in compliance with all debt covenants which include, among other requirements, limitations on incurrence of
debt, collateral requirements and restricted use of proceeds. Primarily all of HomeFed’s EB-5 Program debt
matures in 2024 through 2026.
At November 30, 2022, HomeFed has construction loans with an aggregate committed amount of $101.9
million. The proceeds are being used for construction at certain of its real estate projects. The outstanding
principal amount of the loans bear interest based on the 30 day LIBOR or the SOFR, plus spreads of 1.35% to
3.00%, subject to adjustment on the first of each calendar month. At November 30, 2022, the weighted average
interest rate on these loans was 6.07%. The loans mature between October 2023 and May 2024 and are
collateralized by the property underlying the related project with a guarantee by HomeFed. At November 30,
2022 and November 30, 2021, $57.0 million and $45.6 million, respectively, was outstanding under the
construction loan agreements.
At November 30, 2022, our unsecured long-term debt has a weighted average maturity of approximately 9.5
years.
For further information, see Note 17, Long-Term Debt, in our consolidated financial statements included in this
Annual Report on Form 10-K.
53
Our long-term debt ratings at November 30, 2022 are as follows:
Moody’s Investors Service . . . . . . . . . . . . . . . . . . . .
Standard and Poor’s . . . . . . . . . . . . . . . . . . . . . . . . . .
Fitch Ratings (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rating
Baa2
BBB
BBB
Outlook
Stable
Stable
Positive
(1) On January 24, 2022, Fitch Ratings affirmed our rating of BBB and revised our rating outlook from stable to
positive.
At November 30, 2022,
International Limited (a U.K. broker-dealer) and Jefferies GmbH are as follows:
the long-term debt ratings on our principal subsidiaries, Jefferies LLC, Jefferies
Moody’s Investors Service . . . . . . . . . . . . . . . .
Baa1
Standard and Poor’s . . . . . . . . . . . . . . . . . . . . . . BBB+
Stable
Stable
Rating
Outlook
Rating
Baa1
BBB+
Outlook
Stable
Stable
Jefferies LLC
Jefferies International Limited
Jefferies GmbH
Rating
Outlook
Baa1
BBB+
Stable
Stable
Access to external financing to finance our day to day operations, as well as the cost of that financing, is
dependent upon various factors, including our debt ratings. Our current debt ratings are dependent upon many
factors, including industry dynamics, operating and economic environment, operating results, operating margins,
earnings trend and volatility, balance sheet composition,
liquidity and liquidity management, our capital
structure, our overall risk management, business diversification and our market share and competitive position in
the markets in which we operate. Deterioration in any of these factors could impact our credit ratings. While
certain aspects of a credit rating downgrade are quantifiable pursuant to contractual provisions, the impact on our
business and trading results in future periods is inherently uncertain and depends on a number of factors,
including the magnitude of the downgrade, the behavior of individual clients and future mitigating action taken
by us.
In connection with certain over-the-counter derivative contract arrangements and certain other
trading
arrangements, we may be required to provide additional collateral to counterparties, exchanges and clearing
organizations in the event of a credit rating downgrade. At November 30, 2022, the amount of additional
collateral that could be called by counterparties, exchanges and clearing organizations under the terms of such
agreements in the event of a downgrade of our long-term credit rating below investment grade was $46.8
million. For certain foreign clearing organizations, credit rating is only one of several factors employed in
determining collateral that could be called. The above represents management’s best estimate for additional
collateral to be called in the event of a credit rating downgrade. The impact of additional collateral requirements
is considered in our Contingency Funding Plan and calculation of MLO, as described above.
Equity Capital
At November 30, 2022 and 2021, we had 600,000,000 authorized shares of common stock with a par value of
$1.00 per share. At November 30, 2022, we had outstanding 226,129,626 common shares, 19,036,746 share-
based awards that do not require the holder to pay any exercise price and 5,024,532 stock options that require
the holder to pay an average exercise price of $23.75 per share. The 19,036,746 share-based awards include the
target number of shares under the senior executive award plan until the performance period is complete.
The Board of Directors has authorized the repurchase of common stock under a share repurchase program.
Additionally Treasury stock repurchases include repurchases of common stock for net-share withholding under
our equity compensation plan.
54
The table below presents information about common stock repurchases during the year ended November 30,
2022 (in thousands, except share and per share amounts):
Year Ended
November 30, 2022
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs . . . . .
Approximate Dollar Value of Shares Purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average Share Price of Shares Purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or
Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22,167,689
$737,350
33.26
$
$158,570
At November 30, 2022, we had $158.6 million remaining authorization of future repurchases. On January 9,
2023, our Board of Directors increased our share buyback authorization back to a total of $250.0 million.
In addition, we have mandatorily redeemable convertible preferred shares that as of November 30, 2022 are
convertible into 4,440,863 common shares.
The following table sets forth the declaration dates, record dates, payment date and per common share amounts
for the dividends declared during the years ended November 30, 2022 and 2021.
Declaration Date
Record Date
Payment Date
Per Common Share Amount
Year Ended November 30, 2022
January 12, 2022
March 28, 2022
June 27, 2022
September 28, 2022
February 14, 2022
May 16, 2022
August 15, 2022
November 14, 2022
February 25, 2022
May 27, 2022
August 26, 2022
November 29, 2022
$0.30
$0.30
$0.30
$0.30
Declaration Date
Record Date
Payment Date
Per Common Share Amount
Year Ended November 30, 2021
January 4, 2021
March 24, 2021
June 28, 2021
September 30, 2021
February 12, 2021
May 17, 2021
August 16, 2021
November 15, 2021
February 26, 2021
May 28, 2021
August 27, 2021
November 29, 2021
$0.20
$0.20
$0.25
$0.25
On January 9, 2023, the Board of Directors declared a dividend of $0.30 per common share to be paid on
February 24, 2023 to common shareholders of record at February 13, 2023.
As compared to November 30, 2021, the decrease to total Jefferies Financial Group Inc. shareholders’ equity at
November 30, 2022 is primarily attributed to purchases of common shares for treasury and dividends paid,
partially offset by increases from net earnings and contributions from noncontrolling interests.
Net Capital
As a broker-dealer registered with the SEC and a member firm of the Financial Industry Regulatory Authority
(‘‘FINRA’’), Jefferies LLC is subject to the SEC Commission Uniform Net Capital Rule (‘‘Rule 15c3-1’’), which
requires the maintenance of minimum net capital, and has elected to calculate minimum capital requirements
using the alternative method permitted by Rule 15c3-1 in calculating net capital. Jefferies LLC, as a dually-
registered U.S. broker-dealer and futures commission merchant (‘‘FCM’’), is also subject to Rule 1.17 of the
Commodity Futures Trading Commission (‘‘CFTC’’), which sets forth minimum financial requirements. The
minimum net capital requirement in determining excess net capital for a dually-registered U.S. broker-dealer and
FCM is equal to the greater of the requirement under Rule 15c3-1 or CFTC Rule 1.17.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the ‘‘Dodd-Frank Act’’) contains provisions
that require the registration of all swap dealers, major swap participants, security-based swap dealers, and/or
major security-based swap participants. One of our subsidiaries, Jefferies Financial Services, Inc. (‘‘JFSI’’), a
registered swap dealer, is subject to the CFTC’s regulatory capital requirements and holds regulatory capital in
55
excess of the minimum regulatory requirement. Additionally, JFSI is registered as a security-based swap dealer
with the SEC and is subject to the SEC’s security-based swap dealer regulatory rules. Further, JFSI is registered
with the SEC as an OTC derivatives dealer, and is subject
to compliance with the SEC’s net capital
requirements. As a security-based swap dealer and swap dealer, JFSI is subject to the net capital requirements of
the SEC, CFTC and the NFA, as a member of the NFA. JFSI is required to maintain minimum net capital, as
defined under SEC Rule 18a-1 of not less than the greater of 2% of the risk margin amount, as defined, or $20
million.
At November 30, 2022, Jefferies LLC and JFSI’s net capital and excess net capital were as follows (in
thousands):
Jefferies LLC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
JFSI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$903,349
$436,681
$806,238
$416,681
Net Capital
Excess Net Capital
FINRA is the designated examining authority for Jefferies LLC and the National Futures Association is the
designated self-regulatory organization for Jefferies LLC as an FCM.
Certain other U.S. and non-U.S. subsidiaries are subject to capital adequacy requirements as prescribed by the
regulatory authorities in their respective jurisdictions, including Jefferies International Limited which is subject to
the regulatory supervision and requirements of the Financial Conduct Authority in the U.K.
The regulatory capital requirements referred to above may restrict our ability to withdraw capital from our
regulated subsidiaries.
Other Developments
In February 2022, Russia invaded Ukraine. Following Russia’s invasion, the U.S., the U.K., and the European
Union governments, among others, developed coordinated financial and economic sanctions targeting Russia
that, in various ways, constrain transactions with numerous Russian entities, including major Russian banks and
individuals; transactions in Russian sovereign debt; and investment, trade and financing to, from, or in certain
regions of Ukraine. We do not have any operations in Russia or any clients with significant Russian operations
and we have minimal market risk related to securities of companies either domiciled or operating in Russia. We
continue to monitor the status of trading and the credit risk of our counterparties and we believe that any loss we
might incur will be immaterial.
On January 1, 2022, the publication of the one-week and two-month U.S. Dollar LIBOR maturities and all non-
U.S. Dollar LIBOR maturities ceased and the remaining U.S. Dollar LIBOR maturities will cease immediately
after June 30, 2023. We are a counterparty to a number of LIBOR-based contracts composed primarily of cleared
derivative contracts and floating rate notes. We continue to make progress with our transition program to orderly
transition from Interbank Offered Rates to alternative reference rates in accordance with industry timelines,
which includes a policy that limits new agreements that reference U.S. Dollar LIBOR or non-U.S. Dollar
LIBOR, except as permitted under certain circumstances. Our transition plan is designed to enable operational
readiness and robust risk management and we are taking steps to update operational processes, models and
contracts for any changes that may be required as well as reduce our overall exposure to LIBOR. We are actively
engaged with our counterparties to ensure that our contracts adhere to the International Swaps and Derivative
Association, Inc. fallback protocol or are actively converted to alternative risk-free reference rates and are both
educating and assisting our clients with the transition from and cessation of LIBOR.
56
Off-Balance Sheet Arrangements and Contractual Obligations
Off-Balance Sheet Arrangements
We have contractual commitments arising in the ordinary course of business for securities loaned or purchased
under agreements to resell, repurchase agreements, future purchases and sales of foreign currencies, securities
transactions on a when-issued basis, purchases and sales of corporate loans in the secondary market and
underwriting. Each of these financial instruments and activities contains varying degrees of off-balance sheet risk
whereby the fair values of the securities underlying the financial instruments may be in excess of, or less than,
the contract amount. The settlement of these transactions is not expected to have a material effect upon our
consolidated financial statements.
In the normal course of business we engage in other off balance-sheet arrangements, including derivative
contracts. Neither derivatives’ notional amounts nor underlying instrument values are reflected as assets or
liabilities in our Consolidated Statements of Financial Condition. Rather, the fair values of derivative contracts
are reported in our Consolidated Statements of Financial Condition as Financial instruments owned or Financial
instruments sold, not yet purchased as applicable. Derivative contracts are reflected net of cash paid or received
pursuant to credit support agreements and are reported on a net by counterparty basis when a legal right of offset
exists under an enforceable master netting agreement. For additional information about our accounting policies
and our derivative activities, see Note 2, Summary of Significant Accounting Policies, Note 4, Fair Value
Disclosures, and Note 5, Derivative Financial Instruments, in our consolidated financial statements included in
this Annual Report on Form 10-K.
Contractual Obligations
The table below provides information about our contractual obligations at November 30, 2022. The table
presents principal cash flows with expected maturity dates (in millions):
Expected Maturity Date
2025
and
2026
2027
and
2028
2024
2023
2029
and
Later
Total
Contractual obligations:
Unsecured long-term debt (contractual
principal payments net of unamortized
discounts and premiums) (1). . . . . . . . . . .
Secured long-term debt (1) . . . . . . . . . . . . . .
Interest payment obligations on long-term
debt (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating leases (3) . . . . . . . . . . . . . . . . . . . . .
Purchase obligations (4) . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$409.6
146.7
$ 910.3
1,107.8
$111.1
48.3
$1,235.4
–
$4,804.9
–
$ 7,471.3
1,302.8
110.3
76.8
195.6
$939.0
91.5
78.7
132.7
$2,321.0
136.0
152.6
70.3
$518.3
195.8
137.5
29.0
$1,597.7
835.9
162.5
2.7
$5,806.0
1,369.5
608.1
430.3
$11,182.0
(1) For additional information on long-term debt, see Note 17, Long-Term Debt, in our consolidated financial
statements included in this Annual Report on Form 10-K.
(2) Amounts based on applicable interest rates at November 30, 2022.
(3) For additional information on operating leases related to certain premises and equipment agreements, see
Note 15, Leases, in our consolidated financial statements included in this Annual Report on Form 10-K.
(4) Purchase obligations for goods and services primarily include payments for outsourcing and computer and
telecommunications maintenance agreements. Purchase obligations at November 30, 2022 reflect
the
minimum contractual obligations under legally enforceable contracts.
57
Subsequent to November 30, 2022 and on or before January 31, 2023, we expect to make cash payments of
in our
$1.50 billion related to compensation awards for fiscal 2022. See Note 13, Compensation Plans,
consolidated financial statements included in this Annual Report on Form 10-K for further information.
Risk Management
Overview
Risk is an inherent part of our business and activities. The extent to which we properly and effectively identify,
assess, monitor and manage each of the various types of risk involved in our activities is critical to our financial
soundness, viability and profitability. Accordingly, we have a comprehensive risk management approach, with a
formal governance structure and policies and procedures outlining frameworks and processes to identify, assess,
monitor and manage risk. Principal risks involved in our business activities include market, credit, liquidity and
capital, operational, legal and compliance, new business and reputational risk.
Risk management is a multifaceted process that requires communication, judgment and knowledge of financial
products and markets. Our risk management process encompasses the active involvement of executive and senior
management, and also many departments independent of the revenue-producing business units, including the
Risk Management, Operations, Information Technology, Compliance, Legal and Finance Departments. Our risk
management policies, procedures and methodologies are flexible in nature and are subject to ongoing review and
modification.
In achieving our strategic business objectives, our risk appetite incorporates keeping our clients’ interests as top
priority and ensuring we are in compliance with applicable laws, rules and regulations, as well as adhering to the
highest ethical standards. We undertake prudent risk-taking that protects the capital base and franchise, utilizing
risk limits and tolerances that avoid outsized risk-taking. We maintain a diversified business mix and avoid
significant concentrations to any sector, product, geography, or activity and set quantitative concentration limits
to manage this risk. We consider contagion, second order effects and correlation in our risk assessment process
and actively seek out value opportunities of all sizes. We manage the risk of opportunities larger than our
approved risk levels through risk sharing and risk distribution, sell-down and hedging as appropriate. We have a
limited appetite for illiquid assets and complex derivative financial instruments. We maintain the asset quality of
our balance sheet through conducting trading activity in liquid markets and generally ensure high turnover of our
inventory. We subject less liquid positions and derivative financial instruments to particular scrutiny and use a
wide variety of specific metrics, limits, and constraints to manage these risks. We protect our reputation and
franchise, as well as our standing within the market. We operate a federated approach to risk management and
assign risk oversight responsibilities to a number of functions with specific areas of focus.
For discussion of liquidity and capital risk management, refer to the ‘‘Liquidity, Financial Condition and Capital
Resources’’ section herein.
Governance and Risk Management Structure
Our Board of Directors (‘‘Board’’) and Risk and Liquidity Oversight Committee (‘‘Committee’’). Our Board and
Committee play an important role in reviewing our risk management process and risk appetite. The Committee
assists the Board in its oversight of: (i) the Company’s enterprise risk management, (ii) the Company’s capital,
liquidity and funding guidelines and policies and (iii) the performance of the Company’s Chief Risk Officer. Our
Global Chief Risk Officer (‘‘CRO’’) and Global Treasurer meet with the Committee on no less than a quarterly
basis to present our risk profile and liquidity profile and to respond to questions. Our Chief Information Officer
also meets with the Committee at least semi-annually to receive and review reports related to any exposure to
cybersecurity risk and our plans and programs to mitigate and respond to cybersecurity risks. Additionally, our
risk management team continuously monitors our various businesses, the level of risk the businesses are taking
and the efficacy of potential risk mitigation strategies and presents this information to our senior management
and the Committee.
58
Our Board also fulfills its risk oversight role through the operations of its various committees, including its Audit
Committee. The Audit Committee has responsibility for risk oversight in connection with its review of our
financial statements, internal audit function and internal control over financial reporting, as well as assisting the
Board with our legal and regulatory compliance and overseeing our Code of Business Practice. The Audit
Committee is also updated on risk controls at each of its regularly scheduled meetings.
Internal Audit, which reports to the Audit Committee of the Board and includes professionals with a broad range
of audit and industry experience, including risk management expertise, is responsible for independently assessing
and validating key controls within our risk management framework.
We make extensive use of internal committees to govern risk taking and ensure that business activities are
properly identified, assessed, monitored and managed. The Risk Management Committee (‘‘RMC’’) and
membership comprises our Chief Executive Officer, President, CFO, CRO and Global Treasurer. Our other risk
related committees govern risk taking and ensure that business activities are properly managed for their area of
oversight.
Risk Committees.
• RMC – the principal committee that governs our risk taking activities. The RMC meets weekly to
discuss our risk profile and discuss business or market trends and their potential impact on the business.
The Committee approves our limits as a whole, and across risk categories and business lines, reviews
limit breaches, and approves risk policies and stress testing methodologies and is supported by the
subcommittees, e.g., Credit Committee, Model Governance Committee and Stress Testing Committee,
and management forums in risk management functions.
• Executive Committee – provides insight, perspective and guidance for the day-to-day operations and
strategic direction of their respective businesses and us as a whole.
• Operating Committee – brings together the managers of all control areas and the business line chief
operating officers, whereby each department presents issues regarding current and proposed business.
This committee provides the key forum for coordination and communication between the control
managers entirely focused on our activities as a whole.
• Asset / Liability Committee – seeks to ensure effective management and control of the balance sheet in
terms of risk profile, adequacy of capital and liquidity resources, and funding profile and strategy. The
committee is responsible for developing, implementing and enforcing our liquidity, funding and capital
policies. This includes recommendations for capital and balance sheet size, as well as the allocation of
capital to our businesses.
• Independent Price Verification Committee – establishes our valuation policies and procedures and is
responsible for independently validating the fair value of our financial instruments. The committee,
Internal Audit, Risk Management and
which comprises stakeholders represented by the CFO,
Controllers, meets monthly to assess and approve the results of our inventory price testing.
• New Business Committee – reviews new business, products and activities and extensions of existing
businesses, products and activities that may introduce materially different or greater risks than those of a
business’ existing activities. The new business approval process is a key control over new business
activity. The objectives are to notify all relevant functions of the intention to introduce a new product,
business or activity,
to share information between functions and to ensure there is a thorough
understanding of the proposal.
Risk Considerations
We apply a comprehensive framework of limits on a variety of key metrics to constrain the risk profile of our
business activities. The size of the limits reflects our risk appetite for a certain activity under normal business
conditions. Key metrics included in our risk management framework include inventory position and exposure
59
limits on a gross and net basis, scenario analysis and stress tests, Value-at-Risk (‘‘VaR’’), sensitivities, exposure
concentrations, aged inventory, Level 3 assets, counterparty exposure, leverage and cash capital.
Market Risk
Market risk is defined as the risk of loss due to fluctuations in the market value of financial assets and liabilities
attributable to changes in market variables.
Our market risk principally arises from interest rate risk, from exposure to changes in the yield curve, the
volatility of interest rates, and credit spreads, and from equity price risks from exposure to changes in prices and
volatilities of individual equities, equity baskets and equity indices. In addition, commodity price risk results
from exposure to the changes in prices and volatilities of individual commodities, commodity baskets and
commodity indices, and foreign exchange risk results from changes in foreign currency rates.
Market risk is present in our capital markets business through market making, proprietary trading, underwriting
and investing activities and is present in our asset management business through investments in separately
managed accounts and direct investments in funds. Given our involvement in a broad set of financial products
and markets, market risk exposures are diversified, and economic hedges are established as appropriate.
Market risk is monitored and managed through a set of key risk metrics such as VaR, stress scenarios, risk
sensitivities and position exposures. Limits are set on the key risk metrics to monitor and control the risk
exposure ensuring that it is in line with our risk appetite. Our risk appetite, including the market risk limits, is
periodically reviewed to reflect business strategy and market environment. Material risk changes, top/emerging
risks and limit utilizations/breaches are highlighted, through risk reporting, and escalated as necessary.
Trading is principally managed through front office trader mandates, where each trader is provided a specific
mandate in line with our product registry. Mandates set out the activities, currencies, countries and products that
the desk is permitted to trade in and set the limits applicable.
Trader Mandates
Trading is principally managed through front office trader mandates, where each trader is provided a specific
mandate in line with our product registry. Mandates set out the activities, currencies, countries and products that
the desk is permitted to trade in and set the limits applicable to the desk. Traders are responsible for knowing
their trading limits and trading in a manner consistent with their mandate.
VaR
VaR is a statistical estimate of the potential loss from adverse market movements over a specified time horizon
within a specified probability (confidence level). It provides a common risk measure across financial instruments,
markets and asset classes. We estimate VaR using a model that simulates revenue and loss distributions by
applying historical market changes to the current portfolio. We calculate a one-day VaR using a one year look-
back period measured at a 95% confidence level.
As with all measures of VaR, our estimate has inherent limitations due to the assumption that historical changes
in market conditions are representative of the future. Furthermore, the VaR model measures the risk of a current
static position over a one-day horizon and might not capture the market risk over a longer time horizon where
moves may be more extreme. Previous changes in market risk factors may not generate accurate predictions of
future market movements. While we believe the assumptions and inputs in our risk model are reasonable, we
could incur losses greater than the reported VaR. Consequently, this VaR estimate is only one of a number of
tools we use in our daily risk management activities.
60
The table below shows firmwide VaR for each component of market risk by interest rate and credit spreads,
equity, currency and commodity products using the past 365 days of historical data (in millions):
Daily VaR (1) Value-at-Risk in Trading Portfolios
VaR at
November 30, 2022
Risk Categories:
Interest Rates and Credit
Spreads. . . . . . . . . . . . . . . . . . . .
Equity Prices. . . . . . . . . . . . . . . . .
Currency Rates. . . . . . . . . . . . . . .
Commodity Prices . . . . . . . . . . . .
Diversification Effect (2). . . . . .
Firmwide VaR (3) . . . . . . . . . . . .
$ 6.26
7.91
0.22
0.09
(3.12)
$11.36
Daily VaR for 2022
Average High
Low
$ 5.93 $ 9.01 $3.63
7.83
17.59 3.55
0.12
0.34 0.02
0.83 0.09
0.29
(3.13) N/A N/A
$11.04 $18.94 $5.90
VaR at
November 30, 2021
$ 4.60
9.85
0.12
0.15
(2.06)
$12.66
Daily VaR for 2021
Average High
Low
$ 5.46 $11.15 $3.21
11.66 18.98 6.17
0.12
0.31 0.03
0.77 0.13
0.39
(4.00) N/A N/A
$13.63 $22.91 $6.94
(1) For the firmwide VaR numbers reported above, a one day time horizon, with a one year look-back period,
and a 95% confidence level were used.
(2) The diversification effect is not applicable for the maximum and minimum VaR values as firmwide VaR and
the VaR values for the four risk categories might have occurred on different days during the period.
(3) The aggregated VaR presented here is less than the sum of the individual components (i.e., interest rate risk,
foreign exchange rate risk, equity risk and commodity price risk) due to the benefit of diversification among
the four risk categories. Diversification benefit equals the difference between aggregated VaR and the sum of
VaRs for the four risk categories and arises because the market risk categories are not perfectly correlated.
The table below shows VaR for our capital markets trading activities, which excludes the impact on VaR for each
component of market risk from our asset management activities by interest rate and credit spreads, equity,
currency and commodity products using the past 365 days of historical data (in millions):
Risk Categories:
Interest Rates and Credit
Spreads . . . . . . . . . . . . . . . . . . . .
Equity Prices . . . . . . . . . . . . . . . . .
Currency Rates . . . . . . . . . . . . . . .
Commodity Prices . . . . . . . . . . . .
Diversification Effect (2) . . . . . .
Capital Markets VaR (3) . . . . . .
Daily VaR (1) Value-at-Risk in Trading Portfolios
VaR at
November 30, 2022
Daily VaR for 2022
Average High
Low
VaR at
November 30, 2021
$ 6.01
8.09
0.01
–
(2.48)
$11.63
$ 5.60 $ 8.63 $3.20
31.13 3.42
8.07
0.05
0.29
0.56
0.02
(4.54) N/A N/A
$ 9.20 $19.56 $4.78
–
–
$ 4.63
5.20
0.07
0.01
(2.21)
$ 7.70
Daily VaR for 2021
Average High
Low
$ 5.45 $11.25 $3.29
5.80
13.44 3.23
0.11
0.31 0.02
0.27
0.04
(3.75) N/A N/A
$ 7.65 $12.18 $5.10
–
(1) For the capital markets VaR numbers reported above, a one-day time horizon, with a one year look-back
period, and a 95% confidence level were used.
(2) The diversification effect is not applicable for the maximum and minimum VaR values as the capital markets
VaR and the VaR values for the four risk categories might have occurred on different days during the period.
(3) The aggregated VaR presented here is less than the sum of the individual components (i.e., interest rate risk,
foreign exchange rate risk, equity risk and commodity price risk) due to the benefit of diversification among
the four risk categories. Diversification benefit equals the difference between aggregated VaR and the sum of
VaRs for the four risk categories and arises because the market risk categories are not perfectly correlated.
Our average daily firmwide VaR decreased to $11.04 million for 2022 from $13.63 million for 2021. The
decrease was primarily due to lower exposures from our asset management activities, which was partially offset
by an increase in firmwide VaR from periodic residual exposures to equity block trades. Average daily capital
markets VaR increased to $9.20 million for 2022 from $7.65 million for 2021 driven by periodic residual
exposure to equity block trades.
61
The efficacy of the VaR model is tested by comparing our actual daily net revenues for those positions included
in VaR calculation with the daily VaR estimate. This evaluation is performed at various levels, from the overall
level down to specific business lines. For the VaR model, revenue is defined as principal transactions revenues,
trading related commissions, revenue from securitization activities and net interest income. VaR backtesting
methodologies differ for regulated entities with approved capital models.
For a 95% confidence one day VaR model (i.e., no intra-day trading), assuming current changes in market value
are consistent with the historical changes used in the calculation, losses would not be expected to exceed the
VaR estimates more than twelve times on an annual basis (i.e., once in every 20 days). During 2022, there were
three days when the aggregate net trading loss exceeded the 95% one day VaR.
The chart below reflects our daily VaR over the last four quarters. The drop in VaR from January to end of
February 2022 was driven by exposure reductions in response to market volatility driven by inflation, rate hike
expectations and Russia/Ukraine crisis. VaR increase in early March 2022 was driven by higher equity exposure
which was subsequently reduced. VaR trended lower from June 2022 to mid-July 2022 driven by defensive
positioning. The temporary increase in VaR in mid-July 2022 was driven by a block trade which was
subsequently reduced. VaR was relatively stable during the three months ended November 30, 2022.
Firmwide (Including Asset Management)
Firmwide (Excluding Asset Management)
R
a
V
y
l
i
a
D
)
s
n
o
i
l
l
i
M
n
i
$
(
24
22
20
18
16
14
12
10
8
6
4
2
0
Three Months Ended
February 28, 2022
Three Months Ended
May 31, 2022
Three Months Ended
August 31, 2022
Three Months Ended
November 30, 2022
Daily Net Trading Revenue
There were 30 days with trading losses out of a total of 252 trading days in 2022. The histogram below presents
the distribution of our actual daily net trading revenue for substantially all of our trading activities for 2022 (in
millions).
62
Year Ended November 30, 2022
Distribution of Daily Net Trading Revenue
s
y
a
D
f
o
r
e
b
m
u
N
50
40
30
20
10
0
<(20)
(20)-(10)
(10)-0
0-10
10-20
20-30
>30
Daily Trading Net Revenue in $ Millions
Firmwide (Including Asset Management)
Firmwide (Excluding Asset Management)
Other Risk Measures
Sensitivity analysis is viewed as the most appropriate measure of risks for certain positions within financial
instruments and therefore such positions are not included in the VaR model. Accordingly, Risk Management has
additional procedures in place to assure that the level of potential loss that would arise from market movements
are within acceptable levels. Such procedures include performing stress tests and profit and loss analysis. The
table below presents the potential reduction in net earnings associated with a 10% stress of the fair value of the
positions that are not included in the VaR model at November 30, 2022 (in thousands):
Investment in funds (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Private investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corporate debt securities in default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10%
Sensitivity
$127,498
20,087
7,211
2,588
(1) Includes investments in hedge funds, fund of funds and private equity funds. For additional details on these
investments refer to ‘‘Investments at Fair Value’’ within Note 4, Fair Value Disclosures, in our consolidated
financial statements included in this Annual Report on Form 10-K.
The impact of changes in our own credit spreads on our structured notes for which the fair value option was
elected is not included in VaR. The estimated credit spread risk sensitivity for each one basis point widening in
our own credit spreads on financial liabilities for which the fair value option was elected was an increase in
value of approximately $1.5 million at November 30, 2022, which is included in other comprehensive income.
Other Risk
We are also subject to interest rate risk on our long-term fixed interest rate debt. Generally, the fair market value
of debt securities with a fixed interest rate will increase as interest rates fall, and the fair market value will
decrease as interest rates rise. The following table represents principal cash flows by expected maturity dates and
the related weighted-average interest rate on those maturities for our consolidated long-term debt obligations,
inclusive of any related interest rate hedges. For the variable rate borrowings, the weighted-average interest rates
are based on the rates in effect at the reporting date. Our market risk with respect to foreign currency exposure
on our long-term debt is also shown below. For additional information, see Note 17 to our consolidated financial
statements.
63
2023
Rate Sensitive Liabilities:
Fixed Interest Rate
Expected Maturity Date (Fiscal Years)
2027
2025
2024
2026
(Dollars in thousands)
Thereafter
Total
Fair Value
Borrowings . . . . . . . . . . . . . $393,748 $ 242,000 $90,565 $46,390 $533,438 $3,329,710 $4,635,851 $4,248,868
Weighted-Average Interest
Rate . . . . . . . . . . . . . . . . . . . .
5.54%
2.92% 1.95% 4.18%
5.88%
5.03%
Variable Interest Rate
Borrowings . . . . . . . . . . . . . $150,316 $1,191,568 $38,780 $70,422 $673,007 $1,327,499 $3,451,592 $3,122,061
Weighted-Average Interest
Rate . . . . . . . . . . . . . . . . . . . .
5.42%
6.05% 5.46% 6.64%
6.49%
5.93%
Borrowings with Foreign
Currency Exposure . . . . . . $
–
$ 520,650 $
–
$
–
$
–
$ 761,815 $1,282,465 $1,085,148
Weighted-Average Interest
Rate . . . . . . . . . . . . . . . . . . . .
– %
1.00%
– %
– %
– %
6.59%
Stress Tests and Scenario Analysis
Stress tests are used to analyze the potential impact of specific events or extreme market moves on the current
portfolio both firm-wide and within business segments. Stress testing is an important part of our risk
management approach because it allows us to quantify our exposure to tail risks, highlight potential
loss
concentrations, undertake risk/reward analysis, set risk controls and overall assess and mitigate our risk.
We employ a range of stress scenarios, which comprise both historical market price and rate changes and
hypothetical market environments, and generally involve simultaneous changes of many risk factors. Indicative
market changes in the scenarios include, but are not limited to, a large widening of credit spreads, a substantial
decline in equities markets, significant moves in selected emerging markets, large moves in interest rates and
changes in the shape of the yield curve.
Unlike our VaR, which measures potential losses within a given confidence interval, stress scenarios do not have
an associated implied probability. Rather, stress testing is used to estimate the potential loss from market moves
that tend to be larger than those embedded in the VaR calculation. Stress testing complements VaR to cover for
potential limitations of VaR such as the breakdown in correlations, non-linear risks, tail risk and extreme events
and capturing market moves beyond the confidence levels assumed in the VaR calculations.
Stress testing is performed and reported at least weekly as part of our risk management process and on an ad hoc
basis in response to market events or concerns. Current stress tests provide estimated revenue and loss of the
current portfolio through a range of both historical and hypothetical events. The stress scenarios are reviewed
and assessed at least annually so that they remain relevant and up to date with market developments. Additional
hypothetical scenarios are also conducted on a sub-portfolio basis to assess the impact of any relevant
idiosyncratic stress events as needed.
Counterparty Credit Risk
Credit risk is the risk of loss due to adverse changes in a counterparty’s credit worthiness or its ability or
willingness to meet its financial obligations in accordance with the terms and conditions of a financial contract.
We are exposed to credit risk as a trading counterparty to other broker-dealers and customers, as a counterparty
to derivative contracts, as a direct lender and through extending loan commitments and providing securities-
based lending and as a member of exchanges and clearing organizations. Credit exposure exists across a wide-
range of products, including cash and cash equivalents, loans, securities finance transactions and over-the-
counter derivative contracts. The main sources of credit risk are:
64
• Loans and lending arising in connection with our investment banking and capital markets activities,
which reflects our exposure at risk on a default event with no recovery of loans. Current exposure
represents loans that have been drawn by the borrower and lending commitments that are outstanding. In
addition, credit exposures on forward settling traded loans are included within our loans and lending
exposures for consistency with the balance sheet categorization of these items. Loans and lending also
is with us and
arise in connection with our portion of a Secured Revolving Credit Facility that
Massachusetts Mutual Life Insurance Company, to be funded equally, to support loan underwritings by
Jefferies Finance. For
in our
consolidated financial statements included in this Annual Report on Form 10-K. In addition, we have
loans outstanding to certain of our officers and employees (none of whom are executive officers or
directors). For further information on these employee loans, refer to Note 25, Related Party Transactions,
in our consolidated financial statements included in this Annual Report on Form 10-K.
information on this facility,
Investments,
to Note 9,
further
refer
• Securities and margin financing transactions, which reflect our credit exposure arising from reverse
repurchase agreements, repurchase agreements and securities lending agreements to the extent the fair
value of the underlying collateral differs from the contractual agreement amount and from margin
provided to customers.
• OTC derivatives, which are reported net by counterparty when a legal right of setoff exists under an
enforceable master netting agreement. OTC derivative exposure is based on a contract at fair value, net
of cash collateral received or posted under credit support agreements. In addition, credit exposures on
forward settling trades are included within our derivative credit exposures.
• Cash and cash equivalents, which includes both interest-bearing and non-interest-bearing deposits at
banks.
Credit is extended to counterparties in a controlled manner and in order to generate acceptable returns, whether
such credit is granted directly or is incidental to a transaction. All extensions of credit are monitored and
managed as a whole to limit exposure to loss related to credit risk. Credit risk is managed according to the Credit
Risk Management Policy, which sets out
the process for identifying counterparty credit risk, establishing
counterparty limits, and managing and monitoring credit limits. The policy includes our approach for:
• Client on-boarding and approving counterparty credit limits;
• Negotiating, approving and monitoring credit terms in legal and master documentation;
• Determining the analytical standards and risk parameters for ongoing management and monitoring credit
risk books;
• Actively managing daily exposure, exceptions and breaches; and
• Monitoring daily margin call activity and counterparty performance.
Counterparty credit exposure limits are granted within our credit ratings framework, as detailed in the Credit
Risk Management Policy. The Credit Risk Department assesses counterparty credit risk and sets credit limits at
the counterparty master agreement level. Limits must be approved by appropriate credit officers and initiated in
our credit and trading systems before trading commences. All credit exposures are reviewed against approved
limits on a daily basis.
Our Secured Revolving Credit Facility, which supports loan underwritings by Jefferies Finance, is governed
under separate policies other than the Credit Risk Management Policy and is approved by our Board. The loans
outstanding to certain of our officers and employees are extended pursuant to a review by our most senior
management.
Current counterparty credit exposures at November 30, 2022 and 2021 are summarized in the tables below and
provided by credit quality, region and industry (in millions). Credit exposures presented take netting and
collateral into consideration by counterparty and master agreement. Collateral taken into consideration includes
both collateral received as cash as well as collateral received in the form of securities or other arrangements.
Current exposure is the loss that would be incurred on a particular set of positions in the event of default by the
counterparty, assuming no recovery. Current exposure equals the fair value of the positions less collateral. Issuer
65
risk is the credit risk arising from inventory positions (for example, corporate debt securities and secondary bank
loans). Issuer risk is included in our country risk exposure tables below.
Counterparty Credit Exposure by Credit Rating
November 30, 2022
Loans and
Lending
Securities
and Margin
Finance
OTC
Derivatives
AAA Range . . . . . . . . . . . . . . . . . . . .
AA Range . . . . . . . . . . . . . . . . . . . . . .
A Range . . . . . . . . . . . . . . . . . . . . . . . .
BBB Range . . . . . . . . . . . . . . . . . . . . .
BB or Lower. . . . . . . . . . . . . . . . . . . .
Unrated . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . .
$ –
70.1
1.8
251.1
61.6
377.8
$762.4
$ 2.0
142.7
575.1
155.3
22.1
–
$897.2
$ 0.1
3.9
207.8
(1.3)
44.0
–
$254.5
November 30, 2021
AAA Range . . . . . . . . . . . . . . . . . . . .
AA Range. . . . . . . . . . . . . . . . . . . . . .
A Range . . . . . . . . . . . . . . . . . . . . . . .
BBB Range . . . . . . . . . . . . . . . . . . . .
BB or Lower . . . . . . . . . . . . . . . . . . .
Unrated . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . .
Loans and
Lending
Securities
and Margin
Finance
OTC
Derivatives
$ –
60.0
0.4
250.3
40.0
164.2
$514.9
$
0.8
111.7
530.4
170.9
11.4
–
$825.2
$ –
13.0
338.0
37.2
71.0
–
$459.2
Cash and Cash
Equivalents
Total with Cash
and Cash
Equivalents
$7,162.1
4.7
2,114.1
419.3
–
2.9
$9,703.1
$ 7,164.2
221.4
2,898.8
824.4
127.7
380.7
$11,617.2
Cash and Cash
Equivalents
Total with Cash
and Cash
Equivalents
$ 8,518.2
5.1
1,869.4
349.0
0.1
13.3
$10,755.1
$ 8,519.0
189.8
2,738.2
807.4
122.5
177.5
$12,554.4
Total
$
2.1
216.7
784.7
405.1
127.7
377.8
$1,914.1
Total
$
0.8
184.7
868.8
458.4
122.4
164.2
$1,799.3
Counterparty Credit Exposure by Region
November 30, 2022
Loans and
Lending
Securities
and Margin
Finance
OTC
Derivatives
Asia/Latin America/Other . . . . . . . .
Europe and the Middle East. . . . . .
North America . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . .
$ 15.8
1.7
744.9
$762.4
$ 56.3
273.2
567.7
$897.2
$ 0.3
35.2
219.0
$254.5
Cash and Cash
Equivalents
Total with Cash
and Cash
Equivalents
$ 283.0
43.9
9,376.2
$9,703.1
$
355.4
354.0
10,907.8
$11,617.2
Total
$
72.4
310.1
1,531.6
$1,914.1
November 30, 2021
Asia/Latin America/Other. . . . . . . .
Europe and the Middle East . . . . .
North America. . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . .
Loans and
Lending
$ 14.9
0.3
499.7
$514.9
Securities
and Margin
Finance
OTC
Derivatives
$ 63.7
300.8
460.7
$825.2
$
0.9
66.4
391.9
$459.2
Total
$
79.5
367.5
1,352.3
Cash and Cash
Equivalents
$
268.1
57.0
10,430.0
$1,799.3
$10,755.1
Total with Cash
and Cash
Equivalents
$
347.6
424.5
11,782.3
$12,554.4
66
Counterparty Credit Exposure by Industry
November 30, 2022
Loans and
Lending
Securities
and Margin
Finance
OTC
Derivatives
Asset Managers . . . . . . . . . . . . . . . . .
Banks, Broker-dealers. . . . . . . . . . . .
Corporates . . . . . . . . . . . . . . . . . . . . . .
As Agent Banks. . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . .
$ 20.8
251.9
197.8
–
291.9
$762.4
$ –
623.1
–
182.7
91.4
$897.2
$ –
211.2
36.6
–
6.7
$254.5
November 30, 2021
Loans and
Lending
Securities
and Margin
Finance
OTC
Derivatives
Asset Managers . . . . . . . . . . . . . . . . .
Banks, Broker-dealers . . . . . . . . . . .
Corporates. . . . . . . . . . . . . . . . . . . . . .
As Agent Banks . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . .
$ –
250.7
158.2
–
106.0
$514.9
$ –
602.9
–
185.2
37.1
$825.2
$ –
388.9
68.0
–
2.3
$459.2
Cash and Cash
Equivalents
Total with Cash
and Cash
Equivalents
$7,162.1
2,541.0
–
–
–
$9,703.1
$ 7,182.9
3,627.2
234.4
182.7
390.0
$11,617.2
Cash and Cash
Equivalents
Total with Cash
and Cash
Equivalents
$ 8,518.2
2,236.9
–
–
–
$10,755.1
$ 8,518.2
3,479.4
226.2
185.2
145.4
$12,554.4
Total
$
20.8
1,086.2
234.4
182.7
390.0
$1,914.1
Total
$
–
1,242.5
226.2
185.2
145.4
$1,799.3
For additional information regarding credit exposure to OTC derivative contracts, refer to Note 5, Derivative
Financial Instruments, in our consolidated financial statements included in this Annual Report on Form 10-K.
Country Risk Exposure
Country risk is the risk that events or developments that occur in the general environment of a country or
countries due to economic, political, social, regulatory, legal or other factors, will affect the ability of obligors of
the country to honor their obligations. We define the country of risk as the country of jurisdiction or domicile of
the obligor, and monitor country risk resulting from both trading positions and counterparty exposure, which
may not include the offsetting benefit of any financial instruments utilized to manage market risk. The following
tables reflect our top exposure at November 30, 2022 and 2021 to the sovereign governments, corporations and
financial institutions in those non- U.S. countries in which we have a net long issuer and counterparty exposure
(in millions):
November 30, 2022
Issuer Risk
Counterparty Risk
Fair Value of
Long Debt
Securities
Fair Value of
Short Debt
Securities
Net
Derivative
Notional
Exposure
Loans
and
Lending
Securities
and
Margin
Finance
OTC
Derivatives
Cash
and Cash
Equivalents
Canada . . . . . . . . . . .
United Kingdom. . .
Hong Kong . . . . . . .
France . . . . . . . . . . . .
Netherlands . . . . . . .
Italy . . . . . . . . . . . . . .
Germany . . . . . . . . . .
Spain . . . . . . . . . . . . .
China . . . . . . . . . . . . .
Brazil . . . . . . . . . . . . .
$ 273.6
555.0
18.8
330.3
322.2
911.7
323.8
437.3
200.1
137.2
$
(98.3)
(350.1)
(46.7)
(239.7)
(212.4)
(674.8)
(381.5)
(376.9)
(129.3)
(61.3)
$ (68.7)
(117.5)
–
(42.8)
5.5
(133.3)
68.5
(38.0)
(6.3)
(16.7)
Total . . . . . . . . .
$3,510.0
$(2,571.0)
$(349.3)
$ 91.5
48.7
1.3
82.0
3.8
–
69.3
46.0
–
–
$342.6
$181.1
15.8
–
6.7
0.2
–
2.5
–
–
–
$206.3
$ 1.8
27.8
187.4
–
0.2
0.5
11.4
0.5
–
–
$229.6
$0.1
1.7
–
–
–
–
–
–
–
–
$1.8
67
Issuer and
Counterparty Risk
Excluding
Cash
and Cash
Equivalents
Including
Cash
and Cash
Equivalents
$ 379.3
153.6
(26.6)
136.5
119.3
103.6
82.6
68.4
64.5
59.2
$ 381.1
181.4
160.8
136.5
119.5
104.1
94.0
68.9
64.5
59.2
$1,140.4
$1,370.0
November 30, 2021
Issuer Risk
Counterparty Risk
Fair Value of
Long Debt
Securities
Fair Value of
Short Debt
Securities
Net
Derivative
Notional
Exposure
Loans
and
Lending
Securities
and
Margin
Finance
OTC
Derivatives
Cash
and Cash
Equivalents
Canada . . . . . . . . . . . .
United Kingdom . . .
Hong Kong . . . . . . . .
Japan . . . . . . . . . . . . . .
Spain . . . . . . . . . . . . . .
Australia . . . . . . . . . . .
Netherlands . . . . . . . .
Switzerland . . . . . . . .
France . . . . . . . . . . . . .
China. . . . . . . . . . . . . .
Total . . . . . . . . . .
$ 196.4
570.6
27.9
247.3
191.4
134.1
220.2
97.3
210.7
458.4
$2,354.3
$
(94.2)
(350.1)
(18.3)
(205.4)
(111.8)
(78.5)
(142.0)
(67.6)
(201.7)
(356.9)
$(1,626.5)
$ 1.3
(1.4)
(1.8)
(3.1)
(0.1)
0.6
0.7
3.5
(59.5)
(34.1)
$(93.9)
$–
0.3
–
–
–
–
–
–
–
–
$0.3
$ 63.1
68.9
2.5
18.3
25.3
25.5
3.9
40.3
99.6
–
$347.4
$259.5
24.9
–
0.1
0.3
–
0.1
2.5
26.9
–
$314.3
$ 1.7
26.7
160.6
51.4
–
7.5
1.3
2.7
–
–
$251.9
Issuer and
Counterparty Risk
Excluding
Cash
and Cash
Equivalents
Including
Cash
and Cash
Equivalents
$ 426.1
313.2
10.3
57.2
105.1
81.7
82.9
76.0
76.0
67.4
$1,295.9
$ 427.8
339.9
170.9
108.6
105.1
89.2
84.2
78.7
76.0
67.4
$1,547.8
Operational Risk
Operational risk is the risk of financial or non-financial impact, resulting from inadequate or failed internal
processes, people and systems or from external events. We interpret this definition as including not only financial
loss or gain but also other negative impacts to our objectives such as reputational impact, legal/regulatory impact
and impact on our clients. Third-party risk is also included as a subset of Operational Risk and is defined as the
potential threat presented to us, or our employees or clients, from our supply chain and other third-parties used to
perform a process, service or activity on our behalf.
Our Operational Risk framework includes governance as well as operational risk processes, which comprises
operational risk event capture and analysis, risk and control self-assessments, operational risk key indicators,
action tracking, risk monitoring and reporting, deep dive risk assessments, new business approvals and vendor
risk management. Each revenue producing and support department is responsible for the management and
reporting of operational risks and the implementation of the Operational Risk Management Policy and processes
within the department with regular operational risk training provided to our employees.
Operational Risk events are mapped to Risk Categories used for the consistent classification of risk data to
support root cause and trend analysis, which includes:
• Fraud and Theft
• Clients and Business Practices
• Market Conduct / Regulatory Compliance
• Business Disruption
• Technology
• Data Protection and Privacy
• Trading
• Transaction and Process Management
• People
• Cyber
• Vendor Risk
Operational Risk Management Policy, framework, infrastructure, methodology, processes, guidance and oversight
of the operational risk processes are centralized and consistent firmwide and additionally subject to regional and
legal entity operational risk governance as required. We also maintain a firmwide Third-Party (‘‘Vendor’’) Risk
Management Policy & Framework to ensure adequate control and monitoring over our critical third parties
68
which includes processes for conducting periodic reviews covering areas of risk including financial health,
information security, privacy, business continuity management, disaster recovery and operational risk.
Our leadership continuously monitors circumstances around COVID-19 and provides as-needed communications
to both our clients and our employees to keep them fully abreast of our policies and protocols. We follow local
and federal guidelines to ensure the safety of our people and clients and operate effectively with a hybrid
working environment across all functions with no disruptions to our business or control processes. As the
incidence of COVID-19 decreases, our employees have returned to our offices in numbers matching pre-COVID-
19 attendance levels.
Model Risk
Model risk refers to the risk of losses resulting from decisions that are based on the output of models, due to
errors or weaknesses in the design and development, implementation, or improper use of models. We use
quantitative models primarily to value certain financial assets and liabilities and to monitor and manage our risk.
Model risk is a function of the model materiality, frequency of use, complexity and uncertainty around inputs
and assumptions used in a given model. Robust model risk management is a core part of our risk management
approach and is overseen through our risk governance structure and risk management controls.
Legal and Compliance Risk
Legal and compliance risk includes the risk of noncompliance with applicable legal and regulatory requirements.
We are subject to extensive regulation in the different jurisdictions in which we conduct our business. We have
various procedures addressing issues such as regulatory capital requirements, sales and trading practices, use of
and safekeeping of customer funds, credit granting, collection activities, anti-money laundering and record
keeping. These risks also reflect the potential impact that changes in local and international laws and tax statutes
have on the economics and viability of current or future transactions. In an effort to mitigate these risks, we
continuously review new and pending regulations and legislation and participate in various industry interest
groups. We also maintain an anonymous hotline for employees or others to report suspected inappropriate
actions by us or by our employees or agents.
New Business Risk
New business risk refers to the risks of entering into a new line of business or offering a new product. By
entering a new line of business or offering a new product, we may face risks that we are unaccustomed to
dealing with and may increase the magnitude of the risks we currently face. The New Business Committee
reviews proposals for new businesses and new products to determine if we are prepared to handle the additional
or increased risks associated with entering into such activities.
Reputational Risk
We recognize that maintaining our reputation among clients, investors, regulators and the general public is an
important aspect of minimizing legal and operational risks. Maintaining our reputation depends on a large
number of factors, including the selection of our clients and the conduct of our business activities. We seek to
maintain our reputation by screening potential clients and by conducting our business activities in accordance
with high ethical standards. Our reputation and business activity can be affected by statements and actions of
third-parties, even false or misleading statements by them. We actively monitor public comment concerning us
and are vigilant in seeking to assure accurate information and perception prevails.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Quantitative and qualitative disclosures about market risk are set forth under ‘‘Management’s Discussion and
Analysis of Financial Condition and Results of Operations – Risk Management’’ in Part II, Item 7 of this
Form 10-K.
69
Item 8. Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Management’s Report on Internal Control over Financial Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reports of Independent Registered Public Accounting Firm. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Financial Condition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Changes in Equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
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75
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77
78
79
81
70
Management’s Report on Internal Control over Financial Reporting
is responsible for establishing and maintaining adequate internal control over financial
Our management
reporting. Internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.
its inherent
reporting may not prevent or detect
Because of
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
internal control over
limitations,
financial
Management evaluated our internal control over financial reporting as of November 30, 2022. In making this
assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission in Internal Control – Integrated Framework (2013). As a result of this assessment and
based on the criteria in this framework, management has concluded that, as of November 30, 2022, our internal
control over financial reporting was effective.
Deloitte & Touche LLP, our independent registered public accounting firm, has audited and issued a report on
our internal control over financial reporting, which appears on page 74.
71
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Jefferies Financial Group Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of financial condition of Jefferies Financial Group
Inc. and subsidiaries (the ‘‘Company’’) as of November 30, 2022 and 2021, the related consolidated statements
of change to earnings, comprehensive income, cash flows and changes in equity, for each of the three years in
the period ended November 30, 2022, and the related notes and the schedules listed in the Index at Item 15(a)(2)
(collectively referred to as the ‘‘financial statements’’). In our opinion, the financial statements present fairly, in
all material respects, the financial position of the Company as of November 30, 2022 and 2021, and the results
of its operations and its cash flows for each of the three years in the period ended November 30, 2022, in
conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States) (PCAOB), the Company’s internal control over financial reporting as of November 30, 2022,
based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission and our report dated January 27, 2023, expressed an
unqualified opinion on the Company’s internal control over financial reporting.
Change in Accounting Principle
As discussed in Note 1 to the financial statements, the Company has elected to change its method of accounting
for secondary loan trading activity from the trade date basis method to the settlement date basis method for the
years ended November 30, 2022 and 2021.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express
an opinion on the Company’s financial statements based on our audits. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with
the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our opinion.
Emphasis of Matter
As discussed in Note 1 to the financial statements, Jefferies Group LLC was wholly merged into Jefferies
Financial Group Inc. The Company made certain reclassifications within the Consolidated Statements of
Financial Condition and Consolidated Statement of Earnings in connection with the merger.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial
statements that was communicated or required to be communicated to the audit committee and that (1) relates to
72
accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective, or complex judgments. The communication of critical audit matters does not alter in any way our
opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter
below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it
relates.
Valuation of financial assets and liabilities that incorporate significant unobservable inputs or complex
models/methodologies – Refer to Note 2 and Note 4 to the financial statements
Critical Audit Matter Description
The Company estimates fair value for certain financial assets and liabilities utilizing models and unobservable
inputs. Unlike the fair value of other assets and liabilities which are readily observable and therefore more easily
independently corroborated, these financial assets and liabilities are not actively traded or quoted prices are
available but traded less frequently, and fair value is determined based on significant judgments such as models,
inputs and valuation methodologies.
We identified the valuation of financial assets and liabilities that incorporate significant unobservable inputs or
complex models/methodologies as a critical audit matter because of the pricing inputs, complexity of models
and/or methodologies used by management and third-party specialists to estimate fair value. The valuations
involve a high degree of auditor judgment and an increased extent of effort, including the need to involve our
fair value specialists who possess significant quantitative and modeling experience, to audit and evaluate the
appropriateness of the models and inputs.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures for financial assets and liabilities that
complex models/methodologies included the following procedures, among others:
incorporate significant unobservable inputs or
• We tested the design and operating effectiveness of the Company’s valuation controls, including the:
(cid:4) Independent price verification controls.
(cid:4) Pricing model controls which are designed to review a model’s theoretical soundness and its
appropriateness.
• With the assistance of our fair value specialists, we evaluated the reasonableness of management’s
valuation methodology and estimates by:
(cid:4) Developing independent valuation estimates and comparing such estimates to management’s recorded
values.
(cid:4) Comparing management’s assumptions and both observable and unobservable inputs to relevant
audit evidence, including external sources, where available.
• We evaluated management’s ability to estimate fair value by comparing management’s valuation
estimates to subsequent transactions, when available.
/s/ Deloitte & Touche LLP
New York, New York
January 27, 2023
We have served as the Company’s auditor since 2017.
73
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Jefferies Financial Group Inc.
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of Jefferies Financial Group Inc. and subsidiaries
(the ‘‘Company’’) as of November 30, 2022, based on criteria established in Internal Control – Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion,
in all material respects, effective internal control over financial
reporting as of November 30, 2022, based on criteria established in Internal Control – Integrated Framework
(2013) issued by COSO.
the Company maintained,
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated financial statements as of and for the year ended November 30, 2022, of the
Company and our report dated January 27, 2023, expressed an unqualified opinion on those financial statements and
included an explanatory paragraph regarding the Company’s election to change its method of accounting for
secondary loan trading activity from trade date basis method to settlement date basis method and an emphasis of
matter paragraph regarding certain reclassifications within the Consolidated Statements of Financial Condition and
Consolidated Statement of Earnings in connection with the merger of Jefferies Group LLC into Jefferies Group Inc.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for
included in the accompanying
its assessment of the effectiveness of internal control over financial reporting,
Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on
the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered
with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting
was maintained in all material respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.
its inherent
Because of
reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
internal control over
limitations,
financial
/s/ Deloitte & Touche LLP
New York, New York
January 27, 2023
74
Jefferies Financial Group Inc.
Consolidated Statements of Financial Condition
(In thousands)
Assets
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and securities segregated and on deposit for regulatory purposes or
deposited with clearing and depository organizations . . . . . . . . . . . . . . . . . . . . . . . .
$ 9,703,109
$10,755,133
957,302
1,015,107
November 30,
2022
2021*
Financial instruments owned, at fair value (includes securities pledged of
$14,099,136 and $12,723,502 at November 30, 2022 and 2021, respectively).
Investments in and loans to related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities borrowed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities purchased under agreements to resell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities received as collateral, at fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivables:
Brokers, dealers and clearing organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees, interest and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Premises and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets (includes assets pledged of $1,032,353 and $990,389 at
November 30, 2022 and 2021, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities and Equity
Short-term borrowings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial instruments sold, not yet purchased, at fair value . . . . . . . . . . . . . . . . . . . .
Securities loaned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities sold under agreements to repurchase. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other secured financings (includes $1,712 and $102,788 at fair value at
November 30, 2022 and 2021, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Obligation to return securities received as collateral, at fair value . . . . . . . . . . . . . .
Payables:
Brokers, dealers and clearing organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt (includes $1,583,828 and $1,843,598 at fair value at November
30, 2022 and 2021, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18,666,296
1,426,817
5,831,148
4,546,691
100,362
1,792,937
1,225,137
568,921
906,864
1,736,114
18,024,621
1,587,409
6,409,420
7,642,484
7,289
2,454,918
1,615,822
582,756
911,230
1,745,098
3,595,985
$51,057,683
3,356,024
$56,107,311
$
528,392
11,056,477
1,366,025
7,452,342
$
221,863
9,267,090
1,525,721
8,446,099
2,037,843
100,362
2,628,727
3,578,854
533,708
2,573,927
4,487,224
7,289
3,952,093
4,461,481
548,295
3,334,371
8,774,086
40,630,743
9,125,745
45,377,271
Mezzanine Equity
Redeemable noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mandatorily redeemable convertible preferred shares. . . . . . . . . . . . . . . . . . . . . . . . . . .
6,461
125,000
25,400
125,000
Equity
Common shares, par value $1 per share, authorized 600,000,000 shares;
226,129,626 and 243,541,431 shares issued and outstanding, after deducting
90,334,082 and 72,922,277 shares held in treasury. . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Jefferies Financial Group Inc. common shareholders’ equity . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
226,130
1,967,781
(379,419)
8,418,354
10,232,846
62,633
10,295,479
$51,057,683
243,541
2,742,244
(372,143)
7,940,113
10,553,755
25,885
10,579,640
$56,107,311
* See Note 1 for a description of financial statement presentation changes made as a result of our Merger with
Jefferies Group.
See accompanying notes to consolidated financial statements.
75
Jefferies Financial Group Inc.
Consolidated Statements of Earnings
(In thousands)
Revenues
Investment banking. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commissions and other fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset management fees and revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-interest expenses
Compensation and benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Floor brokerage and clearing fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Underwriting costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Technology and communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Occupancy and equipment rental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Business development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Professional services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total non-interest expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings (loss) attributable to noncontrolling interests . . . . . . . . . . .
Net loss attributable to redeemable noncontrolling interests. . . . . . . . . .
Preferred stock dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended November 30,
2021*
2022
2020*
$2,807,822
833,757
925,494
80,264
1,183,638
1,318,288
7,149,263
1,170,425
5,978,838
$4,365,699
1,617,336
896,015
72,084
956,318
1,038,012
8,945,464
931,638
8,013,826
$2,501,494
1,928,143
822,248
34,209
1,009,548
584,805
6,880,447
1,029,926
5,850,521
2,589,044
347,805
42,067
444,011
108,001
150,500
240,978
172,902
440,837
387,131
4,923,276
1,055,562
273,852
781,710
(2,397)
(1,342)
8,281
3,554,760
301,860
117,572
388,134
106,254
109,772
215,761
157,420
470,870
337,318
5,759,721
2,254,105
576,729
1,677,376
3,850
(826)
6,949
2,944,071
266,592
95,636
335,065
95,754
70,797
176,280
158,439
338,588
302,216
4,783,438
1,067,083
298,673
768,410
(5,271)
(1,558)
5,634
Net earnings attributable to Jefferies Financial Group Inc. . . . . . .
$ 777,168
$1,667,403
$ 769,605
Basic earnings per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted earnings per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
3.13
3.06
$
$
6.29
6.13
$
$
2.68
2.65
* See Note 1 for a description of financial statement presentation changes made as a result of our Merger with
Jefferies Group.
See accompanying notes to consolidated financial statements.
76
Jefferies Financial Group Inc.
Consolidated Statements of Comprehensive Income
(In thousands)
Year Ended November 30,
2021
2022
2020
Net earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive loss, net of tax:
Currency translation adjustments and other (1) . . . . . . . . . . . . . . . . . . . . . .
Changes in fair value related to instrument specific credit risk (2) . . . .
Minimum pension liability adjustments (3) . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized gain (loss) on available-for-sale securities . . . . . . . . . . . . . . . .
Total other comprehensive loss, net of tax (4). . . . . . . . . . . . . . . . . . . . .
Comprehensive income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings (loss) attributable to noncontrolling interests . . . . . . . . . . . . . .
Net loss attributable to redeemable noncontrolling interests . . . . . . . . . . . . .
Preferred stock dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$781,710
$1,677,376
$768,410
(53,572)
49,146
3,311
(6,161)
(7,276)
774,434
(2,397)
(1,342)
8,281
(9,781)
(82,521)
9,320
(244)
35,991
(52,262)
21
372
(83,226)
(15,878)
1,594,150
3,850
(826)
6,949
752,532
(5,271)
(1,558)
5,634
Comprehensive income attributable to Jefferies Financial Group
Inc. common shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$769,892
$1,584,177
$753,727
(1) The amounts include income tax benefits (expenses) of approximately $15.6 million, $0.6 million and
$(11.4) million during the years ended November 30, 2022, 2021 and 2020, respectively.
(2) The amounts include income tax benefits (expenses) of approximately $(15.6) million, $26.7 million and
$16.4 million for the years ended November 30, 2022, 2021 and 2020, respectively. The amounts for the
years ended November 30, 2022, 2021 and 2020 include net gains (losses) of $0.1 million, $(1.9) million
tax benefits (expenses) of $41 thousand, $0.6 million and
and $(0.4) million,
$0.1 million, respectively, for fair value changes related to instrument specific risk, which were reclassified
to Principal transactions revenues within the Consolidated Statements of Earnings.
respectively, net of
(3) The amounts include income tax benefits (expense) of $(1.2) million, $(3.1) million and $13 thousand for
the years ended November 30, 2022, 2021 and 2020, respectively. The amounts during the years ended
November 30, 2022, 2021 and 2020,
losses of $2.5 million, $3.1 million and
$2.9 million, respectively, net of tax benefits of $0.8 million, $1.1 million and $1.0 million, respectively,
which were reclassified to Compensation and benefits expenses within the Consolidated Statements of
Earnings.
include pension net
(4) None of the components of other comprehensive income (loss) are attributable to noncontrolling interests,
redeemable noncontrolling interest or preferred stock dividends.
See accompanying notes to consolidated financial statements.
77
Jefferies Financial Group Inc.
Consolidated Statements of Changes in Equity
(In thousands)
Common shares $1 par value
Balance, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Purchase of common shares for treasury . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
243,541 $
(25,595)
8,184
226,130 $
(8,643)
2,433
249,751 $ 291,644
(42,263)
370
243,541 $ 249,751
Year Ended November 30,
2021
2022
2020
Additional paid-in capital
Balance, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,742,244 $ 2,911,223 $3,627,711
40,038
Share-based compensation expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,056
Change in fair value of redeemable noncontrolling interests . . . . . . . . .
(773,393)
Purchase of common shares for treasury . . . . . . . . . . . . . . . . . . . . . . . . . . .
13,811
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
43,919
(1,147)
(833,998)
16,763
78,160
(6,216)
(260,757)
19,834
Balance, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,967,781 $ 2,742,244 $2,911,223
Accumulated other comprehensive loss, net of tax
Balance, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (372,143) $ (288,917) $ (273,039)
(15,878)
Other comprehensive loss, net of taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(83,226)
(7,276)
Balance, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (379,419) $ (372,143) $ (288,917)
Retained earnings
Balance, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,940,113 $ 6,531,836 $5,933,389
769,605
Net earnings attributable to Jefferies Financial Group Inc. . . . . . . . . . . .
(171,158)
Dividends ($1.20, $0.90, and $0.60 per common share, respectively).
Cumulative effect of change in accounting principle for current
1,667,403
(239,211)
777,168
(298,927)
expected credit losses, net of tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
–
(19,915)
–
Balance, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,418,354 $ 7,940,113 $6,531,836
Total Jefferies Financial Group Inc. common shareholders’
equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,232,846 $10,553,755 $9,403,893
Noncontrolling interests
Balance, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net earnings (loss) attributable to noncontrolling interests . . . . . . . . . . .
Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deconsolidation of asset management entity . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25,885 $
(2,397)
64,880
(2,629)
(23,107)
1
34,632 $
3,850
4,325
(16,263)
–
(659)
21,979
(5,271)
19,617
(1,694)
–
1
Balance, end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
34,632
Total equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $10,295,479 $10,579,640 $9,438,525
25,885 $
62,633 $
See accompanying notes to consolidated financial statements.
78
Jefferies Financial Group Inc.
Consolidated Statements of Cash Flows
(In thousands)
Cash flows from operating activities:
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bad debt expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Income) loss on investments in and loans to related parties . . . . .
Distributions received on investments in related parties . . . . . . . . . .
Gain on sale of subsidiaries and investments in related parties . . .
Other adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net change in assets and liabilities:
Securities deposited with clearing and depository organizations. . .
Receivables:
Brokers, dealers and clearing organizations . . . . . . . . . . . . . . . . . . .
Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fees, interest and other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities borrowed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial instruments owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities purchased under agreements to resell . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payables:
Brokers, dealers and clearing organizations . . . . . . . . . . . . . . . . . . .
Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities loaned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial instruments sold, not yet purchased . . . . . . . . . . . . . . . . . . .
Securities sold under agreements to repurchase . . . . . . . . . . . . . . . . . .
Lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended November 30,
2021
2022
2020
$
781,710
$ 1,677,376 $
768,410
189,343
(70,396)
43,919
46,846
36,287
82,161
(319,041)
(601,303)
144,255
96,890
78,160
55,876
(149,885)
110,963
–
(89,004)
136,475
64,667
40,038
48,157
75,177
63,134
–
320,611
–
34,237
751
631,672
384,097
200,672
548,567
(773,523)
3,047,353
(230,722)
(1,288,912)
(882,576)
(139,557)
1,875,957
(952,584)
(89,689)
(715,432)
(136,614)
(329,026)
(28,340)
520,455
(1,314,603)
(2,552,607)
(225,916)
2,173,266
210,055
(282,403)
992,199
133,423
(64,377)
527,910
(666,491)
185,266
(153,463)
714,664
(877,088)
(752,171)
167,889
294,397
442,913
270,261
(1,014,535)
799,794
(52,553)
1,179,136
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . .
1,804,849
1,582,290
2,055,439
Cash flows from investing activities:
Contributions to investments in and loans to related parties . . . . . . . .
Capital distributions from investments and repayments of loans
from related parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Originations and purchases of automobile loans, notes and other
(351,645)
(2,339,447)
(1,666,323)
286,578
2,310,186
1,552,161
receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(527,929)
(611,486)
(813,867)
Principal collections of automobile loans, notes and other
receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net payments on premises and equipment, and other assets . . . . . . . .
Proceeds from sales of subsidiaries and investments in related
parties, net of expenses and cash of operations sold . . . . . . . . . . . . .
Deconsolidation of asset management entity . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales and maturities of investments and loan
receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
434,487
(224,301)
394,387
(165,605)
686,114
(176,958)
333,149
(23,107)
–
–
3,588
8,641
3,274
(1,174)
179,654
–
69,321
4,215
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . .
(60,539)
(409,865)
(165,683)
Continued on next page.
79
Jefferies Financial Group Inc.
Consolidated Statements of Cash Flows, continued
(In thousands)
Year Ended November 30,
2021
2022
2020
Cash flows from financing activities:
Proceeds from short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,659,098
(3,338,000)
Payments on short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,198,565
Proceeds from issuance of long-term debt, net of issuance costs . . .
(824,894)
Repayment of long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2,448,731)
Net proceeds from (payments on) other secured financings . . . . . . . .
(14,569)
Net change in bank overdrafts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
64,880
Proceeds from contributions of noncontrolling interests. . . . . . . . . . . .
(2,629)
Payments on distributions to noncontrolling interests . . . . . . . . . . . . . .
(859,593)
Purchase of common shares for treasury . . . . . . . . . . . . . . . . . . . . . . . . .
(280,104)
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,752
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2,843,225)
Net cash provided by (used in) financing activities . . . . . . . . . . .
$ 1,005,000
(1,556,090)
2,488,493
(1,646,224)
1,197,231
8,216
4,325
(16,263)
(269,400)
(222,798)
1,804
994,294
$ 1,619,820
(1,368,255)
1,516,693
(1,716,276)
218,010
(34,663)
19,617
(1,694)
(816,871)
(160,940)
1,034
(723,525)
Effect of exchange rate changes on cash, cash equivalents and
restricted cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(22,143)
(3,387)
18,306
Net increase (decrease) in cash, cash equivalents and
(1,121,060)
restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash, cash equivalents and restricted cash at beginning of period . .
11,828,304
Cash, cash equivalents and restricted cash at end of period. . . . . . . . $10,707,244
2,163,332
9,664,972
$11,828,304
1,184,537
8,480,435
$ 9,664,972
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,164,093
214,066
Income taxes, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
936,272
727,126
$ 1,080,368
25
Noncash investing activities:
During the year ended November 30, 2022, we sold our interest in the Oak Hill investment management
company. Noncash investing activities related to the sale were a receivable of $215.9 million. Refer to Note 1,
Organization and Basis of Presentation, for further details.
The following presents our cash, cash equivalents and restricted cash by category within the Consolidated
Statements of Financial Condition (in thousands):
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and securities segregated and on deposit for regulatory purposes with
clearing and depository organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total cash, cash equivalents and restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
November 30,
2022
2021
$ 9,703,109
$10,755,133
957,302
46,833
$10,707,244
1,015,107
58,064
$11,828,304
See accompanying notes to consolidated financial statements.
80
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Index
Note
Note 1. Organization and Basis of Presentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 2. Summary of Significant Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 3. Accounting Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 4. Fair Value Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 5. Derivative Financial Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 6. Collateralized Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 7. Securitization Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 8. Variable Interest Entities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 9. Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 10. Credit Losses on Financial Assets Measured at Amortized Cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 11. Goodwill and Intangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 12. Revenues from Contracts with Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 13. Compensation Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 14. Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 15. Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 16. Short-Term Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 17. Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 18. Mezzanine Equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 19. Common Shares and Earnings Per Common Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 20. Accumulated Other Comprehensive Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 21. Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 22. Commitments, Contingencies and Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 23. Net Capital Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 24. Segment Reporting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 25. Related Party Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Note 26. Subsequent Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
82
86
95
97
115
121
125
126
131
138
141
144
148
154
157
158
159
161
162
163
164
167
169
170
172
173
81
Jefferies Financial Group Inc.
Notes to Consolidated Financial Statements
Note 1. Organization and Basis of Presentation
Organization
Jefferies Financial Group Inc. is a U.S.-headquartered global full service, integrated investment banking and
securities firm. The accompanying Consolidated Financial Statements represent
the accounts of Jefferies
Financial Group Inc. and subsidiaries (together ‘‘we’’ or ‘‘us’’). We, collectively with our consolidated
subsidiaries and through our affiliates, deliver a broad range of financial services across investment banking,
capital markets and asset management.
We operate in two reportable business segments: (1) Investment Banking and Capital Markets and (2) Asset
Management. The Investment Banking and Capital Markets reportable business segment includes our securities,
commodities, futures and foreign exchange capital markets activities and our investment banking business, which
provides underwriting and financial advisory services to our clients across most industry sectors. We operate
globally in the Americas; Europe and the Middle East; and Asia. Investment Banking and Capital Markets also
includes our corporate lending joint venture (‘‘JFIN Parent LLC’’ or ‘‘Jefferies Finance’’), our commercial real
estate joint venture (‘‘Berkadia Commercial Holding LLC’’ or ‘‘Berkadia’’) and our automobile lending and
servicing activities. The Asset Management
reportable business segment provides alternative investment
management services to investors in the U.S. and overseas and generates investment income from capital
invested in and managed by us or our affiliated asset managers.
Jefferies Group LLC (‘‘Jefferies Group’’), our investment banking and securities firm, was historically operated
as a separate consolidated subsidiary and was a separate Securities and Exchange Commission (‘‘SEC’’)
reporting company, filing annual, quarterly and periodic financial reports. On November 1, 2022, Jefferies Group
was wholly merged into Jefferies Financial Group Inc., which has eliminated the requirement for separate SEC
report filings. In addition, we have historically owned a portfolio of investments that have been reflected in our
consolidated financial statements as consolidated subsidiaries, equity investments, securities or in other ways that
constituted our ‘‘merchant banking’’ business, which were reported as part of our Merchant Banking reportable
segment. During the year ended November 30, 2022 and in connection with the merger, we transferred
significantly all of our Merchant Banking investments into our Asset Management reportable segment. Certain
other publicly traded equity investments related to investment banking relationships were transferred from our
Merchant Banking reportable segment to our Investment Banking and Capital Markets reportable segment. These
investments are now managed by the respective segment managers. Additionally, activities that were presented as
part of the Corporate reportable segment are now fully allocated to either the Investment Banking and Capital
Markets or Asset Management reportable segments. Prior year amounts have been revised to conform to the
current segment reporting. For further information on our reportable business segments, refer to Note 24,
Segment Reporting.
During the year ended November 30, 2022, we sold all of our interests in Idaho Timber and sold our interests in
the Oak Hill investment management company, registered investment adviser and general partner entity and
recognized a gain on sale of $138.7 million and $175.1 million, respectively. These gains are presented within
Other revenues in the Consolidated Statements of Earnings and included within our Asset Management
reportable business segment.
Reclassifications to Consolidated Financial Statements
We have made certain reclassifications within our Consolidated Statements of Financial Condition and
Consolidated Statements of Earnings in connection with the merger of Jefferies Group into Jefferies Financial
Group Inc. This streamlines our financial statements and better aligns the presentation of our firm with our
strategy of building our investment banking and capital markets and asset management businesses and reducing
our legacy merchant banking portfolio. The reclassifications including, but not limited to, the presentation of
82
Notes to Consolidated Financial Statements, continued
Note 1. Organization and Basis of Presentation, continued
equity method investments and any related equity method earnings, loans receivable, intangible assets and
interest expense within the financial statements, conform to the presentation utilized in the historical Jefferies
Group LLC consolidated financial statements prior to the merger. Additionally, the presentation of receivables,
payables, asset management fees and revenues and selling, general and other expenses has been disaggregated to
provide additional financial statement
line item categories on the face of the Consolidated Statements of
Financial Condition and the Consolidated Statements of Earnings. These reclassifications have no effect on our
consolidated net earnings, comprehensive income,
total equity. These
reclassifications have no effect on the net change in cash, cash equivalents and restricted cash. Historical
periods have been recast to conform to these reclassifications.
liabilities or
total assets,
total
Changes to Consolidated Financial Statements for Change in Accounting Policy
As of November 30, 2022, we have changed the accounting for our secondary trading activity related to the
purchases and sales of corporate loans. Historically, we have accounted for purchases and sales of corporate
loans in the secondary market on trade date. Purchases of loans in the secondary market were recognized on
trade date within Financial instruments owned for the total amount of the loans and a corresponding liability was
recognized within Payables – brokers, dealers and clearing organizations. Sales of loans in the secondary market
were recognized on trade date within Financial instruments sold, not yet purchased for the total amount of the
loans and a corresponding asset was recognized within Receivables – brokers, dealers and clearing organizations
on the Consolidated Statements of Financial Condition for the amount of cash to be paid or received upon
settlement. We have determined that it is preferable to recognize this trading activity on a settlement date basis.
A firm commitment to purchase and/or sell loans on the date of trade execution due to the extended settlement
period for this trading activity is recognized and results in recognizing the changes in fair value related to the
underlying purchased loans or sold loans. We have elected the fair value option for the firm commitment to
purchase or sell loans and account for changes in the fair value of the firm commitment within Principal
transactions revenues between the trade date and settlement date on the Consolidated Statement of Earnings and
within Financial Instruments owned, or Financial Instruments sold on the Consolidated Statement of Financial
Condition.
instruments owned of $2.1 billion,
This change in accounting policy resulted in a reduction of Financial
Financial
instruments sold, not yet purchased of $2.8 billion, Payables – Brokers of $2.4 billion and
Receivables – Brokers of $3.1 billion on the Consolidated Statement of Financial Condition at November 30,
2022. There was no impact to net earnings or total equity as a result of this change in accounting policy.
The following table sets forth our Consolidated Statement of Financial Condition as of November 30, 2021 as
originally reported and as revised and presented within these consolidated financial statements as a result of the
reclassifications and change in accounting policy.
83
Notes to Consolidated Financial Statements, continued
Note 1. Organization and Basis of Presentation, continued
As Originally
Reported
Balance at November 30, 2021
Increases/Decreases
due to
reclassifications
Increases/Decreases
due to change in
accounting policy
$19,828,670
1,745,790
7,839,240
$
50,964
(158,381)
(7,839,240)
$(1,855,013)
–
–
–
–
–
1,897,500
–
2,352,247
60,404,110
4,896,704
1,615,822
582,756
(1,897,500)
1,745,098
1,003,777
–
(2,441,786)
–
–
–
–
–
(4,296,799)
As Revised
$18,024,621
1,587,409
–
2,454,918
1,615,822
582,756
–
1,745,098
3,356,024
56,107,311
Assets:
Financial instruments owned . . . . . . . . . . . . . .
Investments in and loans to related parties .
Receivables (1) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivables – Brokers, dealers and clearing
organizations . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivables – Customers. . . . . . . . . . . . . . . . . .
Receivables – Fees, interest and other. . . . . .
Intangible assets, net and goodwill. . . . . . . . .
Goodwill. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets (1) . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities:
Financial instruments sold, not yet
purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$11,699,467
$
–
$(2,432,377)
$ 9,267,090
Payables, expense accruals and other
liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13,612,367
(13,612,367)
–
–
Payables – Brokers, dealers and clearing
organizations . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payables – Customers. . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other liabilities. . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . .
–
–
–
49,674,070
5,816,515
4,461,481
3,334,371
–
(1,864,422)
–
–
(4,296,799)
3,952,093
4,461,481
3,334,371
45,377,271
(1) Automobile loans of $745.3 million historically presented within Receivables have been reclassified to Other
assets on the Consolidated Statement of Financial Condition.
The following table sets forth our Consolidated Statements of Earnings for the years ended November 30, 2021
and 2020 as originally reported and as revised and presented within these consolidated financial statements as a
result of the reclassifications.
84
Notes to Consolidated Financial Statements, continued
Note 1. Organization and Basis of Presentation, continued
Year Ended
November 30, 2021
Increases/Decreases
due to
reclassifications
As Originally
Reported
As Revised
As Originally
Reported
Year Ended
November 30, 2020
Increases/Decreases
due to
reclassifications
As Revised
Principal transactions . . . . . . . . . . . . . $1,623,713
Asset management fees and
$
(6,377)
$1,617,336 $1,916,508
$
11,635
$1,928,143
revenues . . . . . . . . . . . . . . . . . . . . . .
Interest . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total revenues. . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . .
Net revenues . . . . . . . . . . . . . . . . . . . .
Compensation and benefits . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . .
Selling, general and other
expenses . . . . . . . . . . . . . . . . . . . . . .
Underwriting costs . . . . . . . . . . . . . . .
Technology and communications . .
Occupancy and equipment rental . .
Business development . . . . . . . . . . . .
Professional services . . . . . . . . . . . . .
Other expenses . . . . . . . . . . . . . . . . . .
Total expenses . . . . . . . . . . . . . .
Income (loss) related to associated
companies. . . . . . . . . . . . . . . . . . . . .
–
943,336
1,211,120
9,039,883
854,554
8,185,329
3,551,124
77,084
1,278,447
–
–
–
–
–
–
5,836,805
72,084
12,982
(173,108)
(94,419)
77,084
(171,503)
3,636
(77,084)
(1,278,447)
117,572
388,134
106,254
109,772
215,761
337,318
(77,084)
72,084
956,318
1,038,012
8,945,464
931,638
8,013,826
3,554,760
–
–
117,572
388,134
106,254
109,772
215,761
337,318
5,759,721
–
997,555
718,125
6,955,930
945,056
6,010,874
2,940,863
84,870
1,078,956
–
–
–
–
–
–
4,868,308
34,209
11,993
(133,320)
(75,483)
84,870
(160,353)
3,208
(84,870)
(1,078,956)
95,636
335,065
95,754
70,797
176,280
302,216
(84,870)
34,209
1,009,548
584,805
6,880,447
1,029,926
5,850,521
2,944,071
–
–
95,636
335,065
95,754
70,797
176,280
302,216
4,783,438
(94,419)
94,419
–
(75,483)
75,483
–
Conforming changes consistent with these reclassifications have been made to our Consolidated Statements of
Cash Flows and to Note 4, Fair Value Disclosures, Note 5, Derivative Financial Instruments, Note 9,
Investments, Note 10, Credit Losses on Financial Instruments Measured at Amortized Cost and Note 24,
Segment Reporting within our consolidated financial statements for the years ended November 30, 2021 and
2020.
Basis of Presentation
The accompanying Consolidated Financial Statements have been prepared in accordance with U.S. generally
accepted accounting principles (‘‘U.S. GAAP’’) for financial information.
We have made a number of estimates and assumptions relating to the reporting of assets and liabilities, the
disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during the
reporting period to prepare these consolidated financial statements in conformity with U.S. GAAP. The most
important of these estimates and assumptions relate to fair value measurements, compensation and benefits,
goodwill and the accounting for income taxes. Although these and other estimates and assumptions are based on
the best available information, actual results could be materially different from these estimates.
85
Notes to Consolidated Financial Statements, continued
Note 1. Organization and Basis of Presentation, continued
Consolidation
Our policy is to consolidate all entities that we control by ownership of a majority of the outstanding voting
stock. In addition, we consolidate entities that meet the definition of a variable interest entity (‘‘VIE’’) for which
we are the primary beneficiary. The primary beneficiary is the party who has the power to direct the activities of
a VIE that most significantly impact the entity’s economic performance and who has an obligation to absorb
losses of the entity or a right to receive benefits from the entity that could potentially be significant to the entity.
For consolidated entities that are less than wholly-owned, the third-party’s holding of equity interest is presented
as Noncontrolling interests in our Consolidated Statements of Financial Condition and Consolidated Statements
of Changes in Equity. The portion of net earnings attributable to the noncontrolling interests is presented as Net
earnings (loss) attributable to noncontrolling interests in our Consolidated Statements of Earnings.
In situations in which we have significant influence, but not control, of an entity that does not qualify as a VIE,
we apply either the equity method of accounting or fair value accounting pursuant to the fair value option
election under U.S. GAAP, with our portion of net earnings or gains and losses recorded in Other revenues or
Principal transactions revenues, respectively. We also have formed nonconsolidated investment vehicles with
third-party investors that are typically organized as partnerships or limited liability companies and are carried at
fair value. We act as general partner or managing member for these investment vehicles and have generally
provided the third-party investors with termination or ‘‘kick-out’’ rights.
Intercompany accounts and transactions are eliminated in consolidation.
Note 2. Summary of Significant Accounting Policies
Revenue Recognition Policies
Commissions and Other Fees. All customer securities transactions are reported in our Consolidated Statements of
Financial Condition on a settlement date basis with related income reported on a trade-date basis. We permit
institutional customers to allocate a portion of their gross commissions to pay for research products and other
services provided by third-parties. The amounts allocated for those purposes are commonly referred to as soft
dollar arrangements. These arrangements are accounted for on an accrual basis and, as we are acting as an agent
in these arrangements, netted against commission revenues in our Consolidated Statements of Earnings. In
addition, we earn asset-based fees associated with the management and supervision of assets, account services
and administration related to customer accounts.
Principal Transactions. Financial instruments owned and Financial instruments sold, not yet purchased are
carried at fair value with gains and losses reflected in Principal transactions revenues in our Consolidated
Statements of Earnings, except for derivatives accounted for as hedges (see ‘‘Hedge Accounting’’ section herein
and Note 5, Derivative Financial Instruments). Fees received on loans carried at fair value are also recorded in
Principal transactions revenues.
Investment Banking. Advisory fees from mergers and acquisitions engagements are recognized at a point in time
when the related transaction is completed. Advisory fees from restructuring engagements are recognized over
time using a time elapsed measure of progress. Expenses associated with investment banking advisory
engagements are deferred only to the extent they are explicitly reimbursable by the client and the related revenue
is recognized at a point in time. All other investment banking advisory related expenses, including expenses
investment banking
incurred related to restructuring advisory engagements, are expensed as incurred. All
advisory expenses are recognized within their respective expense category on the Consolidated Statements of
Earnings and any expenses reimbursed by clients are recognized as Investment banking revenues.
86
Notes to Consolidated Financial Statements, continued
Note 2. Summary of Significant Accounting Policies, continued
Underwriting and placement agent revenues are recognized at a point in time on trade-date. Costs associated with
underwriting activities are deferred until the related revenue is recognized or the engagement is otherwise
concluded and are recorded on a gross basis within Underwriting costs in the Consolidated Statements of
Earnings.
Asset Management Fees and Revenues. Asset management fees and revenues consist of asset management fees,
as well as revenues from third-parties with strategic relationships pursuant to arrangements, which entitle us to
portions of our revenues and/or affiliated managers’ profits and perpetual rights to certain defined revenues for a
given revenue share period. Revenue from third-parties with strategic relationships pursuant to arrangements is
recognized at the end of the defined revenue or profit share period when the revenues have been realized and all
contingencies have been resolved.
Management and administrative fees are generally recognized over the period that the related service is provided.
Performance fee revenue is generally recognized only at the end of the performance period to the extent that the
benchmark return has been met.
Interest Revenue and Expense. We recognize contractual interest on Financial instruments owned and Financial
instruments sold, not yet purchased, on an accrual basis as a component of interest revenue and expense. Interest
flows on derivative trading transactions and dividends are included as part of the fair valuation of these contracts
and recognized in Principal transactions revenues in our Consolidated Statements of Earnings rather than as a
component of interest revenue or expense. We account for our short- and long-term borrowings at amortized
cost, except for those for which we have elected the fair value option, with related interest recorded on an
accrual basis as Interest expense. Discounts/premiums arising on our long-term debt are accreted/amortized to
Interest expense using the effective yield method over the remaining lives of the underlying debt obligations. We
recognize interest revenue related to our securities borrowed and securities purchased under agreements to resell
activities and interest expense related to our securities loaned and securities sold under agreements to repurchase
activities on an accrual basis. In addition, we recognize interest income as earned on brokerage customer margin
balances and interest expense as incurred on credit balances.
Other Revenues. Other revenues include revenue from the sale of manufactured or remanufactured lumber for
which the transaction price is fixed at the time of sale and revenue is generally recognized when the customer
takes control of the product. Other revenues also include revenue from the sale of produced oil and gas and
revenue from the sale of real estate. Contracts for revenue from the sale of produced oil and gas typically include
variable consideration based on monthly pricing tied to local indices and volumes and revenue is recorded at the
point in time when control of the produced oil and gas transfers to the customer, which is when the performance
obligation is satisfied and the variable consideration can be reliably estimated at the end of each month.
Revenues from the sales of real estate are recognized at a point in time when the related transaction is complete.
If performance obligations under the contract with a customer related to a parcel of real estate are not yet
complete when title transfers to the buyer, revenue associated with the incomplete performance obligations is
deferred until the performance obligation is completed.
Cash Equivalents
Cash equivalents include highly liquid investments, including money market funds and certificates of deposit,
not held for resale with original maturities of three months or less.
87
Notes to Consolidated Financial Statements, continued
Note 2. Summary of Significant Accounting Policies, continued
Cash and Securities Segregated and on Deposit for Regulatory Purposes or Deposited with Clearing and
Depository Organizations
In accordance with Rule 15c3-3 of the Securities Exchange Act of 1934, Jefferies LLC as a broker-dealer
carrying client accounts, is subject to requirements related to maintaining cash or qualified securities in a
segregated reserve account for the exclusive benefit of its clients. Certain other entities are also obligated by
rules mandated by their primary regulators to segregate or set aside cash or equivalent securities to satisfy
regulations, promulgated to protect customer assets. In addition, certain exchange and/or clearing organizations
require cash and/or securities to be deposited by us to conduct day-to-day activities.
Financial Instruments and Fair Value
Financial instruments owned and Financial instruments sold, not yet purchased are recorded at fair value, either
as required by accounting pronouncements or through the fair value option election. These instruments primarily
represent our trading activities and include both cash and derivative products. Gains and losses are recognized in
Principal
transactions revenues in our Consolidated Statements of Earnings. The fair value of a financial
instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date (the exit price).
In determining fair value, we maximize the use of observable inputs and minimize the use of unobservable
inputs by requiring that observable inputs be used when available. Observable inputs are inputs that market
participants would use in pricing the asset or liability based on market data obtained from independent sources.
Unobservable inputs reflect our assumptions that market participants would use in pricing the asset or liability
developed based on the best information available in the circumstances. We apply a hierarchy to categorize our
fair value measurements broken down into three levels based on the transparency of inputs as follows:
Level 1: Quoted prices are available in active markets for identical assets or liabilities at the reported
date. Valuation adjustments and block discounts are not applied to Level 1 instruments.
Level 2: Pricing inputs other than quoted prices in active markets, which are either directly or indirectly
observable at the reported date. The nature of these financial instruments include cash instruments for
which quoted prices are available but traded less frequently, derivative instruments for which fair values
have been derived using model inputs that are directly observable in the market, or can be derived
principally from, or corroborated by, observable market data, and financial instruments that are fair
valued by reference to other similar financial instruments, the parameters of which can be directly
observed.
Level 3: Instruments that have little to no pricing observability at the reported date. These financial
instruments are measured using management’s best estimate of fair value, where the inputs into the
determination of fair value require significant management judgment or estimation.
Certain financial instruments have bid and ask prices that can be observed in the marketplace. For financial
instruments whose inputs are based on bid-ask prices, the financial instrument is valued at the point within the
bid-ask range that meets our best estimate of fair value. We use prices and inputs that are current at the
measurement date. For financial instruments that do not have readily determinable fair values using quoted
market prices, the determination of fair value is based on the best available information, taking into account the
types of financial instruments, current financial information, restrictions (if any) on dispositions, fair values of
underlying financial instruments and quotations for similar instruments.
88
Notes to Consolidated Financial Statements, continued
Note 2. Summary of Significant Accounting Policies, continued
instruments may include the use of valuation models and other
techniques.
The valuation of financial
Adjustments to valuations derived from valuation models are permitted based on management’s judgment, which
takes into consideration the features of the financial instrument such as its complexity, the market in which the
financial instrument is traded and underlying risk uncertainties about market conditions. Adjustments from the
price derived from a valuation model reflect management’s judgment that other participants in the market for the
financial instrument being measured at fair value would also consider in valuing that same financial instrument.
To the extent that valuation is based on models or inputs that are less observable or unobservable in the market,
the determination of fair value requires more judgment.
The availability of observable inputs can vary and is affected by a wide variety of factors, including, for
example, the type of financial instrument and market conditions. As the observability of prices and inputs may
change for a financial instrument from period to period, this condition may cause a transfer of an instrument
among the fair value hierarchy levels. The degree of judgment exercised in determining fair value is greatest for
instruments categorized within Level 3.
Securities Borrowed and Securities Loaned
Securities borrowed and securities loaned are carried at the amounts of cash collateral advanced and received in
connection with the transactions and accounted for as collateralized financing transactions. In connection with
both trading and brokerage activities, we borrow securities to cover short sales and to complete transactions in
which customers have failed to deliver securities by the required settlement date, and lend securities to other
brokers and dealers for similar purposes. When we borrow securities, we generally provide cash to the lender as
collateral, which is reflected in our Consolidated Statements of Financial Condition as Securities borrowed. We
earn interest revenues on this cash collateral. Similarly, when we lend securities to another party, that party
provides cash to us as collateral, which is reflected in our Consolidated Statements of Financial Condition as
Securities loaned. We pay interest expense on the cash collateral received from the party borrowing the
securities. The initial collateral advanced or received approximates or is greater than the fair value of the
securities borrowed or loaned. We monitor the fair value of the securities borrowed and loaned on a daily basis
and request additional collateral or return excess collateral, as appropriate. In instances where the Company
receives securities as collateral in connection with securities-for-securities transactions in the which the Company
is the lender of securities and is permitted to sell or repledge the securities received as collateral, the Company
reports the fair value of the collateral received and the related obligation to return the collateral in the Company’s
Consolidated Statement of Financial Condition.
Securities Purchased Under Agreements to Resell and Securities Sold Under Agreements to Repurchase
Securities purchased under agreements to resell and Securities sold under agreements to repurchase (collectively
‘‘repos’’) are accounted for as collateralized financing transactions and are recorded at their contracted resale or
repurchase amount plus accrued interest. We earn and incur interest over the term of the repo, which is reflected
in Interest revenue and Interest expense in our Consolidated Statements of Earnings on an accrual basis. Repos
are presented in our Consolidated Statements of Financial Condition on a net-basis by counterparty, where
permitted by U.S. GAAP. We monitor the fair value of the underlying securities daily versus the related
receivable or payable balances. Should the fair value of the underlying securities decline or increase, additional
collateral is requested or excess collateral is returned, as appropriate.
Offsetting of Derivative Financial Instruments and Securities Financing Agreements
To manage our exposure to credit risk associated with our derivative activities and securities financing
transactions, we may enter into International Swaps and Derivative Association, Inc. (‘‘ISDA’’) master netting
89
Notes to Consolidated Financial Statements, continued
Note 2. Summary of Significant Accounting Policies, continued
agreements, master securities lending agreements, master repurchase agreements or similar agreements and
collateral arrangements with counterparties. A master agreement creates a single contract under which all
transactions between two counterparties are executed allowing for trade aggregation and a single net payment
obligation. Master agreements provide protection in bankruptcy in certain circumstances and, where legally
enforceable, enable receivables and payables with the same counterparty to be settled or otherwise eliminated by
applying amounts due against all or a portion of an amount due from the counterparty or a third-party. Under our
ISDA master netting agreements, we typically also execute credit support annexes, which provide for collateral,
either in the form of cash or securities, to be posted by or paid to a counterparty based on the fair value of the
derivative receivable or payable based on the rates and parameters established in the credit support annex.
In the event of the counterparty’s default, provisions of the master agreement permit acceleration and termination
of all outstanding transactions covered by the agreement such that a single amount is owed by, or to, the non-
defaulting party. In addition, any collateral posted can be applied to the net obligations, with any excess returned;
and the collateralized party has a right to liquidate the collateral. Any residual claim after netting is treated along
with other unsecured claims in bankruptcy court.
The conditions supporting the legal right of offset may vary from one legal jurisdiction to another and the
enforceability of master netting agreements and bankruptcy laws in certain countries or in certain industries is
not free from doubt. The right of offset is dependent both on contract law under the governing arrangement and
consistency with the bankruptcy laws of the jurisdiction where the counterparty is located. Industry legal
opinions with respect to the enforceability of certain standard provisions in respective jurisdictions are relied
upon as a part of managing credit risk. In cases where we have not determined an agreement to be enforceable,
the related amounts are not offset. Master netting agreements are a critical component of our risk management
processes as part of reducing counterparty credit risk and managing liquidity risk.
We are also a party to clearing agreements with various central clearing parties. Under these arrangements, the
central clearing counterparty facilitates settlement between counterparties based on the net payable owed or
receivable due and, with respect to daily settlement, cash is generally only required to be deposited to the extent
of the net amount. In the event of default, a net termination amount is determined based on the market values of
all outstanding positions and the clearing organization or clearing member provides for the liquidation and
settlement of the net termination amount among all counterparties to the open contracts or transactions.
to Note 5, Derivative Financial
Refer
information.
Instruments, and Note 6, Collateralized Transactions,
for
further
Securitization Activities
We engage in securitization activities related to corporate loans, consumer loans, commercial mortgage loans and
mortgage-backed and other asset-backed securities. Transfers of financial assets to secured funding vehicles are
accounted for as sales when we have relinquished control over the transferred assets. The gain or loss on sale of
such financial assets depends, in part, on the previous carrying amount of the assets involved in the transfer
allocated between the assets sold and the retained interests, if any, based upon their respective fair values at the
date of sale. We may retain interests in the securitized financial assets as one or more tranches of the
securitization. These retained interests are included in Financial instruments owned within our Consolidated
Statements of Financial Condition at fair value. Any changes in the fair value of such retained interests are
recognized in Principal transactions revenues in our Consolidated Statements of Earnings.
When a transfer of assets does not meet the criteria of a sale, we account for the transfer as a secured borrowing
and continue to recognize the assets of a secured borrowing in Financial instruments owned and recognize the
associated financing in Other secured financings in our Consolidated Statements of Financial Condition.
90
Notes to Consolidated Financial Statements, continued
Note 2. Summary of Significant Accounting Policies, continued
Investments in and Loans to Related Parties
Investments in and loans to related parties include investments in private equity and other operating entities in
which we exercise significant influence over operating and capital decisions and loans issued in connection with
such activities. Investments in and loans to related parties are accounted for using the equity method or at cost,
as appropriate, and reviewed for impairment when changes in circumstances may indicate a decrease in value
which is other than temporary. Revenues on Investments in and loans related parties are included in Other
revenues in our Consolidated Statements of Earnings. See Note 9, Investments, and Note 25, Related Party
Transactions, for additional information regarding certain of these investments.
Credit Losses
Financial assets measured at amortized cost are presented at the net amount expected to be collected and the
measurement of credit losses and any expected increases in expected credit losses are recognized in earnings.
The estimate of expected credit losses involves judgment and is based on an assessment over the life of the
financial instrument taking into consideration current market conditions and reasonable and supportable forecasts
of expected future economic conditions.
Goodwill and Intangible Assets
Goodwill. Goodwill represents the excess acquisition cost over the fair value of net tangible and intangible assets
acquired. Goodwill is not amortized and is subject to annual impairment testing on August 1 for our Investment
Banking, Fixed Income, Equities and Asset Management reporting units, on November 30 for other identified
reporting units or between annual tests if an event or change in circumstance occurs that would more likely than
not reduce the fair value of a reporting unit below its carrying value. The goodwill impairment test is performed
at the reporting unit level by comparing the estimated fair value of a reporting unit with its respective carrying
value. If the estimated fair value exceeds the carrying value, goodwill at the reporting unit level is not impaired.
If the fair value is less than the carrying value, then an impairment loss is recognized for the amount by which
the carrying value of the reporting unit exceeds the reporting unit’s fair value.
The fair value of reporting units are based on widely accepted valuation techniques that we believe market
participants would use, although the valuation process requires significant judgment and often involves the use
of significant estimates and assumptions. The methodologies we utilize in estimating the fair value of reporting
incorporate price-to-earnings and price-to-book multiples of
units include market valuation methods that
comparable exchange-traded companies and multiples of merger and acquisitions of similar businesses. The
estimates and assumptions used in determining fair value could have a significant effect on whether or not an
impairment charge is recorded and the magnitude of such a charge. Adverse market or economic events could
result in impairment charges in future periods.
Intangible Assets. Intangible assets deemed to have finite lives are amortized on a straight-line basis over their
estimated useful lives, where the useful life is the period over which the asset is expected to contribute directly,
or indirectly, to our future cash flows. Intangible assets are reviewed for impairment on an interim basis when
loss is
certain events or circumstances exist. For intangible assets deemed to be impaired, an impairment
recognized for the amount by which the intangible asset’s carrying value exceeds its fair value. At least annually,
the remaining useful life is evaluated.
An intangible asset with an indefinite useful life is not amortized but assessed for impairment annually, or more
frequently, when events or changes in circumstances occur indicating that it is more likely than not that the
indefinite-lived asset is impaired. Impairment exists when the carrying amount exceeds its fair value. In testing
for impairment, we have the option to first perform a qualitative assessment to determine whether it is more
91
Notes to Consolidated Financial Statements, continued
Note 2. Summary of Significant Accounting Policies, continued
likely than not that an impairment exists. If it is determined that it is not more likely than not that an impairment
exists, a quantitative impairment test is not necessary. If we conclude otherwise, we are required to perform a
quantitative impairment test.
Intangible assets are included in Other assets in our Consolidated Statements of Financial Condition. Our annual
indefinite-lived intangible asset impairment testing date is August 1st. To the extent an impairment loss is
recognized, the loss establishes the new cost basis of the asset that is amortized over the remaining useful life of
that asset, if any. Subsequent reversal of impairment losses is not permitted.
Refer to Note 11, Goodwill and Intangible Assets, for further information.
Premises and Equipment
Premises and equipment are depreciated using the straight-line method over the estimated useful lives of the
related assets (generally three to ten years). Leasehold improvements are amortized using the straight-line
method over the term of the related leases or the estimated useful lives of the assets, whichever is shorter.
Premises and equipment includes internally developed software. The carrying values of internally developed
software ready for its intended use are depreciated over the remaining useful life.
At November 30, 2022 and 2021, furniture, fixtures and equipment amounted to $730.1 million and $728.3
million, respectively, and leasehold improvements amounted to $245.1 million and $236.8 million, respectively.
Accumulated depreciation and amortization was $524.6 million and $526.0 million at November 30, 2022 and
2021, respectively.
Depreciation and amortization expense amounted to $172.9 million, $157.4 million and $158.4 million for the
years ended November 30, 2022, 2021 and 2020, respectively.
Leases
For leases with an original term longer than one year, lease liabilities are initially recognized on the lease
commencement date based on the present value of the future minimum lease payments over the lease term,
including non-lease components such as fixed common area maintenance costs and other fixed costs for
generally all leases. A corresponding right-of-use (‘‘ROU’’) asset is initially recognized equal to the lease
liability adjusted for any lease prepayments, initial direct costs and lease incentives. The ROU assets are included
in Premises and equipment and the lease liabilities are included in Lease liabilities in our Consolidated Statement
of Financial Condition.
The discount rates used in determining the present value of leases represent our collateralized borrowing rate
considering each lease’s term and currency of payment. The lease term includes options to extend or terminate
the lease when it is reasonably certain that we will exercise that option. Certain leases have renewal options that
can be exercised at the discretion of the Company. Lease expense is generally recognized on a straight-line basis
over the lease term and included in Occupancy and equipment rental expense in our Consolidated Statement of
Earnings.
Other Real Estate
Other real estate is classified within Other assets and includes all expenditures incurred in connection with the
acquisition, development and construction of properties. Interest, payroll related to construction, property taxes
and other professional fees attributable to land and property construction are capitalized and added to the cost of
92
Notes to Consolidated Financial Statements, continued
Note 2. Summary of Significant Accounting Policies, continued
those properties when active development begins and ends when the property development is fully completed
and ready for its intended use. During the years ended November 30, 2022, 2021 and 2020, capitalized interest
of $13.5 million, $9.0 million and $8.6 million, respectively was allocated among real estate projects that are
currently under development.
Inventories and Cost of Sales
We have investments in entities that are consolidated by us that are engaged in various manufacturing and real
estate activities. Inventories arising from these consolidated entities are classified as Other assets in the
Consolidated Statements of Financial Condition and are stated at the lower of cost or net realizable value, with
cost principally determined under the first-in-first-out method. Cost of goods sold, which is recognized within
Non-interest expenses on the Consolidated Statements of Earnings in connection with sales of such inventories,
principally includes product and manufacturing costs, inbound and outbound shipping costs and handling costs.
Impairment of Long-Lived Assets
We evaluate our long-lived assets for impairment whenever events or changes in circumstances indicate, in
management’s judgment, that the carrying value of such assets may not be recoverable. When testing for
impairment, we group our long-lived assets with other assets and liabilities at the lowest level for which
identifiable cash flows are largely independent of the cash flows of other assets and liabilities (or asset group).
The determination of whether an asset group is recoverable is based on management’s estimate of undiscounted
future cash flows directly attributable to the asset group as compared to its carrying value. If the carrying amount
of the asset group is greater than the undiscounted cash flows, an impairment loss would be recognized for the
amount by which the carrying amount of the asset group exceeds its estimated fair value.
Share-based Compensation
Share-based awards are measured based on the fair value of the award and recognized over the required service or
vesting period. Certain executive share-based awards contain market, performance and service conditions. Market
conditions are incorporated into the grant-date fair value using a Monte Carlo valuation model. Compensation
expense for awards with market conditions is recognized over the service period and is not reversed if the market
condition is not met. Awards with performance conditions are amortized over the service period if it is determined
that it is probable that the performance condition will be achieved. The fair value of options are estimated at the
date of grant using the Black-Scholes option pricing model. We account for forfeitures as they occur, which results
in dividends and dividend equivalents originally charged against retained earnings for forfeited shares to be
reclassified to compensation expense in the period in which the forfeiture occurs.
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases
and for tax loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected
to apply to taxable income in the years in which those temporary differences are expected to be recovered or
settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the
period that includes the enactment date. The realization of deferred tax assets is assessed and a valuation
allowance is recorded to the extent that it is more likely than not that any portion of the deferred tax asset will
not be realized on the basis of its projected separate return results.
93
Notes to Consolidated Financial Statements, continued
Note 2. Summary of Significant Accounting Policies, continued
We record uncertain tax positions using a two-step process: (i) we determine whether it is more likely than not
that each tax position will be sustained on the basis of the technical merits of the position; and (ii) for those tax
positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit
that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.
We use the portfolio approach relating to the release of stranded tax effects recorded in accumulated other
comprehensive income (loss).
Earnings per Common Share
Basic earnings per share is computed by dividing net earnings available to common shareholders by the
weighted average number of common shares outstanding and certain other shares committed to be, but not yet
issued. Net earnings available to common shareholders represent net earnings to common shareholders reduced
by the allocation of earnings to participating securities. Losses are not allocated to participating securities.
Common shares outstanding and certain other shares committed to be, but not yet issued, include restricted stock
and restricted stock units (‘‘RSUs’’) for which no future service is required. Diluted earnings per share is
computed by dividing net earnings available to common shareholders plus dividends on dilutive mandatorily
redeemable convertible preferred shares by the weighted average number of common shares outstanding and
certain other shares committed to be, but not yet issued, plus all dilutive common stock equivalents outstanding
during the period.
Unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents
(whether paid or unpaid) are participating securities and, therefore, are included in the earnings allocation in
computing earnings per share under the two-class method of earnings per share. Restricted stock and RSUs
granted as part of share-based compensation contain nonforfeitable rights to dividends and dividend equivalents,
respectively, and therefore, prior to the requisite service being rendered for the right to retain the award,
restricted stock and RSUs meet
the definition of a participating security. RSUs granted under the senior
executive compensation plan are not considered participating securities as the rights to dividend equivalents are
forfeitable. See Note 13 for more information regarding the senior executive compensation plan.
Legal Reserves
In the normal course of business, we have been named, from time to time, as a defendant in legal and regulatory
proceedings. We are also involved, from time to time, in other exams, investigations and similar reviews (both
formal and informal) by governmental and self-regulatory agencies regarding our businesses, certain of which
may result in judgments, settlements, fines, penalties or other injunctions.
We recognize a liability for a contingency in Accrued expenses and other liabilities when it is probable that a
liability has been incurred and the amount of loss can be reasonably estimated. If the reasonable estimate of a
probable loss is a range, we accrue the most likely amount of such loss, and if such amount is not determinable,
then we accrue the minimum in the range as the loss accrual. The determination of the outcome and loss
estimates requires significant judgment on the part of management. We believe that any other matters for which
we have determined a loss to be probable and reasonably estimable are not material to our consolidated financial
statements.
In many instances, it is not possible to determine whether any loss is probable or even possible or to estimate the
amount of any loss or the size of any range of loss. We believe that, in the aggregate, the pending legal actions
or regulatory proceedings and any other exams, investigations or similar reviews (both formal and informal)
should not have a material adverse effect on our consolidated results of operations, cash flows or financial
94
Notes to Consolidated Financial Statements, continued
Note 2. Summary of Significant Accounting Policies, continued
condition. In addition, we believe that any amount of potential loss or range of potential loss in excess of what
has been provided in our consolidated financial statements that could be reasonably estimated is not material.
Hedge Accounting
Hedge accounting is applied using interest rate swaps designated as fair value hedges of changes in the
benchmark interest rate of fixed rate senior long-term debt. The interest rate swaps are included as derivative
contracts in Financial instruments owned and Financial instruments sold, not yet purchased in our Consolidated
Statements of Financial Position. We use regression analysis to perform ongoing prospective and retrospective
assessments of the effectiveness of these hedging relationships. A hedging relationship is deemed effective if the
change in fair value of the interest rate swap and the change in the fair value of the long-term debt due to
changes in the benchmark interest rate offset within a range of 80% – 125%. The impact of valuation
adjustments related to our own credit spreads and counterparty credit spreads are included in the assessment of
effectiveness.
For qualifying fair value hedges of benchmark interest rates, the change in the fair value of the derivative and the
change in fair value of the long-term debt provide offset of one another and, together with any resulting
ineffectiveness, are recorded in Interest expense.
We seek to reduce the impact of fluctuations in foreign exchange rates on our net investments in certain non-U.S.
operations through the use of foreign exchange contracts. The foreign exchange contracts are included as
derivative contracts in Financial instruments owned and Financial instruments sold, not yet purchased in our
Consolidated Statements of Financial Position. For foreign exchange contracts designated as hedges,
the
effectiveness of the hedge is assessed based on the overall changes in the fair value of the forward contracts (i.e.,
based on changes in forward rates). For qualifying net investment hedges, all gains or losses on the hedging
instruments are included in Currency translation adjustments and other in our Consolidated Statements of
Comprehensive Income.
Refer to Note 5, Derivative Financial Instruments, for further information.
Foreign Currency Translation
Assets and liabilities of foreign subsidiaries having non-U.S. dollar functional currencies are translated at
exchange rates at the end of a period. Revenues and expenses are translated at average exchange rates during the
period. The gains or losses resulting from translating foreign currency financial statements into U.S. dollars, net
of hedging gains or losses and taxes, if any, are included in Other comprehensive income. Gains or losses
resulting from foreign currency transactions are included in Principal transactions revenues in our Consolidated
Statements of Earnings.
Note 3. Accounting Developments
Adopted Accounting Standards
Reference Rate Reform. In March 2020, the FASB issued new guidance, which was subsequently amended in
January 2021, which provides optional exceptions for applying GAAP to certain contract modifications, hedge
accounting relationships or other transactions affected by reference rate reform. In December 2022, the FASB
issued an accounting standard update to extend the temporary relief until December 31, 2024. Our assessment of
contracts with provisions based on LIBOR is ongoing and this guidance may be applied as we transition away
from LIBOR.
95
Notes to Consolidated Financial Statements, continued
Note 3. Accounting Developments, continued
Income Taxes. In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying
the Accounting for Income Taxes. The objective of the guidance is to simplify the accounting for income taxes
by removing certain exceptions to the general principles in Topic 740 and to provide more consistent application
to improve the comparability of financial statements. We adopted the guidance in the first quarter of fiscal 2021
and the adoption did not have a material impact on our consolidated financial statements.
Consolidation. In October 2018, the FASB issued ASU No. 2018-17, Consolidation: Targeted Improvements to
Related Party Guidance for Variable Interest Entities. The guidance requires indirect interests held through
related parties under common control arrangements be considered on a proportional basis for determining
whether fees paid to decision makers and service providers are variable interests. We adopted the guidance in the
first quarter of fiscal 2021 and the adoption did not have a material impact on our consolidated financial
statements.
Internal-Use Software. In August 2018, the FASB issued ASU No. 2018-15, Intangibles – Goodwill and Other –
Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing
Arrangement That Is a Service Contract. The guidance amends the definition of a hosting arrangement and
requires that the customer in a hosting arrangement that is a service contract capitalize certain implementation
costs as if the arrangement was an internal-use software project. We adopted the guidance in the first quarter of
fiscal 2021 and elected to apply the guidance prospectively to implementation costs incurred after the adoption
date. The adoption did not have an impact on our consolidated financial statements on the adoption date.
Defined Benefit Plans. In August 2018, the FASB issued ASU No. 2018-14, Compensation – Retirement Benefits
– Defined Benefit Plans – General: Disclosure Framework – Changes to the Disclosure Requirements for Defined
Benefit Plans. The objective of the guidance is to improve the effectiveness of disclosure requirements on defined
benefit pension plans and other postretirement plans. We adopted the guidance in the first quarter of fiscal 2021
and the adoption did not have a material impact on our consolidated financial statements.
Goodwill. In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment,
which simplifies goodwill impairment testing. We adopted the guidance in the first quarter of fiscal 2021 and the
adoption did not have a material impact on our consolidated financial statements.
Financial Instruments – Credit Losses. In June 2016, the FASB issued ASU No. 2016-13, Measurement of
Credit Losses on Financial Instruments. The guidance provides for estimating credit losses on financial assets
measured at amortized cost by introducing an approach based on expected losses over the financial asset’s entire
life, recorded at inception or purchase. We adopted the new credit loss guidance on December 1, 2020 and
applied a modified retrospective approach through a cumulative-effect adjustment to retained earnings upon
adoption. At transition on December 1, 2020, the new accounting guidance’s adoption resulted in an increase in
the provision for credit losses of $26.5 million with a corresponding decrease in retained earnings of $19.9
million, net of tax. The increase is primarily attributable to a $30.1 million increase in the allowance for credit
losses in our automobile loans receivables portfolio. We estimate expected credit losses on the portfolio using an
analysis of historical portfolio performance data as well as external economic factors that we consider to be
relevant to the credit losses expected in the portfolio. This was offset by decreases attributable to applying a
revised provisioning methodology based on historical loss experience for our investment banking fee receivables.
The impact upon adoption for our secured financing receivables (reverse repurchases agreements, securities
borrowing arrangements, and margin loans) was immaterial because of the contractual collateral maintenance
provisions that require that the counterparty continually adjust the amount of collateralization securing the credit
exposure on these contracts. For the remaining financial instruments within the guidance’s scope, the expected
credit losses were also determined to be immaterial considering the counterparty’s credit quality, an insignificant
history of credit losses, or the short-term nature of the credit exposures.
96
Notes to Consolidated Financial Statements, continued
Note 4. Fair Value Disclosures
The following is a summary of our financial assets and liabilities that are accounted for at fair value on a
recurring basis, excluding Investments at fair value based on net asset value (‘‘NAV’’) of $1.29 billion and $1.05
billion at November 30, 2022 and 2021, respectively, by level within the fair value hierarchy (in thousands):
November 30, 2022
Level 1
Level 2
Level 3
Counterparty
and
Cash
Collateral
Netting (1)
Total
Assets:
Financial instruments owned:
Corporate equity securities . . . . . . . . . . . . . . . . . $3,117,327 $
Corporate debt securities . . . . . . . . . . . . . . . . . . .
Collateralized debt obligations and
–
collateralized loan obligations . . . . . . . . . . . .
–
140,157 $240,347 $
3,972,153
30,232
71,640
55,824
–
–
–
U.S. government and federal agency
securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Municipal securities. . . . . . . . . . . . . . . . . . . . . . . .
Sovereign obligations . . . . . . . . . . . . . . . . . . . . . .
Residential mortgage-backed securities . . . . . .
Commercial mortgage-backed securities . . . . .
Other asset-backed securities . . . . . . . . . . . . . . .
Loans and other receivables . . . . . . . . . . . . . . . .
Derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments at fair value . . . . . . . . . . . . . . . . . . .
3,442,484
–
896,805
–
–
–
–
3,437
–
15,111
574,903
849,558
1,314,199
442,471
333,164
1,069,041
3,427,921
3,750
–
–
–
27,617
839
94,677
168,875
11,052
161,992
–
–
–
–
–
–
–
(3,093,244)
–
$ 3,497,831
4,002,385
127,464
3,457,595
574,903
1,746,363
1,341,816
443,310
427,841
1,237,916
349,166
165,742
Total financial instruments owned,
excluding Investments at fair value
based on NAV . . . . . . . . . . . . . . . . . . . . . . . . $7,460,053 $12,214,068 $791,455 $(3,093,244) $17,372,332
Securities received as collateral . . . . . . . . . . . . . . . $ 100,362 $
–
$
–
$
Liabilities:
Financial instruments sold, not yet purchased:
Corporate equity securities . . . . . . . . . . . . . . . . . $2,097,436 $
Corporate debt securities . . . . . . . . . . . . . . . . . . .
U.S. government and federal agency
–
48,931 $
2,337,691
750 $
500
–
–
–
$
100,362
$ 2,147,117
2,338,191
securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sovereign obligations . . . . . . . . . . . . . . . . . . . . . .
Commercial mortgage-backed securities . . . . .
Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total financial instruments sold, not yet
3,223,637
879,909
–
–
204
–
771,125
–
180,147
4,174,082
–
–
490
3,164
70,576
–
–
–
–
(2,732,165)
3,223,637
1,651,034
490
183,311
1,512,697
purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,201,186 $ 7,511,976 $ 75,480 $(2,732,165) $11,056,477
Other secured financings . . . . . . . . . . . . . . . . . . . . . $
Obligation to return securities received as
–
$
–
$ 1,712 $
collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 100,362 $
$
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
–
–
$
$
922,705 $661,123 $
–
–
–
–
$
1,712
$
100,362
$ 1,583,828
(1) Represents counterparty and cash collateral netting across the levels of the fair value hierarchy for positions
with the same counterparty.
97
Notes to Consolidated Financial Statements, continued
Note 4. Fair Value Disclosures, continued
November 30, 2021
Level 1
Level 2
Level 3
Counterparty
and
Cash
Collateral
Netting (1)
Assets:
Financial instruments owned:
Corporate equity securities . . . . . . . . . . . . . . . . . $2,737,255 $
Corporate debt securities . . . . . . . . . . . . . . . . . . .
Collateralized debt obligations and
–
257,318 $118,489 $
3,836,341
11,803
–
579,518
31,946
–
–
–
collateralized loan obligations . . . . . . . . . . . .
U.S. government and federal agency
securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Municipal securities. . . . . . . . . . . . . . . . . . . . . . . .
Sovereign obligations . . . . . . . . . . . . . . . . . . . . . .
Residential mortgage-backed securities . . . . . .
Commercial mortgage-backed securities . . . . .
Other asset-backed securities . . . . . . . . . . . . . . .
Loans and other receivables . . . . . . . . . . . . . . . .
Derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments at fair value . . . . . . . . . . . . . . . . . . .
Total financial instruments owned,
3,045,295
–
899,086
–
–
–
–
4,429
–
68,784
509,559
654,199
1,168,246
196,419
337,022
1,515,314
3,861,551
11,369
–
–
–
1,477
2,333
93,524
178,417
10,248
154,373
–
–
–
–
–
–
–
(3,305,756)
–
Total
$ 3,113,062
3,848,144
611,464
3,114,079
509,559
1,553,285
1,169,723
198,752
430,546
1,693,731
570,472
165,742
excluding Investments at fair value
based on NAV . . . . . . . . . . . . . . . . . . . . . . . . $6,686,065 $12,995,640 $602,610 $(3,305,756) $16,978,559
Securities received as collateral . . . . . . . . . . . . . . . $
7,289 $
–
$
–
$
Liabilities:
Financial instruments sold, not yet purchased:
Corporate equity securities . . . . . . . . . . . . . . . . . $1,671,696 $
Corporate debt securities . . . . . . . . . . . . . . . . . . .
U.S. government and federal agency
–
19,654 $ 4,635 $
2,111,777
482
–
–
–
$
7,289
$ 1,695,985
2,112,259
securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sovereign obligations . . . . . . . . . . . . . . . . . . . . . .
Residential mortgage-backed securities . . . . . .
Commercial mortgage-backed securities . . . . .
Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total financial instruments sold, not yet
2,457,420
935,801
–
–
–
1,815
–
593,040
719
–
49,555
5,034,544
–
–
–
210
9,925
78,017
–
–
–
–
–
(3,702,200)
2,457,420
1,528,841
719
210
59,480
1,412,176
purchased . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,066,732 $ 7,809,289 $ 93,269 $(3,702,200) $ 9,267,090
Other secured financings . . . . . . . . . . . . . . . . . . . . . $
Obligation to return securities received as
collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
–
$
76,883 $ 25,905 $
7,289 $
$
–
–
$
$
961,866 $881,732 $
–
–
–
–
$
102,788
7,289
$
$ 1,843,598
(1) Represents counterparty and cash collateral netting across the levels of the fair value hierarchy for positions
with the same counterparty.
98
Notes to Consolidated Financial Statements, continued
Note 4. Fair Value Disclosures, continued
The following is a description of the valuation basis,
measuring our financial assets and liabilities that are accounted for at fair value on a recurring basis:
including valuation techniques and inputs, used in
Corporate Equity Securities
• Exchange-Traded Equity Securities: Exchange-traded equity securities are measured based on quoted
closing exchange prices, which are generally obtained from external pricing services, and are categorized
within Level 1 of the fair value hierarchy, otherwise they are categorized within Level 2 of the fair value
hierarchy. To the extent these securities are actively traded, valuation adjustments are not applied.
• Non-Exchange-Traded Equity Securities: Non-exchange-traded equity securities are measured primarily
using broker quotations, pricing data from external pricing services and prices observed from recently
executed market transactions and are categorized within Level 2 of the fair value hierarchy. Where such
information is not available, non-exchange-traded equity securities are categorized within Level 3 of the
fair value hierarchy and measured using valuation techniques involving quoted prices of or market data
for comparable companies, similar company ratios and multiples (e.g., price/Earnings before interest,
taxes, depreciation and amortization (‘‘EBITDA’’), price/book value), discounted cash flow analyses and
transaction prices observed from subsequent financing or capital issuance by the company. When using
pricing data of comparable companies, judgment must be applied to adjust the pricing data to account for
differences between the measured security and the comparable security (e.g., issuer market capitalization,
yield, dividend rate, geographical concentration).
• Equity Warrants: Non-exchange-traded equity warrants are measured primarily from observed prices on
recently executed market transactions and broker quotations and are categorized within Level 2 of the
fair value hierarchy. Where such information is not available, non-exchange-traded equity warrants are
generally categorized within Level 3 of the fair value hierarchy and can be measured using third-party
valuation services or the Black-Scholes model with key inputs impacting the valuation including the
underlying security price, implied volatility, dividend yield, interest rate curve, strike price and maturity
date.
Corporate Debt Securities
• Investment Grade Corporate Bonds: Investment grade corporate bonds are measured primarily using
pricing data from external pricing services and broker quotations, where available, prices observed from
recently executed market transactions and bond spreads. Investment grade corporate bonds measured
using these valuation methods are categorized within Level 2 of the fair value hierarchy. If broker
quotes, pricing data or spread data is not available, alternative valuation techniques may be used.
Investment grade corporate bonds measured using alternative valuation techniques are categorized within
Level 2 or Level 3 of the fair value hierarchy
• High Yield Corporate and Convertible Bonds: A significant portion of our high yield corporate and
convertible bonds are categorized within Level 2 of the fair value hierarchy and are measured primarily
using broker quotations and pricing data from external pricing services, where available, and prices
observed from recently executed market transactions of institutional size. Where pricing data is less
observable, valuations are categorized within Level 3 of the fair value hierarchy and are based on
pending transactions involving the issuer or comparable issuers, prices implied from an issuer’s
subsequent financing or recapitalization, models incorporating financial ratios and projected cash flows
of the issuer and market prices for comparable issuers.
99
Notes to Consolidated Financial Statements, continued
Note 4. Fair Value Disclosures, continued
Collateralized Debt Obligations and Collateralized Loan Obligations
Collateralized debt obligations (‘‘CDOs’’) and collateralized loan obligations (‘‘CLOs’’) are measured based on
prices observed from recently executed market transactions of the same or similar security or based on valuations
received from third-party brokers or data providers and are categorized within Level 2 or Level 3 of the fair
value hierarchy depending on the observability and significance of the pricing inputs. Valuation that is based on
recently executed market transactions of similar securities incorporates additional review and analysis of pricing
inputs and comparability criteria, including, but not limited to, collateral type, tranche type, rating, origination
year, prepayment rates, default rates and loss severity.
U.S. Government and Federal Agency Securities
• U.S. Treasury Securities: U.S. Treasury securities are measured based on quoted market prices obtained
from external pricing services and categorized within Level 1 of the fair value hierarchy.
• U.S. Agency Debt Securities: Callable and non-callable U.S. agency debt securities are measured
primarily based on quoted market prices obtained from external pricing services and are generally
categorized within Level 1 or Level 2 of the fair value hierarchy.
Municipal Securities
Municipal securities are measured based on quoted prices obtained from external pricing services, where
available, or recently executed independent transactions of comparable size and are generally categorized within
Level 2 of the fair value hierarchy.
Sovereign Obligations
Sovereign government obligations are measured based on quoted market prices obtained from external pricing
transactions of comparable size. Sovereign
services, where available, or
government obligations, with consideration given to the country of issuance, are generally categorized within
Level 1 or Level 2 of the fair value hierarchy.
recently executed independent
Residential Mortgage-Backed Securities
• Agency Residential Mortgage-Backed Securities (‘‘RMBS’’): Agency RMBS include mortgage pass-
through securities (fixed and adjustable rate), collateralized mortgage obligations and principal-only and
interest-only (including inverse interest-only) securities. Agency RMBS are generally measured using
recent transactions, pricing data from external pricing services or expected future cash flow techniques
that
incorporate prepayment models and other prepayment assumptions to amortize the underlying
mortgage loan collateral and are categorized within Level 2 or Level 3 of the fair value hierarchy. We
use prices observed from recently executed transactions to develop market-clearing spread and yield
assumptions. Valuation inputs with regard to the underlying collateral
incorporate factors such as
weighted average coupon, loan-to-value, credit scores, geographic location, maximum and average loan
size, originator, servicer and weighted average loan age.
• Non-Agency RMBS: The fair value of non-agency RMBS is determined primarily using pricing data
from external pricing services, where available, and discounted cash flow methodologies and securities
are categorized within Level 2 or Level 3 of the fair value hierarchy based on the observability and
significance of the pricing inputs used. Performance attributes of the underlying mortgage loans are
100
Notes to Consolidated Financial Statements, continued
Note 4. Fair Value Disclosures, continued
evaluated to estimate pricing inputs, such as prepayment rates, default rates and the severity of credit
losses. Attributes of the underlying mortgage loans that affect the pricing inputs include, but are not
limited to, weighted average coupon; average and maximum loan size; loan-to-value; credit scores;
documentation type; geographic location; weighted average loan age; originator; servicer; historical
prepayment, default and loss severity experience of the mortgage loan pool; and delinquency rate. Yield
curves used in the discounted cash flow models are based on observed market prices for comparable
securities and published interest rate data to estimate market yields. In addition, broker quotes, where
available, are also referenced to compare prices primarily on interest-only securities.
Commercial Mortgage-Backed Securities
• Agency Commercial Mortgage-Backed Securities (‘‘CMBS’’): Government National Mortgage Associa-
loan bonds are measured based on inputs corroborated from and
tion (‘‘Ginnie Mae’’) project
benchmarked to observed prices of
recent securitization transactions of similar securities with
adjustments incorporating an evaluation of various factors, including prepayment speeds, default rates
and cash flow structures. Federal National Mortgage Association (‘‘Fannie Mae’’) Delegated
Underwriting and Servicing (‘‘DUS’’) mortgage-backed securities are generally measured by using
prices observed from recently executed market transactions to estimate market-clearing spread levels for
purposes of estimating fair value. Ginnie Mae project loan bonds and Fannie Mae DUS mortgage-backed
securities are categorized within Level 2 of the fair value hierarchy.
• Non-Agency CMBS: Non-agency CMBS are measured using pricing data obtained from external pricing
services, prices observed from recently executed market transactions or based on expected cash flow
models that incorporate underlying loan collateral characteristics and performance. Non-Agency CMBS
are categorized within Level 2 or Level 3 of the fair value hierarchy depending on the observability of
the underlying inputs.
Other Asset-Backed Securities
Other asset-backed securities (‘‘ABS’’) include, but are not limited to, securities backed by auto loans, credit
card receivables, student loans and other consumer loans and are categorized within Level 2 or Level 3 of the
fair value hierarchy. Valuations are primarily determined using pricing data obtained from external pricing
services, broker quotes and prices observed from recently executed market transactions. In addition, recent
transaction data from comparable deals is deployed to develop market clearing yields and cumulative loss
assumptions. The cumulative loss assumptions are based on the analysis of the underlying collateral and
comparisons to earlier deals from the same issuer to gauge the relative performance of the deal.
Loans and Other Receivables
• Corporate Loans: Corporate loans categorized within Level 2 of the fair value hierarchy are measured
based on market consensus pricing service quotations. Where available, market price quotations from
external pricing services are reviewed to ensure they are supported by transaction data. Corporate loans
categorized within Level 3 of the fair value hierarchy are measured based on price quotations that are
considered to be less transparent. Price quotations are derived using market prices for debt securities of
the same creditor and estimates of future cash flows. Future cash flows use assumptions regarding
creditor default and recovery rates, credit rating, effective yield and consideration of the issuer’s capital
structure.
101
Notes to Consolidated Financial Statements, continued
Note 4. Fair Value Disclosures, continued
• Participation Certificates in Agency Residential Loans: Valuations of participation certificates in agency
residential loans are based on observed market prices of recently executed purchases and sales of similar
loans and data provider pricing. The loan participation certificates are categorized within Level 2 of the
fair value hierarchy given the observability and volume of recently executed transactions and availability
of data provider pricing.
• Project Loans and Participation Certificates in Ginnie Mae Project and Construction Loans: Valuations
of participation certificates in Ginnie Mae project and construction loans are based on inputs
corroborated from and benchmarked to observed prices of recent securitizations with similar underlying
loan collateral to derive an implied spread. Securitization prices are adjusted to estimate the fair value of
the loans to account for the arbitrage that is realized at the time of securitization. The measurements are
categorized within Level 2 of the fair value hierarchy given the observability and volume of recently
executed transactions.
• Consumer Loans and Funding Facilities: Consumer and small business whole loans and related funding
facilities are valued based on observed market transactions and incorporating valuation inputs including,
but not limited to, delinquency and default rates, prepayment rates, borrower characteristics, loan risk
grades and loan age. These assets are categorized within Level 2 or Level 3 of the fair value hierarchy.
• Escrow and Claim Receivables: Escrow and claim receivables are categorized within Level 2 of the fair
value hierarchy where fair value is based on recent observations in the same receivable. Escrow and
claim receivables are categorized within Level 3 of the fair value hierarchy where fair value is estimated
based on reference to market prices and implied yields of debt securities of the same or similar issuers.
Derivatives
• Listed Derivative Contracts: Listed derivative contracts that are actively traded are measured based on
quoted exchange prices, broker quotes or vanilla option valuation models, such as Black-Scholes, using
observable valuation inputs from the principal market or consensus pricing services. Exchange quotes
and/or valuation inputs are generally obtained from external vendors and pricing services. Broker quotes
are validated directly through observable and tradeable quotes. Listed derivative contracts that use
exchange close prices are generally categorized within Level 1 of the fair value hierarchy. All other listed
derivative contracts are generally categorized within Level 2 of the fair value hierarchy.
• Over-the-Counter (‘‘OTC’’) Derivative Contracts: OTC derivative contracts are generally valued using
models, whose inputs reflect assumptions that we believe market participants would use in valuing the
derivative in a current transaction. Where available, valuation inputs are calibrated from observable
market data. For many OTC derivative contracts,
involve material
subjectivity as the methodologies do not entail significant judgment and the inputs to valuation models
do not involve a high degree of subjectivity as the valuation model inputs are readily observable or can
be derived from actively quoted markets. OTC derivative contracts are primarily categorized within
Level 2 of the fair value hierarchy given the observability and significance of the inputs to the valuation
models. Where significant
inputs to the valuation are unobservable, derivative instruments are
categorized within Level 3 of the fair value hierarchy.
the valuation models do not
OTC options include OTC equity, foreign exchange, interest rate and commodity options measured using
various valuation models, such as Black-Scholes, with key inputs including the underlying security price,
foreign exchange spot rate, commodity price, implied volatility, dividend yield, interest rate curve, strike
price and maturity date. Discounted cash flow models are utilized to measure certain OTC derivative
contracts including the valuations of our interest rate swaps, which incorporate observable inputs related
to interest rate curves, valuations of our foreign exchange forwards and swaps, which incorporate
observable inputs related to foreign currency spot rates and forward curves and valuations of our
102
Notes to Consolidated Financial Statements, continued
Note 4. Fair Value Disclosures, continued
commodity swaps and forwards, which incorporate observable inputs related to commodity spot prices
and forward curves. Credit default swaps include both index and single-name credit default swaps.
Where available, external data is used in measuring index credit default swaps and single-name credit
default swaps. For commodity and equity total return swaps, market prices are generally observable for
the underlying asset and used as the basis for measuring the fair value of the derivative contracts. Total
return swaps executed on other underlyings are measured based on valuations received from external
pricing services.
Investments at Fair Value
Investments at fair value includes investments in hedge funds and private equity funds, which are measured at
the NAV of the funds, provided by the fund managers and are excluded from the fair value hierarchy.
Investments at fair value also include direct equity investments in private companies, which are measured at fair
value using valuation techniques involving quoted prices of or market data for comparable companies, similar
company ratios and multiples (e.g., price/EBITDA, price/book value), discounted cash flow analyses and
transaction prices observed for subsequent financing or capital
issuance by the company. Direct equity
investments in private companies are categorized within Level 2 or Level 3 of the fair value hierarchy.
The following tables present information about our investments in entities that have the characteristics of an
investment company (in thousands):
Equity Long/Short Hedge Funds (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity Funds (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commodity Fund (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Multi-asset Funds (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Funds (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity Long/Short Hedge Funds (2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity Funds (3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commodity Fund (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Multi-asset Funds (5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Funds (6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
November 30, 2022
Fair Value (1)
$ 441,229
73,176
24,283
401,655
353,621
$1,293,964
Unfunded
Commitments
$ –
36,861
–
–
53,994
$90,855
November 30, 2021
Fair Value (1)
$ 466,231
66,152
24,401
390,224
99,054
$1,046,062
Unfunded
Commitments
$ –
18,888
–
–
36,090
$54,978
(1) Where fair value is calculated based on NAV, fair value has been derived from each of the funds’ capital
statements.
(2) This category includes investments in hedge funds that invest, long and short, primarily in both public and
private equity securities in domestic and international markets. At November 30, 2022 and 2021,
approximately 58% and 74%, respectively, became redeemable quarterly with 90 days written notice on
December 31, 2021. At November 30, 2022 and 2021, approximately 34% and 21%, respectively, of the fair
value of investments cannot be redeemed because these investments include restrictions that do not allow for
103
Notes to Consolidated Financial Statements, continued
Note 4. Fair Value Disclosures, continued
redemption before November 30, 2023. At November 30, 2022 and 2021, approximately 6% and 5%,
respectively, of the investments are redeemable quarterly with 60 days prior written notice. At November 30,
2022, the remaining balance cannot be redeemed because these investments include restrictions that do not
allow for redemption before August 31, 2025.
(3) The investments in this category include investments in equity funds that invest in the equity of various U.S.
and foreign private companies in the energy, technology, internet service and telecommunication service
industries. These investments cannot be redeemed; instead, distributions are received through the liquidation
of the underlying assets of the funds which are primarily expected to be liquidated in approximately one to
twelve years.
(4) This category includes investments in a hedge fund that invests, long and short, primarily in commodities.
Investments in this category are redeemable quarterly with 60 days prior written notice.
(5) This category includes investments in hedge funds that invest, long and short, primarily in multi-asset
securities in domestic and international markets in both the public and private sectors. At both November 30,
2022 and 2021, investments representing approximately 78% of the fair value of investments in this category
are redeemable monthly with 60 days prior written notice. At November 30, 2022 and 2021, approximately
15% and 22%, respectively, of the fair value of investments in this category are redeemable quarterly with
90 days prior written notice.
(6) This category includes investments in a fund that invests in short-term trade receivables and payables that are
expected to generally be outstanding between 90 to 120 days and short-term credit
instruments. This
category also includes investments in a fund that invests in distressed and special situations long and short
credit strategies across sectors and asset types. Investments in this category are redeemable quarterly with 90
days prior written notice.
Other Secured Financings
Other secured financings that are accounted for at fair value are classified within Level 2 or Level 3 of the fair
value hierarchy. Fair value is based on estimates of future cash flows incorporating assumptions regarding
recovery rates.
Securities Received as Collateral / Obligations to Return Securities Received as Collateral
In connection with securities-for-securities transactions in which we are the lender of securities and are permitted
to sell or repledge the securities received as collateral, we report the fair value of the collateral received and the
related obligation to return the collateral. Valuation is based on the price of the underlying security and is
categorized within the corresponding leveling guidance above. These financial
instruments are typically
categorized within Level 1 of the fair value hierarchy.
Long-term Debt
Long-term debt includes variable rate, fixed-to-floating rate, equity-linked notes, constant maturity swap, digital
and Bermudan structured notes. These are valued using various valuation models that incorporate our own credit
spread, market price quotations from external pricing sources referencing the appropriate interest rate curves,
volatilities and other inputs as well as prices for transactions in a given note during the period. Long-term debt
notes are generally categorized within Level 2 of the fair value hierarchy where market trades have been
observed during the period or model pricing is available, otherwise the notes are categorized within Level 3.
104
Assets:
Financial instruments
owned:
Corporate equity
securities. . . . . . .
Corporate debt
securities. . . . . . .
CDOs and CLOs .
RMBS . . . . . . . . . . .
CMBS . . . . . . . . . . .
Other ABS . . . . . . .
Loans and other
receivables . . . . .
Investments at fair
value . . . . . . . . . .
Liabilities:
Financial instruments
sold, not yet
purchased:
Corporate equity
securities. . . . . . .
Corporate debt
securities. . . . . . .
CMBS . . . . . . . . . . .
Loans . . . . . . . . . . . .
Net derivatives (2)
Other secured
Notes to Consolidated Financial Statements, continued
Note 4. Fair Value Disclosures, continued
Level 3 Rollforwards
The following is a summary of changes in fair value of our financial assets and liabilities that have been
categorized within Level 3 of the fair value hierarchy for the year ended November 30, 2022 (in thousands):
Balance at
November 30,
2021
Total gains/
losses
(realized and
unrealized) (1) Purchases
Sales
Settlements Issuances
Net
transfers
into/(out of)
Level 3
Balance at
November 30,
2022
Other
comprehensive
income (1)
Earnings (1)
For instruments still held at
November 30, 2022,
changes in unrealized gains/
(losses) included in:
$118,489
$
(645) $171,700 $(62,474) $
(298) $ –
$ 13,575
$240,347
$ 7,286
$ –
11,803
31,946
1,477
2,333
93,524
946
7,099
(13,210)
(733)
(6,467)
18,686 (23,964)
44,995 (22,600)
(372)
35,774
(749)
–
74,353 (20,362)
(9)
(16,634)
(240)
–
(39,647)
178,417
(1,912)
45,536 (33,692)
(48,218)
154,373
46,735
74,984 (74,742)
(15,951)
–
–
–
–
–
–
–
22,770
11,018
4,188
(12)
(6,724)
30,232
55,824
27,617
839
94,677
(2,087)
(10,938)
(7,728)
(703)
(26,982)
28,744
168,875
(11,610)
(23,407)
161,992
33,294
–
–
–
–
–
–
–
$ 4,635
$
(3,611) $
(815)$ 4,858 $
(70)
–
(5,173)
(1,559)
–
280
–
1,285
–
–
–
–
96
$ –
$ (4,317)
$
750
$ 2,382
$ –
–
–
–
28,436
–
–
(2,881)
145,343
500
490
3,164
59,524
(88)
–
(2,484)
168,304
–
–
–
–
482
210
9,925
67,769
88
–
1,197
(181,750)
(650)
(280,967)
financings . . . . . . . .
Long-term debt . . . . .
25,905
881,732
–
–
–
–
(23,543)
(3,919) 83,874
–
–
(19,597)
1,712
661,123
650
239,400
–
41,567
(1) Realized and unrealized gains/losses are primarily reported in Principal
transactions revenues in our
Consolidated Statements of Earnings. Changes in instrument-specific credit risk related to structured notes
within long-term debt are included in our Consolidated Statement of Comprehensive Income, net of tax.
(2) Net derivatives represent Financial instruments owned – Derivatives and Financial instruments sold, not yet
purchased – Derivatives.
Analysis of Level 3 Assets and Liabilities for the Year Ended November 30, 2022
During the year ended November 30, 2022, transfers of assets of $111.7 million from Level 2 to Level 3 of the
fair value hierarchy are primarily attributed to:
• Loans and other receivables of $33.2 million, corporate debt securities of $22.8 million, other ABS of
$22.6 million, corporate equity securities of $17.9 million and CDOs and CLOs of $11.0 million due to
reduced pricing transparency.
During the year ended November 30, 2022, transfers of assets of $61.5 million from Level 3 to Level 2 are
primarily attributed to:
• Other ABS of $29.3 million, investment at fair value of $23.4 million, loans and other receivables of
$4.5 million and corporate equity securities of $4.3 million due to greater pricing transparency.
105
Notes to Consolidated Financial Statements, continued
Note 4. Fair Value Disclosures, continued
During the year ended November 30, 2022, transfers of liabilities of $172.1 million from Level 2 to Level 3 of
the fair value hierarchy are primarily attributed to:
• Net derivatives of $152.8 million and structured notes within long-term debt of $19.3 million due to
reduced pricing and market transparency.
During the year ended November 30, 2022, transfers of liabilities of $53.6 million from Level 3 to Level 2 of the
fair value hierarchy are primarily attributed to:
• Structured notes within long-term debt of $38.9 million, net derivatives of $7.5 million and corporate
equity securities of $4.3 million due to greater pricing and market transparency.
Net gains on Level 3 assets were $31.8 million and net gains on Level 3 liabilities were $465.7 million for the
year ended November 30, 2022. Net gains on Level 3 assets were primarily due to increased market values in
investments at fair value and CDOs and CLOs, partially offset by decreases in RMBS and Other ABS. Net gains
on Level 3 liabilities were primarily due to decreased market valuations of certain structured notes within long-
term debt and certain derivatives.
The following is a summary of changes in fair value of our financial assets and liabilities that have been
categorized within Level 3 of the fair value hierarchy for the year ended November 30, 2021 (in thousands):
Balance at
November 30,
2020
Total gains/
losses
(realized and
unrealized) (1) Purchases
Sales
Settlements Issuances
Net
transfers
into/(out of)
Level 3
Balance at
November 30,
2021
Other
comprehensive
income (1)
Earnings (1)
Assets:
For instruments still held at
November 30, 2021,
changes in unrealized gains/
(losses) included in:
Financial instruments
owned:
Corporate equity
securities . . . . . . . . . .
Corporate debt
securities . . . . . . . . . .
CDOs and CLOs . . . .
RMBS . . . . . . . . . . . . . .
CMBS . . . . . . . . . . . . . .
Other ABS . . . . . . . . . .
Loans and other
$116,089
$ 19,213
$ 8,778 $(34,307) $
(49) $
23,146
17,972
21,826
2,003
79,995
1,565
8,092
(243)
(1,694)
5,335
11,161
(7,978)
32,618 (27,332)
(1,183)
708
2,445
(393)
65,277 (21,727)
(1,417)
(5,042)
(354)
(13)
(45,397)
receivables . . . . . . . .
186,568
1,250
50,167 (55,848)
(20,442)
Investments at fair
value . . . . . . . . . . . . .
Liabilities:
213,946
112,012
22,957 (47,243)
(9,809)
–
–
–
–
–
–
–
–
$
8,765
$118,489
$ 11,589
$
(14,674)
5,638
(19,277)
(15)
10,041
11,803
31,946
1,477
2,333
93,524
1,724
(4,390)
(131)
(733)
(14,471)
16,722
178,417
(4,905)
(137,490)
154,373
25,723
–
–
–
–
–
–
–
–
Financial instruments
sold, not yet
purchased:
Corporate equity
securities . . . . . . . . . .
Corporate debt
securities . . . . . . . . . .
CMBS . . . . . . . . . . . . . .
Loans . . . . . . . . . . . . . . .
Net derivatives (2) . . .
Other secured financings
Long-term debt. . . . . . . . .
$ 4,434
$
(83) $
(21) $
318 $
–
$
–
$
(13) $ 4,635
$
83
$
–
141
35
6,913
26,017
1,543
676,028
1,205
–
3,384
7,246
(649)
(22,132)
(815)
(35)
(469)
–
–
–
–
210
220
–
–
–
(49)
–
–
(1,491)
–
–
–
–
–
44,453
25,011
169,975
–
–
(123)
(8,456)
–
57,861
482
210
9,925
67,769
25,905
881,732
(139)
–
(1,523)
(7,371)
649
85,260
–
–
–
–
–
(63,126)
(1) Realized and unrealized gains/losses are primarily reported in Principal
transactions revenues in our
Consolidated Statements of Earnings. Changes in instrument-specific credit risk related to structured notes
within long-term debt are included in our Consolidated Statement of Comprehensive Income, net of tax.
106
Notes to Consolidated Financial Statements, continued
Note 4. Fair Value Disclosures, continued
(2) Net derivatives represent Financial instruments owned – Derivatives and Financial instruments sold, not yet
purchased – Derivatives.
Analysis of Level 3 Assets and Liabilities for the Year Ended November 30, 2021
During the year ended November 30, 2021, transfers of assets of $21.1 million from Level 2 to Level 3 of the
fair value hierarchy are primarily attributed to:
• Other ABS of $10.2 million, CDOs and CLOs of $7.6 million and corporate debt securities of $3.3
million due to reduced pricing transparency.
During the year ended November 30, 2021, transfers of assets of $168.7 million from Level 3 to Level 2 are
primarily attributed to:
• Investments at fair value of $137.5 million, RMBS of $19.3 million, corporate debt securities of $17.9
million and corporate equity securities of $5.4 million due to greater pricing transparency supporting
classification into Level 2.
During the year ended November 30, 2021, transfers of liabilities of $74.3 million from Level 2 to Level 3 of the
fair value hierarchy are primarily attributed to:
• Structured notes within long-term debt of $57.9 million and net derivatives of $16.2 million due to
reduced market and pricing transparency.
During the year ended November 30, 2021, transfers of liabilities of $24.7 million from Level 3 to Level 2 of the
fair value hierarchy are primarily attributed to:
• Net derivatives of $24.7 million due to greater pricing transparency.
Net gains on Level 3 assets were $140.0 million and net gains on Level 3 liabilities were $12.9 million for the
year ended November 30, 2021. Net gains on Level 3 assets were primarily due to increased market values in
investments at fair value, corporate equity securities and CDOs and CLOs. Net gains on Level 3 liabilities were
primarily due to decreased market valuations of certain structured notes within long-term debt, partially offset by
decreased values of certain derivatives and loans.
107
Notes to Consolidated Financial Statements, continued
Note 4. Fair Value Disclosures, continued
The following is a summary of changes in fair value of our financial assets and liabilities that have been
categorized within Level 3 of the fair value hierarchy for the year ended November 30, 2020 (in thousands):
Balance at
November 30,
2019
Total gains/
losses
(realized and
unrealized) (1) Purchases
Sales
Settlements Issuances
Net
transfers
into/(out of)
Level 3
Balance at
November 30,
2020
Other
comprehensive
income (1)
Earnings (1)
Assets:
For instruments still held at
November 30, 2020,
changes in unrealized gains/
(losses) included in:
Financial instruments
owned:
Corporate equity
securities . . . . . . . . .
Corporate debt
securities . . . . . . . . .
CDOs and CLOs. . . .
RMBS. . . . . . . . . . . . . .
CMBS. . . . . . . . . . . . . .
Other ABS. . . . . . . . . .
Loans and other
receivables. . . . . . . .
Investments, at fair
value. . . . . . . . . . . . .
Securities purchased
under agreements
to resell . . . . . . . . . .
Liabilities:
Financial instruments
sold, not yet
purchased:
Corporate equity
$ 58,426
$ 1,411
$ 31,885 $(37,706) $
–
$ 34,688 $ 27,385
$116,089
$ 4,845
$
7,490
28,788
17,740
6,110
42,563
83
(3,821)
(934)
(827)
(3,848)
1,607
(391)
10,913 (14,389)
(969)
7,887
(1,856)
393
(1,638)
69,701
(602)
(5,201)
(1,053)
(1,787)
(43,072)
154,322
(6,203)
110,116 (25,568)
(57,455)
205,412
(31,666)
55,836
(167)
(17,298)
25,000
–
–
–
(25,000)
–
–
–
–
–
–
–
–
14,959
1,682
(845)
(30)
16,289
23,146
17,972
21,826
2,003
79,995
(270)
(17,212)
(599)
(295)
(5,945)
11,356
186,568
(5,522)
1,829
213,946
(33,514)
–
–
–
–
–
–
–
–
–
–
–
–
securities . . . . . . . . .
$ 4,487
$
456
$
(513)$
–
$
–
$
–
$
4
$ 4,434
$
(81)
$
–
Corporate debt
securities . . . . . . . . .
CMBS. . . . . . . . . . . . . .
Loans. . . . . . . . . . . . . . .
Net derivatives (2). . .
Other secured financings
Long-term debt . . . . . . . .
340
35
1,690
77,168
–
480,069
(268)
–
5,297
(40)
(2,475)
84,930
(325)
–
(440)
394
35
–
(7,446) 19,376
–
–
–
–
–
–
–
(2,216)
–
–
–
–
–
4,018
(57,088) 248,718
–
(35)
366
(60,825)
–
(80,601)
141
35
6,913
26,017
1,543
676,028
27
–
(5,409)
(1,805)
2,475
(51,567)
–
–
–
–
–
(33,363)
(1) Realized and unrealized gains/losses are primarily reported in Principal
transactions revenues in our
Consolidated Statements of Earnings. Changes in instrument-specific credit risk related to structured notes
within long-term debt are included in our Consolidated Statement of Comprehensive Income, net of tax.
(2) Net derivatives represent Financial instruments owned – Derivatives and Financial instruments sold, not yet
purchased – Derivatives.
Analysis of Level 3 Assets and Liabilities for the Year Ended November 30, 2020
During the year ended November 30, 2020, transfers of assets of $122.2 million from Level 2 to Level 3 of the
fair value hierarchy are primarily attributed to:
• Loans and other receivables of $45.1 million, corporate equity securities of $32.5 million, other ABS of
$23.0 million and corporate debt securities of $18.0 million due to reduced price transparency.
108
Notes to Consolidated Financial Statements, continued
Note 4. Fair Value Disclosures, continued
During the year ended November 30, 2020, transfers of assets of $24.2 million from Level 3 to Level 2 are
primarily attributed to:
• Other ABS of $6.8 million, Loans and other receivables of $6.6 million, corporate equity securities of
$5.1 million and corporate debt securities of $3.0 million due to greater pricing transparency supporting
classification into Level 2.
During the year ended November 30, 2020, transfers of liabilities of $0.5 million from Level 2 to Level 3 are
primarily attributed to:
• Loans of $0.4 million due to reduced pricing transparency.
During the year ended November 30, 2020, transfers of liabilities of $141.5 million from Level 3 to Level 2 are
primarily attributed to:
• Structured notes within long-term debt of $80.6 million and net derivatives of $60.8 million due to
greater market and pricing transparency.
Net losses on Level 3 assets were $46.3 million and net losses on Level 3 liabilities were $88.0 million for the
year ended November 30, 2020. Net losses on Level 3 assets were primarily due to decreased market values in
investments at fair value, loans and other receivables and other ABS. Net losses on Level 3 liabilities were
primarily due to increased market valuations of certain structured notes within long-term debt and loans, partially
offset by decreased values of other secured financings.
Quantitative Information about Significant Unobservable Inputs used in Level 3 Fair Value Measurements
at November 30, 2022 and 2021
The tables below present information on the valuation techniques, significant unobservable inputs and their
ranges for our financial assets and liabilities, subject to threshold levels related to the market value of the
positions held, measured at fair value on a recurring basis with a significant Level 3 balance. The range of
unobservable inputs could differ significantly across different firms given the range of products across different
firms in the financial services sector. The inputs are not representative of the inputs that could have been used in
the valuation of any one financial instrument (i.e., the input used for valuing one financial instrument within a
particular class of financial instruments may not be appropriate for valuing other financial instruments within that
given class). Additionally, the ranges of inputs presented below should not be construed to represent uncertainty
regarding the fair values of our financial instruments; rather, the range of inputs is reflective of the differences in
the underlying characteristics of the financial instruments in each category.
For certain categories, we have provided a weighted average of the inputs allocated based on the fair values of
the financial instruments comprising the category. We do not believe that the range or weighted average of the
inputs is indicative of the reasonableness of uncertainty of our Level 3 fair values. The range and weighted
average are driven by the individual financial instruments within each category and their relative distribution in
the population. The disclosed inputs when compared with the inputs as disclosed in other periods should not be
expected to necessarily be indicative of changes in our estimates of unobservable inputs for a particular financial
instrument as the population of financial instruments comprising the category will vary from period to period
based on purchases and sales of financial instruments during the period as well as transfers into and out of
Level 3 each period.
109
Notes to Consolidated Financial Statements, continued
Note 4. Fair Value Disclosures, continued
Financial Instruments Owned
Corporate equity securities
Non-exchange-traded securities
Corporate debt securities
November 30, 2022
Valuation
Technique
Fair Value
(in thousands)
$240,347
Market approach
$ 30,232 Market approach
CDOs and CLOs
$ 55,824
CMBS
Other ABS
$
839
$ 55,858
Loans and other receivables
Investments at fair value
Private equity securities
$168,875 Market approach
Scenario analysis
$159,304
Market approach
Significant
Unobservable Input(s)
Input/Range
Weighted
Average
Price
Price
EBITDA multiple
Estimated recovery percentage
Scenario analysis
Discounted cash flows Constant prepayment rate
Constant default rate
Loss severity
Discount rate/yield
Price
Estimated recovery percentage
Estimated recovery percentage
Market approach
Scenario analysis
Scenario analysis
Discounted cash flows Discount rate/yield
$0 – $325
$48 – $82
4.2
7%
20%
2% – 3%
$43
$65
–
–
–
2%
30% – 40% 32%
18% – 23% 22%
$89
$67 – $102
–
69%
–
45%
6% – 20% 17%
8% – 22% 19%
Cumulative loss rate
1.2
Duration (years)
Price
$82
Estimated recovery percentage 6% – 78% 30%
0.8 – 1.6
$1 – $150
Price
Discount rate/yield
Revenue
$0 – $14,919
23%
$30,194,338
$604
–
–
Financial Instruments Sold, Not Yet Purchased
Derivatives
$ 65,841
Equity options
Volatility benchmarking Volatility
26% – 75% 51%
Other secured financings
$
1,712
Scenario analysis
Estimated recovery percentage 9% – 30% 23%
Long-term debt
Structured notes
$661,123
Market approach
Price
Price
$51 – $97
€59 – €99
$64
€77
110
Notes to Consolidated Financial Statements, continued
Note 4. Fair Value Disclosures, continued
November 30, 2021
Financial Instruments Owned
Corporate equity securities
Non-exchange-traded securities
Fair Value
(in thousands)
$117,803
CMBS
Other ABS
Corporate debt securities
CDOs and CLOs
$ 11,803 Market approach
$ 31,944 Discounted cash flows Constant prepayment rate
Price
Valuation
Technique
Significant
Unobservable Input(s)
Input/Range
Weighted
Average
Market approach
Price
Price
Volatility
Volatility benchmarking Volatility
$227
$1 – $662
€15 – €18
€16
25% – 59% 31%
40% – 53% 45%
$86
$13 – $100
–
20%
–
2%
25% – 30% 26%
8% – 19% 16%
$93
$86 – $103
–
81%
Market approach
Scenario analysis
2,333
$
$ 86,099 Discounted cash flows Constant prepayment rate
Constant default rate
Loss severity
Discount rate/yield
Price
Estimated recovery percentage
Constant default rate
Loss severity
Discount rate/yield
Cumulative loss rate
Duration (years)
Price
Price
0% – 35% 31%
4%
2% – 4%
60% – 85% 55%
3% – 16% 10%
7% – 20% 14%
1.1
0.7 – 1.4
$94
$37 – $100
$54
$31 – $101
2.2
0 – 2.2
Estimated recovery percentage 9% – 100% 76%
Discounted cash flows Duration (years)
Scenario analysis
Loans and other receivables
Market approach
$177,193 Market approach
Derivatives
Equity options
Interest rate swaps
Total return swaps
Investments at fair value
Private equity securities
$
6,501
$128,152
Volatility benchmarking Volatility
Market approach
Basis points upfront
Price
Market approach
Scenario analysis
Price
EBITDA multiple
Revenue multiple
Estimated recovery percentage
Discount rate/yield
Revenue growth
46%
0.1 – 8.1
$100
$1 – $152
16.9
4.9 – 5.1
7%
–
3.3
–
$32
–
5.0
–
13% – 21% 17%
0%
–
Financial Instruments Sold, Not Yet Purchased
Corporate equity securities
Non-exchange-traded securities
Loans
Derivatives
Equity options
Interest rate swaps
Total return swaps
$
$
4,635 Market approach
9,925 Market approach
Scenario analysis
$ 76,533
Price
Price
Estimated recovery percentage
$1
$31 – $100
50%
–
$43
–
Volatility benchmarking Volatility
Market approach
Basis points upfront
Price
26% – 77% 40%
3.1
–
0.1 – 8.7
$100
Other secured financings
$ 25,905
Scenario analysis
Estimated recovery percentage 13% – 98% 92%
Long-term debt
Structured notes
$881,732
Market approach
Price
Price
$76 – $115
€81 – €113
$94
€103
The fair values of certain Level 3 assets and liabilities that were determined based on third-party pricing
information, unadjusted past transaction prices or a percentage of the reported enterprise fair value are excluded
from the above tables. At November 30, 2022 and 2021, asset exclusions consisted of $80.2 million and $40.8
million, respectively, primarily composed of corporate equity securities, RMBS, other ABS, loans and other
receivables, certain derivatives and investments at fair value. At November 30, 2022 and 2021,
liability
exclusions consisted of $9.6 million and $2.2 million, respectively, primarily composed of corporate equity
securities, corporate debt securities, CMBS, loans and certain derivatives.
111
Notes to Consolidated Financial Statements, continued
Note 4. Fair Value Disclosures, continued
Uncertainty of Fair Value Measurement from Use of Significant Unobservable Inputs
For recurring fair value measurements categorized within Level 3 of the fair value hierarchy, the uncertainty of
the fair value measurement due to the use of significant unobservable inputs and interrelationships between those
unobservable inputs (if any) are described below:
• Non-exchange-traded securities, corporate debt securities, CDOs and CLOs, loans and other receivables,
other ABS, private equity securities, certain derivatives and structured notes using a market approach
valuation technique. A significant increase (decrease) in the price of the private equity securities, non-
loans and other
exchange-traded securities, corporate debt securities, CDOs and CLOs, other ABS,
receivables, total return swaps or structured notes would result in a significantly higher (lower) fair value
measurement. A significant increase (decrease) in the EBITDA multiple related to corporate debt and
private equity securities would result in a significantly higher (lower) fair value measurement. A significant
increase (decrease) in the revenue multiple related to private equity securities would result in a significantly
higher (lower) fair value measurement. A significant increase (decrease) in the discount rate/security yield
related to private equity securities would result in a significantly lower (higher) fair value measurement.
Depending on whether we are a receiver or (payer) of basis points upfront, a significant increase in basis
points would result in a significant increase (decrease) in the fair value measurement of interest rate swaps.
• Loans and other receivables, corporate debt securities, CDOs and CLOs, CMBS, private equity securities
and other secured financings using scenario analysis. A significant increase (decrease) in the possible
recovery rates of the cash flow outcomes underlying the financial
in a
significantly higher (lower) fair value measurement for the financial instrument. A significant increase
(decrease) in the discount rate/yield underlying the investment would result in a significantly lower
(higher) fair value measurement. A significant increase (decrease) in the revenue growth underlying the
investment would result in a significantly higher (lower) fair value measurement.
instrument would result
• CDOs and CLOs and other ABS using a discounted cash flow valuation technique. A significant
increase (decrease) in isolation in the constant default rate, loss severity or cumulative loss rate would
result in a significantly lower (higher) fair value measurement. The impact of changes in the constant
prepayment rate and duration would have differing impacts depending on the capital structure and type
of security. A significant
in a
significantly lower (higher) fair value measurement. A significant increase (decrease) in term based on
the time to pay off the loan would result in a lower (higher) fair value measurement.
increase (decrease) in the discount rate/security yield would result
• Derivative equity options and non-exchange-traded securities using volatility benchmarking. A significant
increase (decrease) in volatility would result in a significantly higher (lower) fair value measurement.
Fair Value Option Election
We have elected the fair value option for all loans and loan commitments made by our investment banking and
capital markets businesses. These loans and loan commitments include loans entered into by our investment
banking division in connection with client bridge financing and loan syndications, loans purchased by our
leveraged credit
trading desk as part of its bank loan trading activities and mortgage and consumer loan
commitments, purchases and fundings in connection with mortgage-backed and other asset-backed securitization
activities. Loans and loan commitments originated or purchased by our leveraged credit and mortgage-backed
businesses are managed on a fair value basis. Loans are included in Financial instruments owned and loan
commitments are included in Financial instruments owned and Financial instruments sold, not yet purchased in
our Consolidated Statements of Financial Condition. The fair value option election is not applied to loans made
to affiliate entities as such loans are entered into as part of ongoing, strategic business ventures. Loans to affiliate
entities are included in Investments in and loans to related parties in our Consolidated Statements of Financial
Condition and are accounted for on an amortized cost basis. We have also elected the fair value option for
112
Notes to Consolidated Financial Statements, continued
Note 4. Fair Value Disclosures, continued
certain of our structured notes which are managed by our investment banking and capital markets businesses and
are included in Long-term debt and Short-term borrowings in our Consolidated Statements of Financial
Condition. We have elected the fair value option for certain financial instruments held by subsidiaries as the
investments are risk managed by us on a fair value basis. The fair value option has been elected for certain other
secured financings that arise in connection with our securitization activities and other structured financings.
Other secured financings, Receivables – Brokers, dealers and clearing organizations, Receivables – Customers,
Receivables – Fees, interest and other, Payables – Brokers, dealers and clearing organizations and Payables –
Customers, are accounted for at cost plus accrued interest rather than at fair value; however, the recorded
amounts approximate fair value due to their liquid or short-term nature.
The following is a summary of gains (losses) due to changes in fair value related to instrument specific credit
risk on loans, other receivables and debt instruments and gains (losses) due to other changes in fair value on
Short-term borrowings, Other secured financings and Long-term debt measured at fair value under the fair value
option (in thousands):
Year Ended November 30,
2021
2022
2020
Financial instruments owned:
Loans and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (20,529) $ 11,682
$(25,623)
Financial instruments sold, not yet purchased:
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loan commitments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term borrowings:
Other changes in fair value (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other secured financings:
–
–
–
1,077
–
–
–
464
(48)
Other changes in fair value (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
695
650
2,475
Long-term debt:
Changes in fair value of instrument specific credit risk (1) . . . . . . . . . . . .
Other changes in fair value (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
63,344
345,050
(113,027)
108,739
70,201
(84,116)
(1) Changes in fair value of instrument specific credit risk related to structured notes are included in our
Consolidated Statements of Comprehensive Income, net of tax.
(2) Other changes in fair value are included in Principal transactions revenues in our Consolidated Statements of
Earnings.
The following is a summary of the amounts by which contractual principal is greater than (less than) fair value
for loans and other receivables, short-term borrowings, Other secured financings and Long-term debt measured at
fair value under the fair value option (in thousands):
November 30,
2022
2021
Financial instruments owned:
Loans and other receivables (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans and other receivables on nonaccrual status and/or 90 days or greater past
due (1) (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt and short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other secured financings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,144,632
$5,600,648
181,766
369,990
3,563
64,203
(38,391)
3,432
(1) Interest income is recognized separately from other changes in fair value and is included in Interest revenues
in our Consolidated Statements of Earnings.
(2) Amounts include loans and other receivables 90 days or greater past due by which contractual principal
exceeds fair value of $83.4 million and $19.7 million at November 30, 2022 and 2021, respectively.
113
Notes to Consolidated Financial Statements, continued
Note 4. Fair Value Disclosures, continued
The aggregate fair value of loans and other receivables on nonaccrual status and/or 90 days or greater past due
was $69.2 million and $56.9 million at November 30, 2022 and 2021, respectively, which includes loans and
other receivables 90 days or greater past due of $65.1 million and $23.5 million at November 30, 2022 and
2021, respectively.
Assets Measured at Fair Value on a Non-recurring Basis
Certain assets were measured at fair value on a non-recurring basis and are not included in the tables above. The
following table presents those assets measured at fair value on a non-recurring basis for which we recognized a
non-recurring fair value adjustment during the years ended November 30, 2022, 2021 and 2020 (in thousands):
November 30, 2022
Level 2
Level 3
Impairment Losses
Exchange ownership interests and registrations (1) . . . . . . . . . . . . . . . . . . . .
Investments in and loans to related parties (2) . . . . . . . . . . . . . . . . . . . . . . . .
Other assets (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ –
–
–
$
–
106,172
1,709
$
39
27,119
6,701
November 30, 2021
Level 2
Level 3
Impairment Losses
Exchange ownership interests and registrations (1) . . . . . . . . . . . . . . . . . . . .
$1,935
$ –
$66
November 30, 2020
Level 2
Level 3
Impairment Losses
Exchange ownership interests and registrations (1) . . . . . . . . . . . . . . . . . . . .
Intangible assets (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in and loans to related parties (5) . . . . . . . . . . . . . . . . . . . . . . . .
Other assets (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,974
–
–
–
$
–
–
–
36,400
$
468
300
55,612
46,200
(1) These impairment
losses, which represent ownership interests in market exchanges on which trading
business is conducted, and registrations, were recognized in Other expenses in our Consolidated Statements
of Earnings and the assets were in the Investment Banking and Capital Markets reportable business segment.
The fair value is based on observed quoted sales prices for each individual membership. (See Note 11,
Goodwill and Intangible Assets.)
(2) These impairment losses, which are related to certain equity method investments, were recognized in Other
revenues in our Consolidated Statements of Earnings and the assets were in the Asset Management
reportable business segment. The fair values were based on estimated future cash flows using discount rates
ranging from 10.0% to 23.0%. (See Note 9, Investments.)
(3) These impairment losses, which relate to a real estate property, were recognized in Other expenses in our
Consolidated Statements of Earnings and the assets were in the Asset Management reportable business
segment. The fair values were based on estimated future cash flows discounted at 12.0%.
(4) These impairment losses were recognized in Other expenses in our Consolidated Statements of Earnings and
the assets were in the Asset Management reportable business segment. (See Note 11, Goodwill and
Intangible Assets.)
(5) These impairment losses, which are related to a real estate equity method investment, were recognized in
Other revenues in our Consolidated Statements of Earnings and the assets were in the Asset Management
reportable business segment. The fair value was based on a third party appraisal which incorporates Level 3
inputs of comparable property prices. (See Note 9, Investments.)
(6) These impairment losses, which are related to certain oil and gas properties, were recognized in Other
expenses in our Consolidated Statements of Earnings and the assets were in the Asset Management
reportable business segment. The fair values were based on estimated future cash flows of reserves
discounted at 10.0%.
114
Notes to Consolidated Financial Statements, continued
Note 4. Fair Value Disclosures, continued
Financial Instruments Not Measured at Fair Value
Certain of our financial instruments are not carried at fair value but are recorded at amounts that approximate fair
value due to their liquid or short-term nature and generally negligible credit risk. These financial assets include
Cash and cash equivalents and Cash and securities segregated and on deposit for regulatory purposes or
deposited with clearing and depository organizations and would generally be presented within Level 1 of the fair
value hierarchy.
Additionally, at November 30, 2022 and 2021, we had equity securities without readily determinable fair values,
which we account for at cost, minus impairment, of $37.0 million and $119.4 million, respectively, which are
presented within Other assets in the Consolidated Statements of Financial Condition. There were no impairments
on these investments during the years ended November 30, 2022 and 2021. An impairment was recognized on
these investments of $20.4 million during the year ended November 30, 2020. Realized gains of $3.6 million,
$0.8 million and $2.1 million were recognized on these investments during the years ended November 30, 2022,
2021 and 2020, respectively. There were no unrealized gains or losses recognized on these investments during
the years ended November 30, 2022, 2021 and 2020. These investments would generally be presented within
Level 3 of the fair value hierarchy.
Note 5. Derivative Financial Instruments
Derivative Financial Instruments
Our derivative activities are recorded at fair value in our Consolidated Statements of Financial Condition in
Financial instruments owned and Financial instruments sold, not yet purchased, net of cash paid or received
under credit support agreements and on a net counterparty basis when a legally enforceable right to offset exists
under a master netting agreement. We enter into derivative transactions to satisfy the needs of our clients and to
manage our own exposure to market and credit risks. In addition, we apply hedge accounting to: (1) interest rate
swaps that have been designated as fair value hedges of the changes in fair value due to the benchmark interest
rate for certain fixed rate senior long-term debt, and (2) forward foreign exchange contracts designated as hedges
to offset the change in the value of certain net investments in foreign operations.
See Note 4, Fair Value Disclosures, and Note 22, Commitments, Contingencies and Guarantees, for additional
disclosures about derivative financial instruments.
Derivatives are subject to various risks similar to other financial instruments, including market, credit and
operational risk. The risks of derivatives should not be viewed in isolation, but rather should be considered on an
aggregate basis along with our other trading-related activities. We manage the risks associated with derivatives
on an aggregate basis along with the risks associated with proprietary trading as part of our firm wide risk
management policies.
In connection with our derivative activities, we may enter into ISDA master netting agreements or similar
agreements with counterparties. See Note 2, Summary of Significant Accounting Policies, for additional
information regarding the offsetting of derivative contracts.
The following tables present the fair value and related number of derivative contracts at November 30, 2022 and
2021 categorized by type of derivative contract and the platform on which these derivatives are transacted. The
fair value of assets/liabilities represents our receivable/payable for derivative financial instruments, gross of
counterparty netting and cash collateral received and pledged. The following tables also provide information
regarding 1) the extent to which, under enforceable master netting arrangements, such balances are presented net
in our Consolidated Statements of Financial Condition as appropriate under U.S. GAAP and 2) the extent to
115
Notes to Consolidated Financial Statements, continued
Note 5. Derivative Financial Instruments, continued
which other rights of setoff associated with these arrangements exist and could have an effect on our financial
position (in thousands, except contract amounts).
November 30, 2022 (1)
Assets
Liabilities
Fair Value
Number of
Contracts (2)
Fair Value
Number of
Contracts (2)
Derivatives designated as accounting hedges:
Interest rate contracts:
Cleared OTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
Foreign exchange contracts:
Bilateral OTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total derivatives designated as accounting hedges.
–
–
–
–
–
$
217,922
57,875
275,797
3
5
Derivatives not designated as accounting hedges:
Interest rate contracts:
Exchange-traded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cleared OTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bilateral OTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,297
655,140
1,044,632
Foreign exchange contracts:
Exchange-traded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bilateral OTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
–
287,594
49,736
3,843
772
2
2,398
123
452,570
1,573,975
–
251,339
36,085
4,203
704
1
2,428
Equity contracts:
Exchange-traded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bilateral OTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,074,134
348,611
1,323,637
5,201
864,804
800,230
1,338,129
5,543
Commodity contracts:
Exchange-traded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bilateral OTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit contracts:
Cleared OTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bilateral OTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total derivatives not designated as accounting
hedges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
37
4,327
8,364
16,274
3,442,410
Total gross derivative assets/ liabilities:
Exchange-traded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cleared OTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bilateral OTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,077,468
663,504
1,701,438
Amounts offset in our Consolidated Statements of
Financial Condition (3):
Exchange-traded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cleared OTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bilateral OTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net amounts per Consolidated Statements of
(858,921)
(655,969)
(1,578,354)
607
3
35
8
597
5
51
9
19
4,874
7,742
13,389
3,969,065
864,946
678,234
2,701,682
(858,921)
(657,192)
(1,216,052)
Financial Condition (4) . . . . . . . . . . . . . . . . . . . . .
$
349,166
$ 1,512,697
(1) Exchange-traded derivatives include derivatives executed on an organized exchange. Cleared OTC
derivatives include derivatives executed bilaterally and subsequently novated to and cleared through central
clearing counterparties. Bilateral OTC derivatives include derivatives executed and settled bilaterally without
the use of an organized exchange or central clearing counterparty.
116
Notes to Consolidated Financial Statements, continued
Note 5. Derivative Financial Instruments, continued
(2) Number of exchange-traded contracts may include open futures contracts. The unsettled fair value of these
futures contracts is included in Receivables from/Payables to brokers, dealers and clearing organizations in
our Consolidated Statements of Financial Condition.
(3) Amounts netted include both netting by counterparty and for cash collateral paid or received.
(4) We have not received or pledged additional collateral under master netting agreements and/or other credit
support agreements that is eligible to be offset beyond what has been offset in our Consolidated Statements
of Financial Condition.
November 30, 2021 (1)
Assets
Liabilities
Fair Value
Number of
Contracts (2)
Fair Value
Number of
Contracts (2)
Derivatives designated as accounting hedges:
Interest rate contracts:
Cleared OTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
35,726
Foreign exchange contracts:
Bilateral OTC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total derivatives designated as accounting hedges . .
30,462
66,188
2
4
$
32,200
1
–
32,200
–
Derivatives not designated as accounting hedges:
Interest rate contracts:
Exchange-traded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cleared OTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bilateral OTC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,262
373,355
322,353
23,888
4,505
1,037
756
367,134
283,481
39,195
4,467
967
Foreign exchange contracts:
Bilateral OTC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,428,712
17,792
1,437,116
17,576
Equity contracts:
Exchange-traded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bilateral OTC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,206,606
377,132
1,582,713
2,888
1,036,019
1,824,418
1,450,624
2,682
1,457
7
128
17
Commodity contracts:
Exchange-traded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bilateral OTC (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit contracts:
Cleared OTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bilateral OTC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total derivatives not designated as accounting
hedges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
448
2,703
84,180
13,289
3,810,040
Total gross derivative assets/liabilities:
Exchange-traded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cleared OTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bilateral OTC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,208,316
493,261
2,174,651
Amounts offset in our Consolidated Statements of
Financial Condition (4):
Exchange-traded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cleared OTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bilateral OTC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,008,091)
(483,339)
(1,814,326)
1,394
2
132
14
223
9,862
108,999
14,168
5,082,176
1,036,998
508,333
3,569,045
(1,008,091)
(508,333)
(2,185,776)
Net amounts per Consolidated Statements of
Financial Condition (5) . . . . . . . . . . . . . . . . . . . . . .
$
570,472
$ 1,412,176
117
Notes to Consolidated Financial Statements, continued
Note 5. Derivative Financial Instruments, continued
(1) Exchange-traded derivatives include derivatives executed on an organized exchange. Cleared OTC
derivatives include derivatives executed bilaterally and subsequently novated to and cleared through central
clearing counterparties. Bilateral OTC derivatives include derivatives executed and settled bilaterally without
the use of an organized exchange or central clearing counterparty.
(2) Number of exchange-traded contracts may include open futures contracts. The unsettled fair value of these
futures contracts is included in Receivables from/Payables to brokers, dealers and clearing organizations in
our Consolidated Statements of Financial Condition.
(3) As of November 30, 2021, the notional amount of outstanding bilateral commodity contracts was 616 asset
contracts and 825 liability contracts.
(4) Amounts netted include both netting by counterparty and for cash collateral paid or received.
(5) We have not received or pledged additional collateral under master netting agreements and/or other credit
support agreements that is eligible to be offset beyond what has been offset in our Consolidated Statements
of Financial Condition.
The following table provides information related to gains (losses) recognized in Interest expense in our
Consolidated Statements of Earnings related to fair value hedges (in thousands):
Gains (Losses)
Interest rate swaps. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended November 30,
2021
2022
2020
$(212,280) $(41,845) $ 41,524
(36,668)
$ 4,856
58,507
$ 16,662
219,143
6,863
$
The following table provides information related to gains (losses) on our net investment hedges recognized in
in our
Currency translation and other adjustments, a component of Other comprehensive income (loss),
Consolidated Statements of Comprehensive Income (in thousands):
Gains (Losses)
Year Ended November 30,
2021
2022
2020
Foreign exchange contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$116,876
$116,876
$19,008
$19,008
$(3,306)
$(3,306)
The following table presents unrealized and realized gains (losses) on derivative contracts recognized primarily
in Principal transactions revenues in our Consolidated Statements of Earnings, which are utilized in connection
with our client activities and our economic risk management activities (in thousands):
Gains (Losses)
Year Ended November 30,
2021
2022
2020
Interest rate contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commodity contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Credit contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(154,378) $ (48,510) $(52,331)
2,266
(164,729)
47,631
(29,740)
45,491
(43,106)
15,218
15,612
(10,152)
(427,593)
(28,012)
653
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(376,341) $(513,614) $ 58,275
The net gains (losses) on derivative contracts in the table above are one of a number of activities comprising our
business activities and are before consideration of economic hedging transactions, which generally offset the net
118
Notes to Consolidated Financial Statements, continued
Note 5. Derivative Financial Instruments, continued
gains (losses) included above. We substantially mitigate our exposure to market risk on our cash instruments
through derivative contracts, which generally provide offsetting revenues, and we manage the risk associated
with these contracts in the context of our overall risk management framework.
OTC Derivatives. The following tables set forth by remaining contract maturity the fair value of OTC derivative
assets and liabilities at November 30, 2022 (in thousands):
Commodity swaps, options and forwards . . . . . . . .
Equity options and forwards. . . . . . . . . . . . . . . . . . . .
Credit default swaps . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total return swaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency forwards, swaps and options . . .
Fixed income forwards. . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate swaps, options and forwards. . . . . . . .
OTC Derivative Assets (1) (2) (3)
0-12
Months
$ 2,826
51,033
–
126,590
106,481
12,816
134,140
1-5 Years
$
1,512
2,698
762
24,528
7,379
–
763,300
Greater
Than
5 Years
$ –
–
7,209
–
–
–
28,963
Cross-
Maturity
Netting (4)
$
(1,547) $
(499)
(153)
(4,778)
(5,965)
–
(177,420)
Total
2,791
53,232
7,818
146,340
107,895
12,816
748,983
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$433,886
$800,179
$36,172
$(190,362)
1,079,875
Cross-product counterparty netting . . . . . . . . . . . . . .
Total OTC derivative assets included in
Financial instruments owned. . . . . . . . . . . . .
(35,883)
$1,043,992
(1) At November 30, 2022, we held net exchange-traded derivative assets and other credit agreements with a fair
value of $218.6 million, which are not included in this table.
(2) OTC derivative assets in the table above are gross of collateral received. OTC derivative assets are recorded
net of collateral received in our Consolidated Statements of Financial Condition. At November 30, 2022,
cash collateral received was $913.4 million.
(3) Derivative fair values include counterparty netting within product category.
(4) Amounts represent the netting of receivable balances with payable balances for the same counterparty within
product category across maturity categories.
Commodity swaps, options and forwards . . . . .
Equity options and forwards. . . . . . . . . . . . . . . . .
Credit default swaps . . . . . . . . . . . . . . . . . . . . . . . .
Total return swaps . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency forwards, swaps and
options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed income forwards . . . . . . . . . . . . . . . . . . . . . .
Interest rate swaps, options and forwards . . . . .
0-12
Months
$ 3,904
248,343
–
66,364
128,931
5,989
149,794
OTC Derivative Liabilities (1) (2) (3)
Greater
Than
5 Years
Cross-
Maturity
Netting (4)
1-5 Years
$
980
269,123
–
82,529
6,530
–
774,289
$
–
453
153
325
$
(1,547) $
(499)
(153)
(4,778)
Total
3,337
517,420
–
144,440
–
–
524,062
(5,965)
–
(177,420)
129,496
5,989
1,270,725
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$603,325
$1,133,451
$524,993
$(190,362)
2,071,407
Cross-product counterparty netting . . . . . . . . . . .
Total OTC derivative liabilities included
in Financial instruments sold, not yet
purchased . . . . . . . . . . . . . . . . . . . . . . . . . . .
119
(35,883)
$2,035,524
Notes to Consolidated Financial Statements, continued
Note 5. Derivative Financial Instruments, continued
(1) At November 30, 2022, we held net exchange-traded derivative liabilities and other credit agreements with a
fair value of $29.5 million, which are not included in this table.
(2) OTC derivative liabilities in the table above are gross of collateral pledged. OTC derivative liabilities are
recorded net of collateral pledged in our Consolidated Statements of Financial Condition. At November 30,
2022, cash collateral pledged was $552.8 million.
(3) Derivative fair values include counterparty netting within product category.
(4) Amounts represent the netting of receivable balances with payable balances for the same counterparty within
product category across maturity categories.
The following table presents the counterparty credit quality with respect to the fair value of our OTC derivative
assets at November 30, 2022 (in thousands):
Counterparty credit quality (1):
A- or higher . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BBB- to BBB+ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BB+ or lower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 763,128
156,219
73,831
50,814
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,043,992
(1) We utilize internal credit ratings determined by our Risk Management department. Credit ratings determined
by Risk Management use methodologies that produce ratings generally consistent with those produced by
external rating agencies.
Credit Related Derivative Contracts
The external credit ratings of the underlyings or referenced assets for our written credit related derivative
contracts (in millions):
Credit protection sold:
Index credit default swaps. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Single name credit default swaps . . . . . . . . . . . . . . . . . . . . . . .
November 30, 2022
External Credit Rating
Investment
Grade
Non-investment
Grade
Unrated
Total Notional
$207.9
–
$515.8
–
$ –
0.2
$723.7
0.2
November 30, 2021
External Credit Rating
Investment
Grade
Non-investment
Grade
Unrated
Total Notional
Credit protection sold:
Index credit default swaps. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Single name credit default swaps . . . . . . . . . . . . . . . . . . . . . . . .
$2,612.0
–
$1,298.8
17.6
$ –
0.2
$3,910.8
17.8
Contingent Features
Certain of our derivative instruments contain provisions that require our debt to maintain an investment grade
credit rating from each of the major credit rating agencies. If our debt were to fall below investment grade, it
120
Notes to Consolidated Financial Statements, continued
Note 5. Derivative Financial Instruments, continued
would be in violation of these provisions and the counterparties to the derivative instruments could request
immediate payment or demand immediate and ongoing full overnight collateralization on our derivative
instruments in liability positions. The following table presents the aggregate fair value of all derivative
instruments with such credit-risk-related contingent features that are in a liability position, the collateral amounts
we have posted or received in the normal course of business and the potential collateral we would have been
required to return and/or post additionally to our counterparties if the credit-risk-related contingent features
underlying these agreements were triggered (in millions):
Derivative instrument liabilities with credit-risk-related contingent features . . . . . . . . . . . . . .
Collateral posted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Collateral received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Return of and additional collateral required in the event of a credit rating downgrade
below investment grade (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
November 30,
2022
2021
$ 226.5
(168.8)
177.4
$ 821.5
(160.5)
369.3
235.0
1,030.4
(1) These potential outflows include initial margin received from counterparties at the execution of the derivative
to terminate the contract after a
contract. The initial margin will be returned if counterparties elect
downgrade.
Note 6. Collateralized Transactions
Our repurchase agreements and securities borrowing and lending arrangements are generally recorded at cost in
our Consolidated Statements of Financial Condition, which is a reasonable approximation of their fair values due
to their short-term nature. We enter into secured borrowing and lending arrangements to obtain collateral
necessary to effect settlement, finance inventory positions, meet customer needs or re-lend as part of our dealer
operations. We monitor the fair value of the securities loaned and borrowed on a daily basis as compared with
the related payable or receivable, and request additional collateral or return excess collateral, as appropriate. We
pledge financial instruments as collateral under repurchase agreements, securities lending agreements and other
secured arrangements, including clearing arrangements. Our agreements with counterparties generally contain
contractual provisions allowing the counterparty the right to sell or repledge the collateral. Pledged securities
owned that can be sold or repledged by the counterparty are included in Financial instruments owned, at fair
value and noted parenthetically as Securities pledged in our Consolidated Statements of Financial Condition.
In instances where we receive securities as collateral in connection with securities-for-securities transactions in
which we are the lender of securities and are permitted to sell or repledge the securities received as collateral, we
report
in our
the fair value of the collateral received and the related obligation to return the collateral
Consolidated Statements of Financial Condition.
121
Notes to Consolidated Financial Statements, continued
Note 6. Collateralized Transactions, continued
The following tables set forth the carrying value of securities lending arrangements, repurchase agreements and
obligation to return securities received as collateral, at fair value, by class of collateral pledged (in thousands):
November 30, 2022
Securities
Lending
Arrangements
Repurchase
Agreements
Obligation to
Return
Securities
Received as
Collateral, at
Fair Value
Collateral Pledged:
Corporate equity securities. . . . . . . . . . . . . . . . . . . . . . . .
Corporate debt securities . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage-backed and asset-backed securities. . . . . . .
U.S. government and federal agency securities . . . . .
Municipal securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sovereign obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans and other receivables . . . . . . . . . . . . . . . . . . . . . .
$ 967,800
332,204
–
66,021
–
–
–
$
471,581
2,210,934
1,192,265
6,203,263
535,619
2,450,880
538,491
$
–
–
–
100,362
–
–
–
Total
$ 1,439,381
2,543,138
1,192,265
6,369,646
535,619
2,450,880
538,491
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,366,025
$13,603,033
$100,362
$15,069,420
November 30, 2021
Collateral Pledged:
Corporate equity securities . . . . . . . . . . . . . . . . . . . . . .
Corporate debt securities . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage-backed and asset-backed securities . . . . .
U.S. government and federal agency securities. . . .
Municipal securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sovereign obligations . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans and other receivables . . . . . . . . . . . . . . . . . . . . .
Securities
Lending
Arrangements
$1,160,916
321,356
–
6,348
–
37,101
–
Repurchase
Agreements
$
150,602
2,684,458
1,209,442
8,426,536
413,073
2,422,901
712,388
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,525,721
$16,019,400
Obligation to
Return
Securities
Received as
Collateral, at
Fair Value
$7,289
–
–
–
–
–
–
$7,289
Total
$ 1,318,807
3,005,814
1,209,442
8,432,884
413,073
2,460,002
712,388
$17,552,410
The following tables set forth the carrying value of securities lending arrangements, repurchase agreements and
obligation to return securities received as collateral, at fair value, by remaining contractual maturity (in
thousands):
Securities lending arrangements. . . . . .
Repurchase agreements . . . . . . . . . . . . .
Obligation to return securities
received as collateral, at fair value
November 30, 2022
Overnight and
Continuous
$ 808,472
6,930,667
Up to 30 Days
31-90 Days
$
–
1,521,629
$ 273,865
2,262,705
Greater than
90 Days
$ 283,688
2,888,032
Total
$ 1,366,025
13,603,033
100,362
–
–
–
100,362
Total . . . . . . . . . . . . . . . . . . . . . . . . . .
$7,839,501
$1,521,629
$2,536,570
$3,171,720
$15,069,420
122
Notes to Consolidated Financial Statements, continued
Note 6. Collateralized Transactions, continued
Securities lending arrangements . . . . . . .
Repurchase agreements. . . . . . . . . . . . . . .
Obligation to return securities
received as collateral, at fair value. .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . .
November 30, 2021
Overnight and
Continuous
$ 595,628
6,551,934
Up to 30 Days
31-90 Days
Greater than
90 Days
Total
$
1,318
1,798,716
$ 539,623
4,361,993
$ 389,152
3,306,757
$ 1,525,721
16,019,400
7,289
$7,154,851
–
$1,800,034
–
$4,901,616
–
$3,695,909
7,289
$17,552,410
We receive securities as collateral under resale agreements, securities borrowing transactions, customer margin
loans, as initial margin on certain derivative transactions and in connection with securities-for-securities
transactions in which we are the lender of securities. In many instances, we are permitted by contract to
rehypothecate the securities received as collateral. These securities may be used to secure repurchase agreements,
enter into securities lending transactions, satisfy margin requirements on derivative transactions or cover short
positions. At November 30, 2022 and 2021, the approximate fair value of securities received as collateral by us
that may be sold or repledged was $26.82 billion and $31.97 billion, respectively. At November 30, 2022 and
2021, a substantial portion of the securities received by us had been sold or repledged.
Offsetting of Securities Financing Agreements
To manage our exposure to credit risk associated with securities financing transactions, we may enter into master
netting agreements and collateral arrangements with counterparties. Generally, transactions are executed under
standard industry agreements, including, but not limited to, master securities lending agreements (securities
lending transactions) and master repurchase agreements (repurchase transactions). See Note 2, Summary of
information regarding the offsetting of securities financing
Significant Accounting Policies, for additional
agreements.
The following tables provide information regarding repurchase agreements, securities borrowing and lending
arrangements and securities received as collateral, at fair value, and obligation to return securities received as
collateral, at fair value, that are recognized in our Consolidated Statements of Financial Condition and 1) the
extent
in our
to which, under enforceable master netting arrangements, such balances are presented net
Consolidated Statements of Financial Condition as appropriate under U.S. GAAP and 2) the extent to which
other rights of setoff associated with these arrangements exist and could have an effect on our financial position
(in thousands).
123
Notes to Consolidated Financial Statements, continued
Note 6. Collateralized Transactions, continued
November 30, 2022
Netting in
Consolidated
Statement of
Financial
Condition
Net Amounts in
Consolidated
Statement of
Financial
Condition
Additional
Amounts
Available for
Setoff (1)
Gross
Amounts
Available
Collateral (2)
Net
Amount (3)
Assets
Securities borrowing arrangements . . . . . . . $ 5,831,148 $
Reverse repurchase agreements . . . . . . . . . . 10,697,382
Securities received as collateral, at fair
–
(6,150,691)
$5,831,148
4,546,691
$(285,361) $(1,381,404) $4,164,383
41,497
(3,954,525)
(550,669)
value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100,362
–
100,362
–
(100,362)
–
Liabilities
Securities lending arrangements . . . . . . . . . . $ 1,366,025 $
Repurchase agreements. . . . . . . . . . . . . . . . . . 13,603,033
Obligation to return securities received as
collateral, at fair value . . . . . . . . . . . . . . . .
100,362
–
(6,150,691)
$1,366,025
7,452,342
$(285,361) $(1,054,228) $
(550,669)
(6,374,480)
26,436
527,193
–
100,362
–
(100,362)
–
November 30, 2021
Netting in
Consolidated
Statement of
Financial
Condition
Net Amounts in
Consolidated
Statement of
Financial
Condition
Additional
Amounts
Available for
Setoff (1)
Gross
Amounts
Available
Collateral (2)
Net
Amount (4)
Assets
Securities borrowing arrangements . . . . . . $ 6,409,420 $
Reverse repurchase agreements . . . . . . . . .
Securities received as collateral, at fair
15,215,785
–
(7,573,301)
$6,409,420
7,642,484
$(271,475) $(1,528,206) $4,609,739
53,349
(7,048,823)
(540,312)
value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,289
–
7,289
–
(7,289)
–
Liabilities
Securities lending arrangements . . . . . . . . . $ 1,525,721 $
Repurchase agreements (5) . . . . . . . . . . . . .
Obligation to return securities received
16,019,400
–
(7,573,301)
$1,525,721
8,446,099
$(271,475) $(1,213,563) $
(540,312)
(7,136,585)
40,683
769,202
as collateral, at fair value . . . . . . . . . . . .
7,289
–
7,289
–
(7,289)
–
(1) Under master netting agreements with our counterparties, we have the legal right of offset with a
counterparty, which incorporates all of the counterparty’s outstanding rights and obligations under the
arrangement. These balances reflect additional credit risk mitigation that is available by a counterparty in the
event of a counterparty’s default, but which are not netted in our Consolidated Statement of Financial
Condition because other netting provisions of U.S. GAAP are not met.
(2) Includes securities received or paid under collateral arrangements with counterparties that could be liquidated
in the event of a counterparty default and thus offset against a counterparty’s rights and obligations under the
respective repurchase agreements or securities borrowing or lending arrangements.
(3) Amounts include $4.12 billion of securities borrowing arrangements, for which we have received securities
collateral of $4.02 billion, and $495.2 million of repurchase agreements, for which we have pledged
securities collateral of $507.3 million, which are subject to master netting agreements, but we have not
determined the agreements to be legally enforceable.
(4) Amounts include $4.51 billion of securities borrowing arrangements, for which we have received securities
collateral of $4.35 billion, and $765.0 million of repurchase agreements, for which we have pledged
securities collateral of $781.8 million, which are subject to master netting agreements, but we have not
determined the agreements to be legally enforceable.
124
Notes to Consolidated Financial Statements, continued
Note 6. Collateralized Transactions, continued
(5) There was an immaterial correction in the amount of available collateral, which resulted in a $200 million
decrease in the available collateral and a $200 million increase in the net amount related to repurchase
agreements at November 30, 2021.
Cash and Securities Segregated and on Deposit for Regulatory Purposes or Deposited with Clearing and
Depository Organizations
Cash and securities segregated in accordance with regulatory regulations and deposited with clearing and depository
organizations totaled $0.96 billion and $1.02 billion at November 30, 2022 and 2021, respectively. Segregated cash
and securities consist of deposits in accordance with Rule 15c3-3 of the Securities Exchange Act of 1934, which
subjects Jefferies LLC as a broker-dealer carrying customer accounts to requirements related to maintaining cash or
qualified securities in segregated special reserve bank accounts for the exclusive benefit of its customers.
Note 7. Securitization Activities
We engage in securitization activities related to corporate loans, mortgage loans, consumer loans and mortgage-
backed and other asset-backed securities. In our securitization transactions, we transfer these assets to special
purpose entities (‘‘SPEs’’) and act as the placement or structuring agent for the beneficial interests sold to
investors by the SPE. A significant portion of our securitization transactions are the securitization of assets
issued or guaranteed by U.S. government agencies. These SPEs generally meet the criteria of VIEs; however, we
generally do not consolidate the SPEs as we are not considered the primary beneficiary for these SPEs. See Note
8, Variable Interest Entities, for further discussion on VIEs and our determination of the primary beneficiary.
We account for our securitization transactions as sales, provided we have relinquished control over the
transferred assets. Transferred assets are carried at fair value with unrealized gains and losses reflected in
transactions revenues in our Consolidated Statements of Earnings prior to the identification and
Principal
isolation for securitization. Subsequently,
revenues recognized upon securitization are reflected as net
underwriting revenues. We generally receive cash proceeds in connection with the transfer of assets to an
SPE. We may, however, have continuing involvement with the transferred assets, which is limited to retaining
one or more tranches of the securitization (primarily senior and subordinated debt securities in the form of
mortgage-backed and other-asset backed securities or CLOs). These securities are included in Financial
instruments owned, at fair value in our Consolidated Statements of Financial Condition and are generally initially
categorized as Level 2 within the fair value hierarchy. For further information on fair value measurements and
the fair value hierarchy, refer to Note 4, Fair Value Disclosures, and Note 2, Summary of Significant Accounting
Policies, herein.
The following table presents activity related to our securitizations that were accounted for as sales in which we
had continuing involvement (in millions):
Year Ended November 30,
2021
2022
2020
Transferred assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds on new securitizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flows received on retained interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$6,351.2
6,402.6
31.7
$10,487.3
10,488.6
21.8
$6,556.2
6,556.2
26.8
We have no explicit or implicit arrangements to provide additional financial support to these SPEs, have no
liabilities related to these SPEs and do not have any outstanding derivative contracts executed in connection with
these securitization activities at November 30, 2022 and 2021.
125
Notes to Consolidated Financial Statements, continued
Note 7. Securitization Activities, continued
The following tables summarize our retained interests in SPEs where we transferred assets and have continuing
involvement and received sale accounting treatment (in millions):
Securitization Type
U.S. government agency RMBS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. government agency CMBS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CLOs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consumer and other loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
November 30,
2022
2021
Total
Assets
$ 219.8
2,997.7
5,140.5
2,526.7
Retained
Interests
$ 2.9
173.9
31.9
122.8
Total
Assets
$ 330.2
2,201.8
3,382.3
2,271.4
Retained
Interests
$ 4.9
69.2
31.0
136.4
Total assets represent
the unpaid principal amount of assets in the SPEs in which we have continuing
involvement and are presented solely to provide information regarding the size of the transactions and the size of
the underlying assets supporting our retained interests, and are not considered representative of the risk of
potential loss. Assets retained in connection with a securitization transaction represent the fair value of the
securities of one or more tranches issued by an SPE, including senior and subordinated tranches. Our risk of loss
is limited to this fair value amount which is included in total Financial instruments owned in our Consolidated
Statements of Financial Condition.
Although not obligated, in connection with secondary market-making activities we may make a market in the
securities issued by these SPEs. In these market-making transactions, we buy these securities from and sell these
securities to investors. Securities purchased through these market-making activities are not considered to be
continuing involvement in these SPEs. To the extent we purchased securities through these market-making
activities and we are not deemed to be the primary beneficiary of the VIE, these securities are included in agency
and non-agency mortgage-backed and asset-backed securitizations in the nonconsolidated VIEs section presented
in Note 8, Variable Interest Entities.
Note 8. Variable Interest Entities
VIEs are entities in which equity investors lack the characteristics of a controlling financial interest. VIEs are
consolidated by the primary beneficiary. The primary beneficiary is the party who has both (1) the power to
direct the activities of a VIE that most significantly impact the entity’s economic performance and (2) an
obligation to absorb losses of the entity or a right to receive benefits from the entity that could potentially be
significant to the entity.
Our variable interests in VIEs include debt and equity interests, commitments, guarantees and certain fees. Our
involvement with VIEs arises primarily from:
• Purchases of securities in connection with our trading and secondary market making activities;
• Retained interests held as a result of securitization activities;
• Acting as placement agent and/or underwriter in connection with client-sponsored securitizations;
• Financing of agency and non-agency mortgage-backed and other asset-backed securities;
• Acting as servicer for a fee to automobile loan financing vehicles;
• Warehouse funding arrangements for client-sponsored consumer and mortgage loan vehicles and CLOs
through participation agreements, forward sale agreements, reverse repurchase agreements, and revolving
loan and note commitments; and
• Loans to, investments in and fees from various investment vehicles.
126
Notes to Consolidated Financial Statements, continued
Note 8. Variable Interest Entities, continued
We determine whether we are the primary beneficiary of a VIE upon our initial involvement with the VIE and
we reassess whether we are the primary beneficiary of a VIE on an ongoing basis. Our determination of whether
we are the primary beneficiary of a VIE is based upon the facts and circumstances for each VIE and requires
judgment. Our considerations in determining the VIE’s most significant activities and whether we have power to
direct those activities include, but are not limited to, the VIE’s purpose and design and the risks passed through
the voting interests of the VIE, management, service and/or other agreements of the VIE,
to investors,
involvement in the VIE’s initial design and the existence of explicit or implicit financial guarantees. In situations
where we have determined that the power over the VIE’s significant activities is shared, we assess whether we
are the party with the power over the most significant activities. If we are the party with the power over the most
significant activities, we meet the ‘‘power’’ criteria of the primary beneficiary. If we do not have the power over
the most significant activities or we determine that decisions require consent of each sharing party, we do not
meet the ‘‘power’’ criteria of the primary beneficiary.
We assess our variable interests in a VIE both individually and in aggregate to determine whether we have an
obligation to absorb losses of or a right to receive benefits from the VIE that could potentially be significant to
the VIE. The determination of whether our variable interest is significant to the VIE requires judgment. In
determining the significance of our variable interest, we consider the terms, characteristics and size of the
variable interests, the design and characteristics of the VIE, our involvement in the VIE and our market-making
activities related to the variable interests.
Consolidated VIEs
The following table presents information about our consolidated VIEs at November 30, 2022 and 2021 (in
millions). The assets and liabilities in the tables below are presented prior to consolidation and thus a portion of
these assets and liabilities are eliminated in consolidation.
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial instruments owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities purchased under agreements to resell (1). . . . . . . . . . . . . . . . .
Receivables from brokers (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial instruments sold, not yet purchased . . . . . . . . . . . . . . . . . . . . . .
Other secured financings (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payables to broker dealers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities (5). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
November 30,
2022
2021
Secured
Funding
Vehicles
$
–
–
1,565.0
–
–
798.8
$2,363.8
$
–
2,289.9
–
4.6
–
$2,294.5
Other
$ 1.4
7.1
–
15.2
–
88.3
$112.0
$ 5.7
–
–
37.6
24.7
$ 68.0
Secured
Funding
Vehicles
$
3.8
173.1
3,697.1
–
0.6
740.8
$4,615.4
$
–
4,521.6
44.2
2.4
–
$4,568.2
Other
$ –
146.4
–
40.6
–
–
$187.0
$109.1
–
–
75.3
–
$184.4
(1) Securities purchased under agreements to resell primarily represent amounts due under collateralized
transactions on related consolidated entities, which are eliminated in consolidation.
(2) Approximately $1.2 million of receivables from brokers at November 30, 2021 are with related consolidated
entities, which are eliminated in consolidation.
127
Notes to Consolidated Financial Statements, continued
Note 8. Variable Interest Entities, continued
(3) Approximately $82.4 million and $56.5 million of the other assets at November 30, 2022 and 2021,
respectively, represent intercompany receivables with related consolidated entities, which are eliminated in
consolidation.
(4) Approximately $253.8 million and $36.7 million of the other secured financings at November 30, 2022 and
2021, respectively, are with related consolidated entities and are eliminated in consolidation.
(5) Approximately $30.9 million and $75.3 million of the other liabilities amounts at November 30, 2022 and
2021, respectively, are with related consolidated entities, which are eliminated in consolidation.
Secured Funding Vehicles. We are the primary beneficiary of asset-backed financing vehicles to which we sell
agency and non-agency residential and commercial mortgage loans, and asset-backed securities pursuant to the
terms of a master repurchase agreement. Our variable interests in these vehicles consist of our collateral margin
maintenance obligations under the master repurchase agreement, which we manage, and retained interests in
securities issued. The assets of these VIEs consist of reverse repurchase agreements, which are available for the
benefit of the vehicle’s debt holders.
We are the primary beneficiary of automobile loan financing vehicles to which we transfer automobile loans, act
as servicer of the automobile loans for a fee and retain equity interests in the vehicles. The assets of these VIEs
consist primarily of automobile loans, which are accounted for as loans held for investment at amortized cost
included within Other assets on the Consolidated Statement of Financial Condition. The liabilities of these VIEs
consist of notes issued by the VIEs, which are accounted for at amortized cost and included within Other secured
financings on the Consolidated Statement of Financial Condition and do not have recourse to our general credit.
The automobile loans are pledged as collateral for the related notes and available only for the benefit of the note
holders.
Other. We are the primary beneficiary of certain investment vehicles set up for the benefit of our employees. We
manage and invest alongside our employees in these vehicles. The assets of these VIEs consist of private equity
securities, and are available for the benefit of the entities’ equity holders. Our variable interests in these vehicles
consist of equity securities. The creditors of these VIEs do not have recourse to our general credit and each such
VIE’s assets are not available to satisfy any other debt.
We also are the primary beneficiary of a real estate syndication entity that is developing multi-family residential
property and manage the property. The assets of the VIE consist primarily of real estate and its liabilities consist
primarily of accrued expenses and long-term debt secured by the real estate property. Our variable interest in the
VIE consist primarily of our limited liability company interest, a sponsor promote and development and asset
management fees for managing the project.
Nonconsolidated VIEs
The following tables present information about our variable interests in nonconsolidated VIEs (in millions):
November 30, 2022
Carrying Amount
Assets
Liabilities
CLOs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset-backed vehicles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Related party private equity vehicles . . . . . . . . . . . . . . . . . . . . . . . . . .
Other investment vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FXCM. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 133.5
561.0
24.8
1,172.6
94.8
$1,986.7
$1.4
–
–
–
–
$1.4
Maximum
Exposure
to Loss
$1,642.5
690.4
35.5
1,254.0
94.8
$3,717.2
VIE Assets
$ 7,705.3
4,408.3
69.1
18,940.5
389.6
$31,512.8
128
Notes to Consolidated Financial Statements, continued
Note 8. Variable Interest Entities, continued
Carrying Amount
Assets
Liabilities
November 30, 2021
Maximum
Exposure
to Loss
CLOs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset-backed vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Related party private equity vehicles . . . . . . . . . . . . . . . . . . . . . . . . . .
Other investment vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FXCM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 582.2
281.9
27.1
1,111.5
99.5
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,102.2
$2.0
–
–
–
–
$2.0
$2,557.1
359.3
37.8
1,201.6
99.5
VIE Assets
$10,277.5
3,474.6
78.9
15,101.4
387.9
$4,255.3
$29,320.3
Our maximum exposure to loss often differs from the carrying value of the variable interests. The maximum
exposure to loss is dependent on the nature of our variable interests in the VIEs and is limited to the notional
amounts of certain loan and equity commitments and guarantees. Our maximum exposure to loss does not
include the offsetting benefit of any financial instruments that may be utilized to hedge the risks associated with
our variable interests and is not reduced by the amount of collateral held as part of a transaction with a VIE.
Collateralized Loan Obligations. Assets collateralizing the CLOs include bank loans, participation interests, sub-
investment grade and senior secured U.S. loans, and senior secured Euro denominated corporate leveraged loans
and bonds. We underwrite securities issued in CLO transactions on behalf of sponsors and provide advisory
services to the sponsors. We may also sell corporate loans to the CLOs. Our variable interests in connection with
CLOs where we have been involved in providing underwriting and/or advisory services consist of the following:
• Forward sale agreements whereby we commit to sell, at a fixed price, corporate loans and ownership
interests in an entity holding such corporate loans to CLOs;
• Warehouse funding arrangements in the form of:
(cid:4) Participation interests in corporate loans held by CLOs and commitments to fund such participation
interests,
(cid:4) Reverse repurchase agreements with collateral margin maintenance obligations and commitments to
fund such reverse repurchase agreements; and
(cid:4) Senior and subordinated notes issued in connection with CLO warehousing activities.
• Trading positions in securities issued in CLO transactions; and
• Investments in variable funding notes issued by CLOs.
Asset-Backed Vehicles. We provide financing and lending related services to certain client-sponsored VIEs in the
form of revolving funding note agreements, revolving credit facilities, forward purchase agreements and reverse
repurchase agreements. The underlying assets, which are collateralizing the vehicles, are primarily composed of
unsecured consumer loans and mortgage loans. In addition, we may provide structuring and advisory services
and act as an underwriter or placement agent for securities issued by the vehicles. We do not control the
activities of these entities.
Related Party Private Equity Vehicles. We committed to invest in private equity funds, (the ‘‘JCP Funds’’,
including JCP Fund V (see Note 9, Investments)) managed by Jefferies Capital Partners, LLC (the ‘‘JCP
Manager’’). Additionally, we committed to invest in the general partners of the JCP Funds (the ‘‘JCP General
Partners’’) and the JCP Manager. Our variable interests in the JCP Funds, JCP General Partners and JCP
Manager (collectively, the ‘‘JCP Entities’’) consist of equity interests that, in total, provide us with limited and
general partner investment returns of the JCP Funds, a portion of the carried interest earned by the JCP General
Partners and a portion of the management fees earned by the JCP Manager. At November 30, 2022 and 2021,
129
Notes to Consolidated Financial Statements, continued
Note 8. Variable Interest Entities, continued
our total equity commitment in the JCP Entities was $133.0 million, of which $122.4 million and $122.3 million
had been funded, respectively. The carrying value of our equity investments in the JCP Entities was $24.8
million and $27.1 million at November 30, 2022 and 2021, respectively. Our exposure to loss is limited to the
total of our carrying value and unfunded equity commitment. The assets of the JCP Entities primarily consist of
private equity and equity related investments.
Other Investment Vehicles. At November 30, 2022 and 2021, we had equity commitments to invest $1.14 billion
and $1.09 billion, respectively, in various other investment vehicles, of which $1.06 billion and $999.8 million
was funded, respectively. The carrying value of our equity investments was $1.17 billion and $1.11 billion at
November 30, 2022 and 2021, respectively. Our exposure to loss is limited to the total of our carrying value and
unfunded equity commitment. These investment vehicles have assets primarily consisting of private and public
equity investments, debt instruments, trade and insurance claims and various oil and gas assets.
FXCM. We have equity interests in FXCM of $59.7 million consisting of a 50% voting interest in FXCM and
rights to a majority of all distributions in respect of the equity of FXCM, which is accounted for under the equity
method of accounting and reported within Investments in and loans to related parties in the Consolidated
Statements of Financial Condition. We also have a senior secured term loan to FXCM due May 6, 2023, which
is accounted for at a fair value of $35.1 million and $50.5 million, at November 30, 2022 and 2021, respectively,
and is reported within Financial instruments owned, at fair value in our Consolidated Statements of Financial
Condition. The assets of FXCM consist primarily of brokerage receivables and other financial instruments and
operating assets as part of FXCM’s foreign exchange trading business.
Mortgage-Backed and Other Asset-Backed Secured Funding Vehicles. In connection with our secondary trading
and market making activities, we buy and sell agency and non-agency mortgage-backed securities and other
asset-backed securities, which are issued by third-party securitization SPEs and are generally considered variable
interests in VIEs. Securities issued by securitization SPEs are backed by residential mortgage loans, U.S. agency
collateralized mortgage obligations, commercial mortgage loans, CDOs and CLOs and other consumer loans,
such as installment receivables, automobile loans and student loans. These securities are accounted for at fair
value and included in Financial instruments owned in our Consolidated Statements of Financial Condition. We
have no other involvement with the related SPEs and therefore do not consolidate these entities.
We also engage in underwriting, placement and structuring activities for third-party-sponsored securitization
trusts generally through agency (Fannie Mae, Federal Home Loan Mortgage Corporation (‘‘Freddie Mac’’) or
Ginnie Mae) or non-agency-sponsored SPEs and may purchase loans or mortgage-backed securities from third-
parties that are subsequently transferred into the securitization trusts. The securitizations are backed by residential
and commercial mortgage, home equity and automobile loans. We do not consolidate agency-sponsored
securitizations as we do not have the power to direct the activities of the SPEs that most significantly impact
their economic performance. Further, we are not
the servicer of non-agency-sponsored securitizations and
therefore do not have power to direct the most significant activities of the SPEs and accordingly, do not
consolidate these entities. We may retain unsold senior and/or subordinated interests at the time of securitization
in the form of securities issued by the SPEs.
At November 30, 2022 and 2021, we held $1.47 billion and $1.31 billion of agency mortgage-backed securities,
respectively, and $180.6 million and $253.9 million of non-agency mortgage-backed and other asset-backed
securities, respectively, as a result of our secondary trading and market-making activities, and underwriting,
placement and structuring activities. Our maximum exposure to loss on these securities is limited to the carrying
value of our investments in these securities. These mortgage-backed and other asset-backed secured funding
vehicles discussed are not included in the above table containing information about our variable interests in
nonconsolidated VIEs.
130
Notes to Consolidated Financial Statements, continued
Note 9. Investments
Investments for which we exercise significant influence over the investee are accounted for under the equity
method of accounting with our shares of the investees’ earnings recognized in Other revenues in our
Consolidated Statements of Earnings. Equity method investments, including any loans to the investees, are
reported within Investments in and loans to related parties in our Consolidated Statements of Financial Condition
are summarized as follows (in millions).
November 30,
2022
2021
Total Investments in and loans to related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,426.8
$1,587.4
Total equity method pickup income recognized in Other revenues in our
Consolidated Statements of Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(36.3) $149.9
$(75.2)
The following presents summarized financial information about our significant equity method investees. For
certain investees, we receive financial information at a lag and the summarized information provided for these
investees is based on the latest financial information available as of November 30, 2022, 2021 and 2020,
respectively.
Year Ended November 30,
2022
2020
2021
Jefferies Finance
Jefferies Finance, our 50/50 joint venture entity pursuant to an agreement with Massachusetts Mutual Life
Insurance Company (‘‘MassMutual’’),
is a commercial finance company that structures, underwrites and
syndicates primarily senior secured loans to corporate borrowers; and manages proprietary and third-party
investments for both broadly syndicated and direct lending loans. Jefferies Finance conducts its operations
primarily through two business lines, Leveraged Finance Arrangement and Asset Management. Loans are
originated primarily through our investment banking efforts and Jefferies Finance typically syndicates to third-
party investors substantially all of its arranged volume through us. Jefferies Finance may also underwrite and
arrange other debt products such as second lien term, bridge and mezzanine loans, as well as related equity co-
investments. The Asset Management business, collectively referred to as Jefferies Credit Partners, LLC,
(formerly known as JFIN Asset Management LLC) manages a broad portfolio of assets under management
composed of portions of loans it has arranged, as well as loan positions that it has purchased in the primary and
secondary markets. Jefferies Credit Partners composed of three registered Investment Advisors: Jefferies Finance,
Apex Credit Partners LLC and Jefferies Credit Partners LLC, which serve as a private credit platform managing
proprietary and third-party capital across commingled funds, separately managed accounts and CLOs.
At November 30, 2022, we and MassMutual each had equity commitments to Jefferies Finance of $750.0
million, for a combined total commitment of $1.5 billion. The equity commitment is reduced quarterly based on
our share of any undistributed earnings from Jefferies Finance and the commitment is increased only to the
extent the share of such earnings are distributed. At November 30, 2022, our remaining commitment to Jefferies
Finance was $15.4 million. The investment commitment is scheduled to expire on March 1, 2023 with automatic
one year extensions absent a 60 days termination notice by either party.
Jefferies Finance has executed a Secured Revolving Credit Facility with us and MassMutual, to be funded
equally, to support loan underwritings by Jefferies Finance, which bears interest based on the interest rates of the
related Jefferies Finance underwritten loans and is secured by the underlying loans funded by the proceeds of the
facility. The total Secured Revolving Credit Facility is a committed amount of $500.0 million at November 30,
2022. Advances are shared equally between us and MassMutual. The facility is scheduled to mature on March 1,
2023 with automatic one year extensions absent a 60 days termination notice by either party. At November 30,
131
Notes to Consolidated Financial Statements, continued
Note 9. Investments, continued
2022, we had funded $0.0 million of our $250.0 million commitment. The following summarizes the activity
included in our Consolidated Statements of Earnings related to the facility (in millions):
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unfunded commitment fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$0.4
1.2
$1.5
1.2
$2.4
1.1
The following is a summary of selected financial information for Jefferies Finance (in millions):
Year Ended November 30,
2022
2020
2021
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Our total equity balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
November 30,
2022
$6,763.0
5,490.1
2021
$8,258.7
6,843.9
November 30,
2022
$636.4
2021
$707.4
Year Ended November 30,
2022
2020
2021
Net earnings (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(129.4) $205.7
$(74.9)
The following summarizes activity related to our other transactions with Jefferies Finance (in millions):
Year Ended November 30,
2022
2020
2021
Origination and syndication fee revenues (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Origination fee expenses (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CLO placement fee revenues (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Underwriting fees (3). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service fees (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$194.7
39.7
4.6
–
94.7
$410.5
66.8
5.7
2.5
85.1
$198.1
27.3
1.7
1.7
65.1
(1) We engage in the origination and syndication of loans underwritten by Jefferies Finance. In connection with
such services, we earned fees, which are recognized in Investment banking revenues in our Consolidated
Statements of Earnings. In addition, we paid fees to Jefferies Finance in respect of certain loans originated
by Jefferies Finance, which are recognized as Business development expenses in our Consolidated
Statements of Earnings.
(2) We act as a placement agent for CLOs managed by Jefferies Finance, for which we recognized fees, which
are included in Investment banking revenues in our Consolidated Statements of Earnings. At November 30,
2022 and 2021, we held securities issued by CLOs managed by Jefferies Finance, which are included in
Financial instruments owned, at fair value in our Consolidated Statements of Financial Condition.
(3) We acted as underwriter in connection with term loans issued by Jefferies Finance.
(4) Under a service agreement, we charge Jefferies Finance for services provided.
In connection with non-U.S. dollar loans originated by Jefferies Finance to borrowers who are investment
banking clients of ours, we have entered into an agreement to indemnify Jefferies Finance with respect to any
foreign currency exposure.
Receivables from Jefferies Finance,
included in Other assets in our Consolidated Statements of Financial
Condition, were $1.2 million and $26.2 million at November 30, 2022 and 2021, respectively. At November 30,
132
Notes to Consolidated Financial Statements, continued
Note 9. Investments, continued
2022 and 2021, payables to Jefferies Finance related to cash deposited with us and included in Payables to
customers in our Consolidated Statements of Financial Condition, were $0.5 million and $8.5 million,
respectively.
Berkadia
Berkadia is a commercial mortgage banking, servicing and finance joint venture that was formed by us and
Berkshire Hathaway Inc. We are entitled to receive 45% of the profits of Berkadia. Berkadia originates
commercial/multifamily real estate loans that are sold to U.S. government agencies or other investors. Berkadia
also is an investment sales advisor focused on the multifamily industry. Berkadia is a servicer of commercial real
estate loans in the U.S., performing primary, master and special servicing functions for U.S. government agency
programs, commercial mortgage-backed securities transactions, banks, insurance companies and other financial
institutions.
Commercial paper issued by Berkadia is supported by a $1.50 billion surety policy issued by a Berkshire
Hathaway insurance subsidiary and corporate guaranty, and we have agreed to reimburse Berkshire Hathaway for
one-half of any losses incurred thereunder. At November 30, 2022, the aggregate amount of commercial paper
outstanding was $1.47 billion.
The following is a summary of selected financial information for Berkadia (in millions):
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total noncontrolling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$4,436.0
2,801.7
690.1
$4,630.7
3,377.0
425.8
Our total equity balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$425.9
$373.4
November 30,
2022
2021
November 30,
2022
2021
Gross revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Our share of net earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,361.2
276.5
124.4
$1,262.4
290.3
130.6
$1,000.4
153.1
68.9
We received distributions from Berkadia on our equity interest as follows (in millions):
Year Ended November 30,
2021
2022
2020
Year Ended November 30,
2021
2020
2022
Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$69.8
$58.0
$37.1
At November 30, 2022 and 2021, we had commitments to purchase $237.4 million and $425.6 million,
respectively, of agency CMBS from Berkadia.
OpNet
We own approximately 42% of the common shares and 48% of the voting rights of OpNet (formerly known as
Linkem). In addition to common stock, we own convertible preferred stock, which is automatically convertible
133
Notes to Consolidated Financial Statements, continued
Note 9. Investments, continued
to common shares in 2026, and common stock warrants, which are exercisable by June 2024 and June 2027. If
our convertible preferred stock and warrants were all converted or exercised, our ownership would increase to
approximately 63% of OpNet’s common equity and voting rights. The convertible preferred stock is reported in
Other assets in our Consolidated Statements of Financial Condition and had a carrying value of $0 million and
$17.4 million at November 30, 2022 and 2021, respectively. The common stock warrants are reported in
Financial instruments owned, at fair value in our Consolidated Statements of Financial Condition and had a fair
value of $54.2 million and $27.8 million at November 30, 2022 and 2021, respectively.
We also own redeemable preferred stock and subordinated bonds issued by OpNet. The redeemable preferred
stock is reported in Other assets in our Consolidated Statements of Financial Condition and had a carrying value
of $24.5 million and $89.1 million at November 30, 2022 and 2021, respectively. During the year ended
November 30, 2022, we reported the subordinated bonds in Financial instruments owned, at fair value in our
Consolidated Statements of Condition with a fair value of $48.6 million. Additionally, during the year ended
November 30, 2022 we have made shareholder loans to OpNet with a carrying value of $19.3 million at
November 30, 2022.
In November 2022, we made a subscription advance of $12.5 million, and subsequent to year end we have made
additional subscription advances of $20.8 million to participate in a new convertible preferred stock offering,
which were partially issued in January 2023. We also received warrants for the new convertible preferred stock
in January 2023, which are exercisable by December 23, 2027.
We, along with another significant shareholder in OpNet, have agreed to provide additional financial support, if
necessary, to meet certain funding needs of OpNet until June 2023.
The following is a summary of selected financial information for OpNet (in millions):
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,050.8
935.2
$782.0
734.0
November 30,
2022
2021
Our total equity balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ –
$ –
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(88.6) $(90.5) $(78.8)
Year Ended November 30,
2022
2020
2021
November 30,
2021
2022
FXCM
We have a 50% voting interest in FXCM, a provider of online foreign exchange trading services and have the
ability to significantly influence FXCM through our seats on the board of directors. We also have a senior
instruments owned, at fair value in our
secured term loan to FXCM, which is reported within Financial
Consolidated Statements of Financial Condition and had a fair value of $35.1 million and $50.5 million as of
November 30 2022, and 2021, respectively. We are amortizing our basis difference between the estimated fair
value and the underlying book value of FXCM customer relationships, technology and trade name over their
respective useful lives (weighted average life of 11 years). FXCM is considered a VIE and our term loan and
equity interest are variable interests. During the year ended November 30, 2022, we recognized an other-than-
134
Notes to Consolidated Financial Statements, continued
Note 9. Investments, continued
temporary impairment charge of $25.3 million within Other revenues on the Consolidated Statement of Earnings
on our investment. The following is a summary of selected financial information for FXCM (in millions):
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$389.6
341.4
$387.9
382.2
November 30,
2022
2021
Our total equity balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$59.7
$49.0
Net earnings (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$39.0
$(21.5)
$6.5
In connection with foreign exchange contracts entered into with FXCM, we have $0.5 million and $0.7 million
at November 30, 2022 and 2021, respectively, included in Payables – brokers, dealers and clearing organizations
in our Consolidated Statements of Financial Condition.
Year Ended November 30,
2022
2020
2021
November 30,
2022
2021
Golden Queen Mining Company LLC
We have a 50% ownership interest in Golden Queen Mining Company, LLC (‘‘Golden Queen’’), which owns
and operates a gold and silver mine project located in California. We also own warrants to purchase shares with
a fair value of $0.6 million and $3.1 million at November 30, 2022 and 2021, which if exercised, would increase
our ownership to approximately 51.9% of Golden Queen’s common equity. We also have a shareholder loan to
Golden Queen with a carrying value of $14.0 million and $13.9 million at November 30, 2022 and 2021,
respectively. The following is a summary of selected financial information for Golden Queen (in millions):
November 30,
2022
2021
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$209.8
102.1
$224.5
101.6
Our total equity balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
November 30,
2022
$46.5
2021
$55.1
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(15.2)
$(14.7)
$(9.6)
Year Ended November 30,
2022
2021
2020
Real Estate Investments
Our real estate equity method investments primarily consist of equity interests in Brooklyn Renaissance Plaza
and Hotel and 54 Madison.
Brooklyn Renaissance Plaza is composed of a hotel, office building complex and parking garage located in
Brooklyn, New York. We have a 25.4% equity interest in the hotel and a 61.3% equity interest in the office
building and garage. Although we have a majority interest in the office building and garage, we do not have
135
Notes to Consolidated Financial Statements, continued
Note 9. Investments, continued
control, but only have the ability to exercise significant influence on this investment. We are amortizing our basis
difference between the estimated fair value and the underlying book value of Brooklyn Renaissance office
building and garage over the respective useful lives (weighted average life of 39 years). An impairment charge of
$6.9 million was recognized during the year ended November 30, 2020, which represented all of the carrying
value in the Brooklyn Renaissance Plaza hotel.
We own approximately 48.1% equity interest in 54 Madison, a fund that owns an interest in one real estate
project and is in the process of being liquidated. We received cash distributions of $18.4 million and
$39.4 million from 54 Madison during years ended November 30, 2022 and 2021, respectively. The following is
a summary of selected financial information for our significant Real Estate Investments (in millions):
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$350.4
487.5
$434.5
506.1
November 30,
2022
2021
Our total equity balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$107.3
$115.2
Net earnings (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$17.7
$(27.0) $(12.3)
Year Ended November 30,
2022
2020
2021
November 30,
2022
2021
JCP Fund V
We have limited partnership interests of 11% and 50% in Jefferies Capital Partners V L.P. and the Jefferies SBI
USA Fund L.P. (together, ‘‘JCP Fund V’’), respectively, which are private equity funds managed by a team led
by our President. The amount of our investments in JCP Fund V included in Financial instruments owned, at fair
value in our Consolidated Statements of Financial Condition was $23.9 million and $25.4 million at November
30, 2022 and 2021, respectively. We account for these investments at fair value based on the NAV of the funds
provided by the fund managers (see Note 2, Summary of Significant Accounting Policies, herein). The following
summarizes the results from these investments which are included in Principal transactions revenues in our
Consolidated Statements of Earnings (in millions):
Net gains (losses) from our investments in JCP Fund V . . . . . . . . . . . . . . . . . . . . . . . . . .
$0.1
$7.7
$(3.0)
At both November 30, 2022 and 2021, we were committed to invest equity of up to $85.0 million in JCP Fund
V. At both November 30, 2022 and 2021, our unfunded commitment relating to JCP Fund V was $8.7 million.
The following is a summary of selected financial information for 100.0% of JCP Fund V, in which we owned
effectively 35.2% of the combined equity interests (in millions):
Year Ended November 30,
2022
2020
2021
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total partners’ capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$68
–
68
$72
–
72
September 30,
2022 (1)
2021 (1)
136
Notes to Consolidated Financial Statements, continued
Note 9. Investments, continued
Nine Months
Ended
September 30,
2022 (1)
Three Months
Ended
December 31,
2021 (1)
Nine Months
Ended
September 30,
2021 (1)
Three Months
Ended
December 31,
2020 (1)
Nine Months
Ended
September 30,
2020 (1)
Three Months
Ended
December 31,
2019 (1)
Net increase (decrease)
in net assets resulting
from operations . . . . . .
$(1.3)
$(3.2)
$23.8
$(1.0)
$(12.5)
$(1.4)
(1) Financial information for JCP Fund V in financial position and results of operations at November 30, 2022
and 2021 and for the years ended November 30, 2022, 2021 and 2020 is included based on the presented
periods.
Other Asset Management Investments
We have investments in asset management entities with an aggregate carrying amount of $18.6 million and
$25.0 million at November 30, 2022 and 2021, respectively, which consist of our shares in Monashee, an
investment management company, registered investment advisor and general partner of various investment
management funds and provide us with a 50% voting rights interest and the rights to distributions of 47.5% of
the annual net profits of Monashee’s operations if certain thresholds are met. A portion of the carrying amount of
the investment in Monashee relates to contract and customer relationship and client relationship intangible assets
and goodwill. The intangible assets are amortized over their useful life and the goodwill is not amortized.
We also have an investment management agreement whereby Monashee provides asset management services to
us for certain separately managed accounts. Our net investment balance in the separately managed accounts was
$17.7 million and $13.6 million at November 30, 2022 and 2021, respectively. The following table presents the
activity included in our Consolidated Statements of Earnings related to these separately managed accounts (in
millions):
Year Ended November 30,
2022
2020
2021
Investment losses (1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management fees (2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(3.2)
0.7
$(0.8)
–
$–
–
(1) Included in Principal transactions revenues in our Consolidated Statements of Earnings.
(2) Included in Floor brokerage and clearing fees in our Consolidated Statements of Earnings.
At November 30, 2021 our equity method investments also consist of membership interests and limited
partnership interests of approximately 15% in the Oak Hill investment management company and registered
investment adviser and the Oak Hill general partner entity, which is entitled to a carried interest from certain Oak
Hill managed funds (collectively ‘‘the Oak Hill interests’’). On September 30, 2022, we sold the Oak Hill
interests with a carrying value of $167.7 million and recognized $175.1 million within Other revenues in our
Consolidated Statement of Earnings as a result of the sale.
ApiJect
We owned shares which represent a 38% economic interest in ApiJect at November 30, 2022. Our investment in
ApiJect is accounted for at fair value by electing the fair value option available under U.S. GAAP and is
included within corporate equity securities in Financial instruments owned, at fair value in our Consolidated
Statements of Financial Condition. At November 30, 2022, we purchased additional common shares of ApiJect
and obtained a right to 1.125% of ApiJect’s future revenues for cash consideration of $25.0 million. In addition,
137
Notes to Consolidated Financial Statements, continued
Note 9. Investments, continued
we converted our $25.0 million term loan agreement into additional common shares. At November 30, 2022, the
change in fair value of our equity investments in ApiJect was a mark-to-market gain of $37.3 million and the
total fair value of our equity investment in common shares of ApiJect is $100.1 million, which is included within
Level 3 of the fair value hierarchy. Additionally, we owned warrants to purchase up to 950,000 shares of
common stock at any time or from time to time on or before April 15, 2032.
We also have a term loan agreement with a principal of ApiJect for $28.7 million, maturing on February 28,
2023. The loan is accounted for at cost plus accrued interest and is reported within Other assets in our
Consolidated Statements of Financial Condition. Interest income on the term loan of $2.3 million and $1.6
million was recognized in Interest revenues in our Consolidated Statements of Earnings for the year ended
November 30, 2022 and 2021, respectively. The loan has a fair value of $28.9 million and $26.6 million at
November 30, 2022 and 2021, which is classified as Level 3 in the fair value hierarchy.
Note 10. Credit Losses on Financial Assets Measured at Amortized Cost
Automobile Loans. Financial assets measured at amortized cost are presented at the net amount expected to be
collected and the measurement of credit losses and any expected increases or decreases in expected credit losses
are recognized in earnings. The estimate of expected credit losses involves judgment based on an assessment
over the life of the financial
taking into consideration forecast of expected future economic
conditions.
instrument
At November 30, 2022 and 2021, we had automobile loans, including accrued interest and related fees, of
$891.1 million and $812.6 million, respectively, which are classified as either held for investment or held for sale
depending on the intent and ability to hold the loans, which are collateralized by a security interest in the
vehicles’ titles. These loans are included in Other assets in our Consolidated Statements of Financial Condition.
Loans held for investment are recorded at cost net of deferred acquisition costs and an allowance for credit
losses. Loans held for sale are recorded at the lower of cost or fair value until the loans are sold.
Provision for credit losses are charged to income in amounts sufficient to maintain an allowance for credit losses
inherent in the automobile loans held for investment which is established systematically by management as of
the reporting date. All automobile loans held for investment are collectively evaluated for impairment.
Management’s estimate of expected credit losses is based on an evaluation of relevant information about past
events, current conditions, and reasonable and supportable forecasts that affect the future collectability of the
reported amounts. We use static pool modeling techniques to determine the allowance for loan losses expected
over the remaining life of the loans, which is supplemented by management judgment. Expected losses are
estimated for groups of accounts aggregated by monthly vintage.
Generally, the expected losses are projected based on historical loss experience over the last eight years, more
heavily weighted toward recent performance when determining the allowance to result in an estimate that is more
reflective of the current internal and external environments. Our estimate of expected credit losses includes a
reasonable and supportable forecast period of two years and then reverts to an estimate based on historical losses.
We review charge-off experience factors, contractual delinquency, historical collection rates,
the value of
underlying collateral and other information to make the necessary judgments as to credit losses expected in the
portfolio as of the reporting date. While management utilizes the best
information available to make its
evaluations, changes in macroeconomic conditions, interest rate environments, or both, may significantly impact
the assumptions and inputs used in determining the allowance for credit losses. Our charge-off policy is based on
a loan by loan review of delinquent loans. We have an accounting policy to not place loans on nonaccrual status;
however, the allowance for credit losses is determined including the accrued interest receivable that it does not
expect to collect.
138
Notes to Consolidated Financial Statements, continued
Note 10. Credit Losses on Financial Assets Measured at Amortized Cost, continued
the allowance for credit
A rollforward of
November 30, 2022, 2021 and 2020 is as follows (in thousands):
losses related to our automobile loans for
the years ended
Year Ended November 30,
2021
2020
2022
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustment for change in accounting principle for current expected credit
losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charge-offs, net of recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 67,236
$ 29,710
$ 23,606
–
35,173
(22,795)
$ 79,614
30,148
18,768
(11,390)
$ 67,236
–
27,974
(21,870)
$ 29,710
The following tables present a summary of automobile loans held for investment by credit score, determined at
origination, at November 30, 2022 for each vintage of the loan portfolio:
2022
2021
2020
2019
2018
Prior
Years
Total
Percent
Year of Origination
Credit scores of 680 and
above . . . . . . . . . . . . . . . . . . . . . $ 53,700 $ 46,668 $17,276 $16,560 $ 7,631 $ 1,378 $143,213
16.3%
Credit scores between 620 to
679 . . . . . . . . . . . . . . . . . . . . . . .
Credit scores below 620 . . . . . .
170,220
175,690
132,528
97,953
44,095
21,371
35,393
19,039
17,635
8,840
7,647
5,602
407,518
328,495
46.3
37.4
Total. . . . . . . . . . . . . . . . . . . . . . $399,610 $277,149 $82,742 $70,992 $34,106 $14,627 $879,226 100.0%
The following tables present a summary of automobile loans held for investment by credit score, determined at
origination, at November 30, 2021 for each vintage of the loan portfolio:
2021
2020
2019
2018
2017
Prior
Years
Total
Percent
Year of Origination
Credit scores of 680 and
above . . . . . . . . . . . . . . . . . . . . $ 71,724 $ 31,215 $ 31,143 $16,695 $ 3,642 $
805 $155,224
19.4%
Credit scores between 620 to
679 . . . . . . . . . . . . . . . . . . . . . .
Credit scores below 620. . . . .
198,097
132,374
79,315
38,322
66,247
34,638
37,714
18,277
17,637
11,689
6,509
5,644
405,519
240,944
50.6
30.0
Total. . . . . . . . . . . . . . . . . . . . . $402,195 $148,852 $132,028 $72,686 $32,968 $12,958 $801,687 100.0%
The aging of automobile loans held for investment at November 30, 2022 is as follows:
2022
2021
2020
2019
2018
Prior
Years
Total
Percent
Year of Origination
Current Accounts . . . . . . . . . . . . $380,863 $255,412 $76,841 $66,338 $31,269 $13,291 $824,014
Delinquent Accounts
30 – 59 days . . . . . . . . . . . . . . . .
60 – 89 days . . . . . . . . . . . . . . . .
90 days and over . . . . . . . . . . . .
12,720
3,718
2,309
15,550
4,156
2,031
39,074
10,448
5,690
1,097
181
59
4,307
1,090
504
3,380
734
539
2,020
569
248
93.7%
4.4
1.2
0.7
Total. . . . . . . . . . . . . . . . . . . . . . $399,610 $277,149 $82,742 $70,991 $34,106 $14,628 $879,226 100.0%
139
Notes to Consolidated Financial Statements, continued
Note 10. Credit Losses on Financial Assets Measured at Amortized Cost, continued
The aging of automobile loans held for investment at November 30, 2021 is as follows:
2021
2020
2019
2018
2017
Prior
Years
Total
Percent
Year of Origination
Current Accounts . . . . . . . . . . . $391,366 $142,210 $125,580 $68,852 $31,147 $12,041 $771,196
Delinquent Accounts
30 – 59 days . . . . . . . . . . . . . . .
60 – 89 days . . . . . . . . . . . . . . .
90 days and over . . . . . . . . . . .
21,310
6,897
2,284
2,979
616
240
4,444
1,586
612
7,387
2,613
829
4,330
1,620
498
1,472
305
44
698
157
61
96.2%
2.7
0.8
0.3
Total. . . . . . . . . . . . . . . . . . . . . $402,195 $148,852 $132,028 $72,687 $32,968 $12,957 $801,687 100.0%
Secured Financing Receivables. In evaluating secured financing receivables (reverse repurchases agreements,
securities borrowing arrangements, and margin loans), the underlying collateral maintenance provisions are taken
into consideration. The underlying contractual collateral maintenance for significantly all of our secured
financing receivables requires that the counterparty continually adjust the collateralization amount, securing the
credit exposure on these contracts. Collateralization levels for our secured financing receivables are initially
established based upon the counterparty, the type of acceptable collateral that is monitored daily and adjusted to
mitigate the potential of any credit losses. Credit losses are not recognized for secured financing receivables
where the underlying collateral’s fair value is equal to or exceeds the asset’s amortized cost basis. In cases where
the collateral’s fair value does not equal or exceed the amortized cost basis, the allowance for credit losses, if
any, is limited to the difference between the fair value of the collateral at the reporting date and the amortized
cost basis of the financial assets. During the year ended November 30, 2021, we incurred bad debt expense of
$39.0 million related to a specific default in our prime brokerage business.
Broker Receivables. Our receivables from brokers, dealers, and clearing organizations include deposits of cash
with exchange clearing organizations to meet margin requirements, amounts due from clearing organizations for
daily variation settlements, securities failed-to-deliver or
fees and
commissions, and receivables arising from unsettled securities or loans transactions. These receivables generally
do not give rise to material credit risk and have a remote probability of default either because of their short-term
nature or due to the credit protection framework inherent in the design and operations of brokers, dealers and
clearing organizations. As such, generally, no allowance for credit losses is held against these receivables.
receivables and payables for
receive,
Other Financial Assets. For all other financial assets measured at amortized cost, we estimate expected credit
losses over the financial assets’ life as of the reporting date based on relevant information about past events,
current conditions, and reasonable and supportable forecasts.
Our allowance for credit losses on our investment banking fee receivables using a provisioning matrix based on
the shared risk characteristics and historical loss experience for such receivables. In some instances, we may
adjust the allowance calculated based on the provision matrix to incorporate a specific allowance based on the
unique credit risk profile of a receivable. The provisioning matrix is periodically updated to reflect changes in
the underlying portfolio’s credit characteristics and most recent historical loss data.
140
Notes to Consolidated Financial Statements, continued
Note 10. Credit Losses on Financial Assets Measured at Amortized Cost, continued
The allowance for credit losses for investment banking receivables for the years ended November 30, 2022, 2021
and 2020 is as follows (in thousands):
Year Ended November 30,
2021
2020
2022
Beginning balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustment for change in accounting principle for current expected credit
losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bad debt expense, net of reversals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recoveries collected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 4,824
$19,788
$ 6,817
–
4,141
(910)
(2,141)
(3,594)
2,287
(6,409)
(7,248)
–
19,582
(2,083)
(4,528)
Ending balance (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 5,914
$ 4,824
$19,788
(1) The allowance for doubtful accounts balances are substantially all related to mergers and acquisitions and
restructuring fee receivables, which include recoverable expense receivables.
Note 11. Goodwill and Intangible Assets
Goodwill
Goodwill attributed to our reportable business segments are as follows (in thousands):
November 30,
2022
2021
Investment Banking and Capital Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,552,944
183,170
$1,736,114
$1,561,928
183,170
$1,745,098
The following table is a summary of the changes to goodwill (in thousands):
Balance, at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Currency translation and other adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance, at end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,745,098
(8,984)
$1,736,114
$1,746,314
(1,216)
$1,745,098
Year Ended November 30,
2022
2021
Goodwill Impairment Testing
A reporting unit is an operating segment or one level below an operating segment. The quantitative goodwill
impairment test is performed at the level of the reporting unit. The fair value of each reporting unit is compared
with its carrying value, including goodwill and allocated intangible assets. If the fair value is in excess of the
carrying value, the goodwill for the reporting unit is considered not to be impaired. If the fair value is less than
the carrying value, then an impairment loss is recognized for the amount by which the carrying value of the
reporting unit exceeds the reporting unit’s fair value. Allocated tangible equity plus allocated goodwill and
intangible assets are used for the carrying amount of each reporting unit.
141
Notes to Consolidated Financial Statements, continued
Note 11. Goodwill and Intangible Assets, continued
Estimating the fair value of a reporting unit requires management judgment. Estimated fair values for our
reporting units were determined using methodologies that include a market valuation method that incorporated
price-to-earnings and price-to-book multiples of comparable public companies and/or projected cash flows.
Under the market valuation approach,
the key assumptions are the selected multiples and our internally
developed projections of future profitability, growth and return on equity for each reporting unit. The weight
assigned to the multiples requires judgment in qualitatively and quantitatively evaluating the size, profitability
and the nature of the business activities of the reporting units as compared to the comparable publicly-traded
companies. In addition, as the fair values determined under the market valuation approach represent a
noncontrolling interest, we applied a control premium to arrive at the estimated fair value of each reporting unit
on a controlling basis. We engaged an independent valuation specialist to assist us in our valuation process at
August 1, 2022.
Historically, we have performed our annual goodwill impairment testing within the Investment Banking and
Capital Markets and Asset Management reportable business segments, which did not indicate any goodwill
impairment as of our annual testing date of August 1, 2022. On November 1, 2022, in connection with the
merger of Jefferies Group LLC into Jefferies Financial Group Inc., we reassessed our reporting units based on
the discrete financial information to be made available to segment management as of and subsequent to the
merger. As a result, we identified each of the Investment Banking, Equities and Fixed Income businesses to be
reporting units within the Investment Banking and Capital Markets reportable business segment. The total
goodwill of $1.55 billion attributed to the Investment Banking and Capital Markets reportable business segment
has been assigned to each of these reporting units as of November 1, 2022, based on the relative fair value of
each of the reporting units as of November 1, 2022. The relative fair value estimate of each of the reporting units
as of November 1, 2022 was based on methodologies consistent with the market valuation approach used in our
annual
test, which are consistent with valuation techniques market participants would use. In
connection with the transfer of certain legacy merchant banking investments to our Asset Management segment,
goodwill previously attributable to our Merchant Banking reportable segment is now included within our Asset
Management reportable business segment.
impairment
We tested the assigned goodwill to each of the Investment Banking, Equities and Fixed Income reporting units as
of November 1, 2022 for impairment by comparing the fair value of the reporting units to their carrying values
as of November 1, 2022. The carrying values of the reporting units were determined based on, allocated tangible
equity as determined by our cash capital model plus allocated goodwill and intangible assets. The amount of
tangible equity allocated to a reporting unit is based on our cash capital model deployed in managing our
businesses, which seeks to approximate the capital a business would require if it were operating independently.
Intangible assets are allocated to a reporting unit based on either specifically identifying a particular intangible
asset as pertaining to a reporting unit or, if shared among reporting units, based on an assessment of the reporting
unit’s benefit from the intangible asset
in order to generate results. There was no indication of goodwill
impairment in any of the reporting units as a result of the testing performed as of November 1, 2022 in
connection with the reassessment of our reporting units.
Intangible Assets
Intangible assets are included in Other assets in our Consolidated Statements of Financial Condition. The
following tables present the gross carrying amount, changes in carrying amount, net carrying amount and
142
Notes to Consolidated Financial Statements, continued
Note 11. Goodwill and Intangible Assets, continued
weighted average amortization period of identifiable intangible assets at November 30, 2022 and 2021 (dollars in
thousands):
Customer relationships . . . . . . . . . . . . . . . . . . . . .
Trade name. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exchange and clearing organization
membership interests and registrations. . . . .
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross cost
$126,028
127,185
7,447
14,957
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$275,617
November 30, 2022
Impairment
losses
Accumulated
amortization
Net carrying
amount
Weighted
average
remaining
lives (years)
$ –
–
(39)
–
$(39)
$ (89,109)
(35,486)
$ 36,919
91,699
–
(11,521)
7,408
3,436
$(136,116)
$139,462
8.2
25.3
N/A
4.7
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . .
Trade name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exchange and clearing organization
membership interests and registrations . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
November 30, 2021
Impairment
losses
Accumulated
amortization
Net carrying
amount
Weighted
average
remaining
lives (years)
$ –
–
(66)
–
$(66)
$(128,012)
(32,244)
$ 42,808
96,509
–
(11,329)
$(171,585)
7,732
5,353
$152,402
9.0
26.3
N/A
5.6
Gross cost
$170,820
128,753
7,798
16,682
$324,053
We performed our annual impairment testing of intangible assets with an indefinite useful life, which consists of
exchange and clearing organization membership interests and registrations, at August 1, 2022. We utilized
quantitative assessments of membership interests and registrations that have available quoted sales prices as well
as certain other membership interests and registrations that have declined in utilization and qualitative
assessments were performed on the remainder of our indefinite-life intangible assets. In applying our quantitative
assessments, we recognized impairment losses on certain exchange membership interests and registrations. With
regard to our qualitative assessments of the remaining indefinite life intangible assets, based on our assessments
of market conditions, the utilization of the assets and the replacement costs associated with the assets, we have
concluded that it is not more likely than not that the intangible assets are impaired.
Amortization Expense
For finite life intangible assets, aggregate amortization expense amounted to $10.9 million, $14.2 million and
$15.3 million for the years ended November 30, 2022, 2021 and 2020, respectively. These expenses are included
in Other expenses in our Consolidated Statements of Earnings.
The estimated future amortization expense for the five succeeding fiscal years is as follows (in thousands):
Year ending November 30, 2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year ending November 30, 2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year ending November 30, 2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year ending November 30, 2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year ending November 30, 2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$9,902
9,147
8,636
8,608
8,593
143
Notes to Consolidated Financial Statements, continued
Note 12. Revenues from Contracts with Customers
The following table presents our total revenues separated for our revenues from contracts with customers and our
other sources of revenues (in thousands):
Year Ended November 30,
2021
2022
2020
Revenues from contracts with customers:
Investment banking. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commissions and other fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset management fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Manufacturing revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Oil and gas revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other contracts with customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,807,822
925,494
23,525
412,605
302,135
223,323
47,954
$4,365,699
896,015
14,836
538,628
182,973
102,297
41,353
$2,501,494
822,248
14,702
421,434
102,210
26,671
34,468
Total revenue from contracts with customers . . . . . . . . . . . . . . . . . . . . .
4,742,858
6,141,801
3,923,227
Other sources of revenue:
Principal transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revenues from strategic affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
833,757
56,739
1,183,638
332,271
1,617,336
57,248
956,318
172,761
1,928,143
19,507
1,009,548
22
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$7,149,263
$8,945,464
$6,880,447
Revenue from contracts with customers is recognized when, or as, we satisfy our performance obligations by
transferring the promised goods or services to the customers. A good or service is transferred to a customer
when, or as, the customer obtains control of that good or service. A performance obligation may be satisfied over
time or at a point in time. Revenue from a performance obligation satisfied over time is recognized by measuring
our progress in satisfying the performance obligation in a manner that depicts the transfer of the goods or
services to the customer. Revenue from a performance obligation satisfied at a point in time is recognized at the
point in time that we determine the customer obtains control over the promised good or service. The amount of
revenue recognized reflects the consideration we expect to be entitled to in exchange for those promised goods
or services (i.e., the ‘‘transaction price’’). In determining the transaction price, we consider multiple factors,
including the effects of variable consideration. Variable consideration is included in the transaction price only to
the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur
when the uncertainties with respect
to the amount are resolved. In determining when to include variable
consideration in the transaction price, we consider the range of possible outcomes, the predictive value of our
past experiences, the time period of when uncertainties expect to be resolved and the amount of consideration
that is susceptible to factors outside of our influence, such as market volatility or the judgment and actions of
third-parties.
The following provides detailed information on the recognition of our revenues from contracts with customers:
Investment Banking. We provide our clients with a full range of financial advisory and underwriting services.
Revenues from financial advisory services primarily consist of fees generated in connection with merger,
acquisition and restructuring transactions. Advisory fees from mergers and acquisitions engagements are
recognized at a point in time when the related transaction is completed, as the performance obligation is to
successfully broker a specific transaction. Fees received prior to the completion of the transaction are deferred
within Accrued expenses and other liabilities in our Consolidated Statements of Financial Condition. Advisory
fees from restructuring engagements are recognized over time using a time elapsed measure of progress as our
clients simultaneously receive and consume the benefits of those services as they are provided. A significant
portion of the fees we receive for our advisory services are considered variable as they are contingent upon a
144
Notes to Consolidated Financial Statements, continued
Note 12. Revenues from Contracts with Customers, continued
future event (e.g., completion of a transaction or third-party emergence from bankruptcy) and are excluded from
the transaction price until the uncertainty associated with the variable consideration is subsequently resolved,
which is expected to occur upon achievement of the specified milestone. Payment for advisory services are
generally due promptly upon completion of a specified milestone or, for retainer fees, periodically over the
course of the engagement. We recognize a receivable between the date of completion of the milestone and
payment by the customer. Expenses associated with investment banking advisory engagements are deferred only
to the extent they are explicitly reimbursable by the client and the related revenue is recognized at a point in
time. All other
including expenses incurred related to
restructuring assignments, are expensed as incurred. All investment banking advisory expenses are recognized
within their respective expense category in our Consolidated Statements of Earnings and any expenses
reimbursed by our clients are recognized as Investment banking revenues.
investment banking advisory related expenses,
Underwriting services include underwriting and placement agent services in both the equity and debt capital
markets, including private equity placements, initial public offerings, follow-on offerings and equity-linked
securities transactions and structuring, underwriting and distributing public and private debt,
including
investment grade debt, high yield bonds, leveraged loans, municipal bonds and mortgage-backed and asset-
backed securities. Underwriting and placement agent revenues are recognized at a point in time on trade-date, as
the client obtains the control and benefit of the underwriting offering at that point. Costs associated with
underwriting transactions are deferred until the related revenue is recognized or the engagement is otherwise
concluded, and are recorded on a gross basis within Underwriting costs in our Consolidated Statements of
Earnings as we are acting as a principal in the arrangement. Any expenses reimbursed by our clients are
recognized as Investment banking revenues.
Commissions and Other Fees. We earn commission and other fee revenue by executing, settling and clearing
transactions for clients primarily in equity, equity-related and futures products. Trade execution and clearing
services, when provided together, represent a single performance obligation as the services are not separately
identifiable in the context of the contract. Commission revenues associated with combined trade execution and
clearing services, as well as trade execution services on a standalone basis, are recognized at a point in time on
trade-date. Commissions revenues are generally paid on settlement date and we record a receivable between
trade-date and payment on settlement date. We permit institutional customers to allocate a portion of their gross
commissions to pay for research products and other services provided by third-parties. The amounts allocated for
those purposes are commonly referred to as soft dollar arrangements. We act as an agent in the soft dollar
arrangements as the customer controls the use of the soft dollars and directs our payments to third-party service
providers on its behalf. Accordingly, amounts allocated to soft dollar arrangements are netted against commission
revenues in our Consolidated Statements of Earnings. We also earn investment research fees for the sales of our
proprietary investment research when a contract with a client has been identified. The delivery of investment
research services represents a distinct performance obligation that is satisfied over time when the performance
obligation is to provide ongoing access to a research platform or research analysts, with fees recognized on a
straight-line basis over the period in which the performance obligation is satisfied. The performance obligation is
satisfied at a point in time when the performance obligation is to provide individual interactions with research
analysts or research events, with fees recognized on the interaction date.
We earn account advisory and distribution fees in connection with wealth management services. Account
advisory fees are recognized over time using the time-elapsed method as we determined that the customer
simultaneously receives and consumes the benefits of investment advisory services as they are provided. Account
advisory fees may be paid in advance of a specified service period or in arrears at the end of the specified service
period (e.g., quarterly). Account advisory fees paid in advance are initially deferred within Accrued expenses and
other liabilities in our Consolidated Statements of Financial Condition. Distribution fees are variable and
recognized when the uncertainties with respect to the amounts are resolved.
145
Notes to Consolidated Financial Statements, continued
Note 12. Revenues from Contracts with Customers, continued
Asset Management Fees. We earn management and performance fees in connection with investment advisory
services provided to various funds and accounts, which are satisfied over time and measured using a time
elapsed measure of progress as the customer receives the benefits of the services evenly throughout the term of
the contract. Management and performance fees are considered variable as they are subject to fluctuation (e.g.,
changes in assets under management, market performance) and/ or are contingent on a future event during the
measurement period (e.g., meeting a specified benchmark) and are recognized only to the extent it is probable
that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty is
resolved. Management fees are generally based on month-end assets under management or an agreed upon
notional amount and are included in the transaction price at the end of each month when the assets under
management or notional amount is known. Performance fees are received when the return on assets under
management for a specified performance period exceed certain benchmark returns, ‘‘high-water marks’’ or other
performance targets. The performance period related to our performance fees is annual or semi-annual.
Accordingly, performance fee revenue will generally be recognized only at the end of the performance period to
the extent that the benchmark return has been met.
Manufacturing Revenues. We earn revenues from the sale of manufactured or
remanufactured lumber.
Agreements with customers for these sales specify the type, quantity and price of products to be delivered as
well as the delivery date and payment terms. The transaction price is fixed at the time of sale and revenue is
generally recognized when the customer takes control of the product.
Oil and Gas Revenues. The sales of oil and natural gas are made under contracts negotiated with customers,
which typically include variable consideration based on monthly pricing tied to local indices and volumes.
Revenue is recorded at the point in time when control of the produced oil and gas transfers to the customer,
which is when the performance obligation is satisfied. The amount of production delivered to the customer and
the price that will be received for the sale of the product is estimated utilizing production reports, market indices
and estimated differential. The variable consideration can be reasonably estimated at the end of the month when
the performance obligation is satisfied.
Real Estate Revenues. Revenues from the sales of real estate are recognized at a point in time when the related
transaction is complete. The majority of our real estate sales of land, lots and homes transfer the goods and
services to the customer at the close of escrow when the title transfers to the buyer and the buyer has the benefit
and control of the goods and service. If performance obligation under the contract with a customer related to a
parcel of real estate are not yet complete when title transfers to the buyer, revenue associated with the incomplete
performance obligation is deferred until the performance obligation is completed.
146
Notes to Consolidated Financial Statements, continued
Note 12. Revenues from Contracts with Customers, continued
Disaggregation of Revenue
The following presents our revenues from contracts with customers disaggregated by major business activity and
primary geographic regions (in thousands):
Year Ended November 30,
2022
2021
2020
Reportable Segment
Reportable Segment
Reportable Segment
Investment
Banking and
Capital
Markets
Asset
Management
Total
Investment
Banking and
Capital
Markets
Asset
Management
Total
Investment
Banking and
Capital
Markets
Asset
Management
Total
Major business activity:
Investment banking -
Advisory . . . . . . . . . . . . . . $1,778,003 $
–
$1,778,003 $1,873,560 $
Investment banking -
Underwriting . . . . . . . . . . .
1,029,819
Equities (1) . . . . . . . . . . . . . .
910,254
Fixed income (1) . . . . . . . . .
15,240
–
–
–
Asset management . . . . . . . .
Merchant banking . . . . . . . .
–
–
23,525
986,017
1,029,819
2,492,139
910,254
881,660
15,240
23,525
986,017
14,355
–
–
–
–
–
–
14,836
865,251
$1,873,560 $1,053,500 $
2,492,139
1,447,994
881,660
806,340
14,355
14,836
865,251
15,908
–
–
–
–
–
–
14,702
584,783
$1,053,500
1,447,994
806,340
15,908
14,702
584,783
Total . . . . . . . . . . . . . . . . . . $3,733,316 $1,009,542 $4,742,858 $5,261,714 $880,087 $6,141,801 $3,323,742 $599,485 $3,923,227
Primary geographic
region:
Americas. . . . . . . . . . . . . . . . . $2,910,318 $1,005,200 $3,915,518 $4,249,641 $876,242 $5,125,883 $2,741,288 $592,474 $3,333,762
Europe and the Middle
East . . . . . . . . . . . . . . . . . . .
Asia . . . . . . . . . . . . . . . . . . . . .
575,012
247,986
2,595
1,747
577,607
249,733
766,746
245,327
2,816
1,029
769,562
246,356
401,853
180,601
6,645
366
408,498
180,967
Total . . . . . . . . . . . . . . . . . . $3,733,316 $1,009,542 $4,742,858 $5,261,714 $880,087 $6,141,801 $3,323,742 $599,485 $3,923,227
(1) Revenues from contracts with customers associated with the equities and fixed income businesses primarily
represent commissions and other fee revenue.
Refer to Note 24, Segment Reporting, for a further discussion on the allocation of revenues to geographic
regions.
Information on Remaining Performance Obligations and Revenue Recognized from Past Performance
We do not disclose information about remaining performance obligations pertaining to contracts that have an
original expected duration of one year or less. The transaction price allocated to remaining unsatisfied or partially
unsatisfied performance obligations with an original expected duration exceeding one year was not material at
November 30, 2022. Investment banking advisory fees that are contingent upon completion of a specific
milestone and fees associated with certain distribution services are also excluded as the fees are considered
variable and not included in the transaction price at November 30, 2022.
During the years ended November 30, 2022, 2021 and 2020, we recognized $78.9 million, $50.0 million and
$11.1 million, respectively, of revenue related to performance obligations satisfied (or partially satisfied) in
previous periods, mainly due to resolving uncertainties in variable consideration that was constrained in prior
periods. In addition, we recognized $28.1 million, $12.1 million and $17.6 million of revenues primarily
147
Notes to Consolidated Financial Statements, continued
Note 12. Revenues from Contracts with Customers, continued
associated with distribution services during the years ended November 30, 2022, 2021 and 2020, respectively, a
portion of which relates to prior periods.
Contract Balances
The timing of our revenue recognition may differ from the timing of payment by our customers. We record a
receivable when revenue is recognized prior to payment and we have an unconditional right to payment.
Alternatively, when payment precedes the provision of the related services, we record deferred revenue until the
performance obligations are satisfied.
Our deferred revenue primarily relates to retainer and milestone fees received in investment banking advisory
engagements where the performance obligation has not yet been satisfied. Deferred revenue at November 30,
2022 and 2021 was $27.0 million and $49.7 million, respectively, which are recorded in Accrued expenses and
other liabilities in our Consolidated Statements of Financial Condition. During the years ended November 30,
2022, 2021 and 2020, we recognized revenue of $48.7 million, $10.8 million and $10.9 million, respectively,
that were recorded as deferred revenue at the beginning of the year. We had receivables related to revenues from
contracts with customers of $206.6 million and $298.7 million at November 30, 2022 and 2021, respectively.
Contract Costs
We capitalize costs to fulfill contracts associated with investment banking advisory engagements where the
revenue is recognized at a point in time and the costs are determined to be recoverable. Capitalized costs to
fulfill a contract are recognized at the point in time that the related revenue is recognized.
At November 30, 2022 and 2021, capitalized costs to fulfill a contract were $3.4 million and $1.6 million,
respectively, which are recorded in Receivables–Fees,
interest and other in the Consolidated Statement of
Financial Condition. For the years ended November 30, 2022, 2021 and 2020, we recognized expenses of $1.6
million, $1.7 million and $5.1 million, respectively, related to costs to fulfill a contract that were capitalized as of
the beginning of the year. There were no significant
impairment charges recognized in relation to these
capitalized costs during the years ended November 30, 2022, 2021 and 2020.
Note 13. Compensation Plans
Equity Compensation Plan. Our 2003 Incentive Compensation Plan, as Amended and Restated (‘‘Incentive
Plan’’), allowed awards in the form of incentive stock options (within the meaning of Section 422 of the Internal
Revenue Code), nonqualified stock options, stock appreciation rights, restricted stock, unrestricted stock,
performance awards, restricted stock units (‘‘RSUs’’), dividend equivalents or other share-based awards. We also
have the 1999 Directors’ Stock Compensation Plan, as Amended and Restated July 25, 2013 (the ‘‘Directors’
Plan’’), which provided for equity awards to our non-employee directors.
On March 25, 2021, a new Equity Compensation Plan (the ‘‘ECP’’) was approved by shareholders. The ECP
replaced the Incentive Plan and Directors’ Plan; no further awards will be granted under the replaced plans. The
ECP is an omnibus plan authorizing a variety of equity award types, as well as cash incentive awards, to be used
for employees, non-employee directors and other service providers. At November 30, 2022, 4,489,965 shares
remain available for new grants under the ECP.
Restricted stock awards are grants of our common shares that require service as a condition of vesting. RSUs
give a participant the right to receive shares if service or performance conditions are met, and which may specify
148
Notes to Consolidated Financial Statements, continued
Note 13. Compensation Plans, continued
an additional deferral period allowing a participant to hold an interest tied to common stock on a tax deferred
basis. Prior to settlement, RSUs carry no voting or dividend rights associated with the stock ownership, but
dividend equivalents are accrued to the extent there are dividends declared on the underlying common shares as
cash amounts or as deemed reinvestments in additional RSUs.
Restricted stock and RSUs may be granted to new employees as ‘‘sign-on’’ awards, to existing employees as
‘‘retention’’ awards and to certain executive officers as incentive awards. Sign-on and retention awards are
generally subject to annual ratable vesting over a multi-year service period and are amortized as compensation
expense on a straight-line basis over the service period. Restricted stock and RSUs granted to certain senior
executives may contain market, performance and/or service conditions. Market conditions are incorporated into
the grant-date fair value of senior executive awards using a Monte Carlo valuation model. Compensation
expense for awards with market conditions is recognized over the service period and is not reversed if the market
conditions are not met. Awards with performance conditions are amortized over the service period if, and to the
extent, it is determined to be probable that the performance condition will be achieved. If awards are forfeited
due to failure to achieve performance conditions or failure to satisfy service conditions, any previously
recognized expense for such awards is reversed.
Senior Executive Compensation Plan. The Compensation Committee of our Board of Directors approved an
executive compensation plan for our senior executives for compensation year 2020 (the ‘‘2020 Plan’’). For each
senior executive, the Compensation Committee targeted long-term compensation of $22.5 million per year under
the 2020 Plan with a target of $16.0 million in long-term equity in the form of RSUs and a target of $6.5 million
in cash for both plan years. To receive targeted long-term equity, our senior executives had to achieve 9% growth
on a multi-year compounded basis in Jefferies’ total shareholder return (‘‘TSR’’) and to receive targeted cash, our
senior executives had to achieve 9% growth in annual Jefferies’ Return on Tangible Deployable Equity
(‘‘ROTDE’’). If TSR and ROTDE were less than 6%, our senior executives would receive no incentive
compensation. If TSR growth rates were greater than 9%, our senior executives were eligible to receive up to
75% additional incentive compensation relative to our peer companies. If ROTDE growth rates were greater than
9%, our senior executives were eligible to receive up to 75% additional
incentive compensation on an
interpolated basis, up to 12% growth rates.
In December 2020, the Compensation Committee of our Board of Directors granted our senior executives
nonqualified stock options and stock appreciation rights (‘‘SARs’’). The total initial fair value of the stock
options and SARs were recorded as expense at the time of the grant, as both awards have no future service
requirements. The SARs initially provided for settlement in cash but, at the sole discretion of the Compensation
Committee, the awards could be converted irrevocably to a stock-settled award. Accordingly, the SARs were
initially determined to be liability-classified share-based awards. In March 2021, the Compensation Committee
exercised its discretion and converted the SARs to stock-settled awards, and at which time they became equity-
classified share-based awards. As a result, a total of 2,506,266 stock options, with an exercise price of $23.75,
were issued to each of our senior executives. The SARs included excess dividend rights, which provide for
crediting to the executive a cash amount equal to two times the amount of any quarterly dividend paid in the 9.5
years after grant to the extent the dividend exceeds the quarterly dividend rate in effect at the time of grant for
each share underlying the granted SARs (including after conversion to stock options). Beginning in March 2021,
the credited amounts are converted to share units at the dividend payment date, to be settled by issuance of
shares 9.5 years after grant of the SARs. All of the stock options vest in three equal annual tranches beginning
December 6, 2021, with a final expiration date of December 5, 2030. For the year ended November 30, 2021, we
recorded $48.6 million of total Compensation and benefits expense relating to the stock options and SARs. At
both November 30, 2022 and 2021, 5,012,532 of our common shares were designated for the senior executive
nonqualified stock options.
149
Notes to Consolidated Financial Statements, continued
Note 13. Compensation Plans, continued
the Compensation Committee of our Board of Directors granted each of our senior
In December 2021,
executives RSUs with a grant date fair value of $8.2 million and performance stock units (‘‘PSUs’’) with a target
fair market value of $8.2 million. The RSUs have a three-year cliff vesting schedule. With respect to the PSUs,
there is a three-year service period, along with performance period measures of fiscal 2021 through fiscal 2023
performance, the threshold level of Return on Tangible Equity (‘‘ROTE’’) was 7.5%, the target level of ROTE
was 10%, and the upper end was 15%. Any performance below 7.5% will result in forfeiture of all PSUs; 7.5%
ROTE will result in receiving 75% of target PSUs; and 15% ROTE or greater will result in receiving 150% of
target PSUs. ROTE performance between 7.5% and 10% and 10% and 15% will be linearly interpolated to
determine PSU distribution.
In December 2021, the Board of Directors also granted our senior executives each a special long-term, five-year
retention grant, termed the Leadership Continuity Grant, with a grant date fair value of $25.0 million. Our senior
executives will gain the benefits of the retention award after an additional three-year holding period following
the five-year service period.
The following table details the total activity in restricted stock, inclusive across all plans, during the years ended
November 30, 2022, 2021 and 2020 (in thousands, except per share amounts):
Weighted-
Average
Grant Date
Fair Value
Restricted Stock
Balance at November 30, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fulfillment of vesting requirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at November 30, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fulfillment of vesting requirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at November 30, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fulfillment of vesting requirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at November 30, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,008
115
(21)
(619)
1,483
337
(40)
(196)
1,584
1,457
–
(902)
2,139
$22.04
$13.20
$23.38
$19.99
$22.19
$30.81
$24.92
$23.55
$23.78
$29.91
$ –
$24.03
$27.85
150
Notes to Consolidated Financial Statements, continued
Note 13. Compensation Plans, continued
The following table details the activity in total RSUs,
November 30, 2022, 2021 and 2020 (in thousands, except per share amounts):
inclusive across all plans, during the years ended
Weighted-Average
Grant Date
Fair Value
Future
Service
Required
No Future
Service
Required
Future
Service
Required
No Future
Service
Required
Balance at November 30, 2019. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributions of underlying shares . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fulfillment of service requirement (1) . . . . . . . . . . . . . . . . . . . . . . . .
Balance at November 30, 2020. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributions of underlying shares . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fulfillment of service requirement (1) . . . . . . . . . . . . . . . . . . . . . . . .
Balance at November 30, 2021. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distributions of underlying shares . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fulfillment of vesting requirement (1) . . . . . . . . . . . . . . . . . . . . . . . .
Balance at November 30, 2022. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10
14
–
–
(3)
21
80
–
–
(53)
48
2,299
–
–
(39)
2,308
15,667
487
(88)
–
2,477
18,543
445
(1,803)
–
8
17,193
472
(6,453)
–
1,443
12,655
$18.83
$13.20
$ –
$ –
$18.83
$14.99
$27.10
$ –
$ –
$25.03
$24.07
$33.75
$ –
$ –
$24.67
$33.70
$21.35
$15.73
$25.48
$ –
$19.80
$20.97
$30.03
$26.32
$ –
$15.52
$20.64
$28.79
$14.65
$ –
$25.38
$24.55
(1) Fulfillment of vesting requirement during the years ended November 30, 2022, 2021 and 2020, includes
1,433 RSUs, 0 RSUs and 2,474 RSUs, respectively, related to the senior executive compensation plans.
During the years ended November 30, 2022, 2021 and 2020, grants include approximately 550,000, 445,000 and
484,000, respectively, of dividend equivalents declared on RSUs; the weighted-average grant date fair values of
the dividend equivalents were approximately $28.78, $30.03 and $15.73, respectively.
151
Notes to Consolidated Financial Statements, continued
Note 13. Compensation Plans, continued
In addition, the following table details the activity in RSUs related to the senior executive compensation plan
targeted number of shares during the years ended November 30, 2022, 2021 and 2020 (in thousands, except per
share amounts):
Target
Number of
Shares
Weighted-
Average
Grant Date
Fair Value
Balance at November 30, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fulfillment of vesting requirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at November 30, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fulfillment of vesting requirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at November 30, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fulfillment of vesting requirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at November 30, 2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,491
187
(15)
(2,474)
4,189
74
(1,396)
–
2,867
537
–
(1,433)
1,971
$23.13
$15.19
$19.01
$19.80
$24.75
$29.81
$25.31
$ –
$25.43
$35.44
$ –
$25.43
$28.16
During the years ended November 30, 2022, 2021 and 2020, grants related to the targeted number of shares
include approximately 67,000, 74,000 and 139,000, respectively, of dividend equivalents declared on RSUs; the
weighted-average grant date fair values of the dividend equivalents were approximately $28.67, $29.81 and
$15.82, respectively. During the year ended November 30, 2020, grants include approximately 48,000 of RSUs
issued as a result of superior performance pursuant to the 2016 compensation year award. In December 2022, the
Compensation Committee of our Board of Directors approved a total of 934,718 RSUs relating to above target
performance earned under the compensation year 2020 Plan.
In estimating the fair value of each stock option award on the grant date we use the Black-Scholes option pricing
model. The below includes both the options granted in December 2020 and the SARs, fair valued as of the time
when the liability settled award was converted to an equity settled option award in March 2021. The following
summary presents the weighted-average assumptions used for the senior executive stock options issued during
the year ended November 30, 2021:
Year Ended
November 30, 2021
Risk free interest rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected life . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted-average fair value per grant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.8%
32.9%
2.6%
5.8 years
$7.43
The risk-free interest rate was based on the U.S. Treasury yield for zero-coupon U.S. Treasury notes with
maturities approximating each grant’s expected life. Expected life assumed options are exercised midway
between the vesting date and expiration date. The expected volatility was based on the historical behavior of the
Company’s stock price using the expected life. Dividend yield was based on our current dividend yield at the
time of grant. The fair value of the excess dividend rights was determined by means of a Monte Carlo
simulation.
152
Notes to Consolidated Financial Statements, continued
Note 13. Compensation Plans, continued
Employee Stock Purchase Plan. An Employee Stock Purchase Plan (the ‘‘ESPP’’) has been implemented under
both the prior Incentive Plan and the new ECP. We consider the ESPP to be noncompensatory effective January
1, 2007. The ESPP allows eligible employees to make payroll contributions that are used to acquire shares of our
stock, generally at a discounted price.
Deferred Compensation Plan. A Deferred Compensation Plan (the ‘‘DCP’’), has been implemented under both
the prior Incentive Plan and the new ECP. The DCP permits eligible employees to defer compensation which
may be deemed invested in our common shares usually at a discount, or directed among other investment
vehicles available under the DCP. We often invest directly, as a principal, in investments corresponding to the
other investment vehicles, relating to our obligations to perform under the DCP. The compensation deferred by
our eligible employees is expensed in the period earned. The change in fair value of our investments in assets
corresponding to the specified other investment vehicles are recognized in Principal transactions revenues and
changes in the corresponding deferred compensation liability are reflected as Compensation and benefits expense
in our Consolidated Statements of Earnings.
Other Stock-Based Plans. In connection with the HomeFed merger in 2019, each HomeFed stock option was
converted into an option to purchase two of our common shares. At November 30, 2022, 2021 and 2020,
12,000, 96,000 and 313,000, respectively, of our common shares were designated for the HomeFed stock
options.
Profit Sharing Plan. We have a profit sharing plan, covering substantially all employees, which includes a salary
reduction feature designed to qualify under Section 401(k) of the Internal Revenue Code.
Restricted Cash Awards. We provide compensation to new and existing employees in the form of loans and/or
other cash awards which are subject to ratable vesting terms with service requirements. We amortize these
awards to compensation expense over the relevant service period, which is generally considered to start at the
beginning of the annual compensation year.
Compensation Expense. The components of
compensation plans are as follows (in millions):
total compensation costs associated with certain of our
Components of compensation costs:
Restricted cash awards (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock options and Stock appreciation rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted stock and RSUs (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Profit sharing plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$196.6
–
43.9
10.5
$375.5
48.7
29.5
7.8
$474.3
0.1
39.9
7.8
Total compensation costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$251.0
$461.5
$522.1
Year Ended November 30,
2022
2020
2021
(1) Amounts include costs related to the accelerated amortization of certain cash-based awards, which were
amended to remove any service requirements for vesting in the awards, which amounted to $0.0 million and
$188.3 million for the years ended November 30, 2022 and 2021, respectively.
(2) Total compensation costs associated with restricted stock and RSUs include the amortization of sign-on,
retention and senior executive awards,
less forfeitures and clawbacks. Additionally, we recognize
compensation costs related to the discount provided to employees in electing to defer compensation under
the DCP. These compensation costs were approximately $0.5 million, $0.4 million and $0.3 million for the
years ended November 30, 2022, 2021 and 2020, respectively.
153
Notes to Consolidated Financial Statements, continued
Note 13. Compensation Plans, continued
Remaining unamortized amounts related to certain compensation plans at November 30, 2022 are as follows
(dollars in millions):
Remaining
Unamortized
Amounts
Weighted
Average Vesting
Period
(in Years)
Non-vested share-based awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$124.6
289.7
$414.3
4
3
In December 2022, $528.0 million of restricted cash awards related to the 2022 performance year that contain a
future service requirement were approved and awarded. Absent actual
forfeitures or cancellations or
accelerations, the annual compensation cost for these awards will be recognized as follows (in millions):
Restricted cash awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$90.4
$106.8
$103.7
$227.1
$528.0
Year Ended November 30,
2022
2023
2024
Thereafter
Total
Note 14. Benefit Plans
U.S. Pension Plans
to the agreement
Pursuant
to sell one of our former subsidiaries, WilTel Communications Group, LLC,
(‘‘WilTel’’) the responsibility for WilTel’s defined benefit pension plan was retained by us. All benefits under
this plan were frozen as of October 30, 2005. Jefferies Group LLC Employees’ Pension Plan (the ‘‘U.S. Pension
Plan’’) is a defined benefit pension plan covering certain employees; benefits under that plan were frozen as of
December 31, 2005. We contributed $1.0 million to the U.S. Pension Plan during the year ended November 30,
2022 and we anticipate making $1.0 million contribution to the plan for the year ending November 30, 2023.
A summary of activity with respect to both plans is as follows (in thousands):
Change in projected benefit obligation:
Projected benefit obligation, beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial (gains) losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Projected benefit obligation, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in plan assets:
Fair value of plan assets, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actual return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employer contributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Administrative expenses paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of plan assets, end of year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Year Ended November 30,
2022
2021
$226,728
5,805
(47,362)
(4,702)
(8,403)
$172,066
$199,215
(37,574)
1,000
(8,403)
(4,702)
(2,264)
$147,272
$236,572
4,946
(4,977)
–
(9,813)
$226,728
$190,220
13,619
7,089
(9,813)
–
(1,900)
$199,215
Funded status at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (24,794)
$ (27,513)
154
Notes to Consolidated Financial Statements, continued
Note 14. Benefit Plans, continued
As of November 30, 2022 and 2021, $40.5 million and $44.9 million, respectively, of the net amount recognized
in the Consolidated Statements of Financial Condition was reflected as a charge to Accumulated other
comprehensive income (loss) (substantially all of which were cumulative losses) and $24.8 million and $27.5
million, respectively, was reflected as accrued pension cost.
The following table summarizes the components of net periodic pension cost and other amounts recognized in
other comprehensive income (loss) excluding taxes (in thousands):
Year Ended November 30,
2021
2020
2022
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlement losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 5,805
(7,311)
833
3,348
$ 4,946
(8,433)
–
4,192
$ 6,349
(7,934)
376
3,453
Net periodic pension cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 2,675
$
705
$ 2,244
Amounts recognized in other comprehensive income (loss):
Net (gains) losses arising during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlement losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (211) $ (8,264) $ 3,821
(376)
–
(3,453)
(833)
(3,348)
(4,192)
Total recognized in other comprehensive income (loss) . . . . . . . . . . . . . . . . .
$(4,392) $(12,456) $
(8)
Net amount recognized in net periodic benefit cost and other
comprehensive income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(1,717) $(11,751) $ 2,236
The amounts in Accumulated other comprehensive income (loss) at November 30, 2022 and 2021 have not yet
been recognized as components of net periodic pension cost in the Consolidated Statements of Operations.
The assumptions used are as follows:
WilTel Plan
Discount rate used to determine benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted-average assumptions used to determine net pension cost:
November 30,
2022
2021
4.90% 2.60%
Discount rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected long-term return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.60% 2.20%
6.00% 7.00%
U.S. Pension Plan
Discount rate used to determine benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted-average assumptions used to determine net pension cost:
4.80% 2.40%
Discount rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected long-term return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.40% 2.00%
5.00% 5.00%
155
Notes to Consolidated Financial Statements, continued
Note 14. Benefit Plans, continued
The following pension benefit payments are expected to be paid (in thousands):
Fiscal Year:
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2028 – 2032. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$15,869
12,362
12,015
12,933
13,487
63,356
U.S. Plan Assets
The information below on the plan assets for the WilTel plan and the U.S. Pension Plan is presented separately
for the plans as the investments are managed independently.
WilTel Plan Assets
The current investment objectives are designed to close the funding gap while mitigating funded status volatility
through a combination of liability hedging and investment returns. As plan funded status improves, the asset
allocation will move along a predetermined, de-risking glide path that reallocates capital from growth assets to
liability-hedging assets in order to reduce funded status volatility and lock in funded status gains. Plan assets are
split into two separate portfolios, each with different asset mixes and objectives. The portfolios are valued at
their NAV as a practical expedient for fair value.
• The Growth Portfolio consists of global equities and high yield investments.
• The Liability-Driven Investing (‘‘LDI’’) Portfolio consists of long duration credit bonds and a suite of
long duration, Treasury-based instruments designed to provide capital-efficient interest rate exposure as
well as target specific maturities. The objective of the LDI Portfolio is to seek to achieve performance
similar to the WilTel plan’s liability by seeking to match the interest rate sensitivity and credit sensitivity.
The LDI Portfolio is managed to mitigate volatility in funded status deriving from changes in the
discounted value of benefit obligations from market movements in the interest
rate and credit
components of the underlying discount curve.
U.S. Pension Plan Assets
We have an agreement with an external investment manager to invest and manage the plan’s assets under a
strategy using a combination of two portfolios. The investment manager allocates the plan’s assets between a
growth portfolio and a liability-driven portfolio according to certain target allocations and tolerance bands that
are agreed to by the Administrative Committee of the U.S. Pension Plan. Such target allocations will take into
consideration the plan’s funded ratio. The manager will also monitor the strategy and, as the plan’s funded ratio
changes over time, will rebalance the strategy, if necessary, to be within the agreed tolerance bands and target
allocations. The portfolios are composed of certain common collective investment trusts that are established and
maintained by the investment manager. The common collective trusts are valued at their NAV as a practical
expedient for fair value.
156
Notes to Consolidated Financial Statements, continued
Note 14. Benefit Plans, continued
Plan Assumptions
To develop the assumption for the expected long-term rate of return on plan assets, we considered the following
underlying assumptions: 2.5% current expected inflation, (0.5)% to 1.5% real rate of return for long duration risk
free investments and an additional 0.5% to 1.5% return premium for corporate credit risk. For U.S. and
international equity, we assume an equity risk premium over risk-free assets equal to 4.6%. We then weighted
these assumptions based on invested assets and assumed that investment expenses were offset by expected
returns in excess of benchmarks, which resulted in the selection of 6.0% and 5.0% expected long-term rate of
return assumption for WilTel and U.S. Pension plan, respectively, for 2022.
Other
We have defined contribution pension plans, including 401(k) plans, that cover certain employees. Amounts
charged to expense related to such plans were $12.7 million, $9.8 million and $9.5 million for the years ended
November 30, 2022, 2021 and 2020, respectively.
Note 15. Leases
We enter into lease and sublease agreements, primarily for office space, across our geographic locations.
Information related to operating leases in our Consolidated Statements of Financial Condition at November 30,
2022 and 2021 is as follows (in thousands, except lease term and discount rate):
Premises and equipment – ROU assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average:
Remaining lease term (in years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
November 30,
2022
2021
$455,264
$472,014
10.0
2.9%
10.0
2.9%
The following table presents the maturities of our operating lease liabilities and a reconciliation to the Lease
liabilities included in our Consolidated Statements of Financial Condition at November 30, 2022 and 2021 (in
thousands):
Fiscal Year
November 30,
2022
2021
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2028 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
–
76,847
78,656
78,103
74,472
71,255
228,722
$ 75,384
71,383
67,039
66,939
64,105
61,722
228,964
Total undiscounted cash flows. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Difference between undiscounted and discounted cash flows . . . . . . . . . . . . . . . . . . .
Operating leases amount in our Consolidated Statements of Financial Condition . . . . . .
Finance leases amount in our Consolidated Statements of Financial Condition . . . . . . . .
608,055
(75,353)
532,702
1,006
635,536
(87,470)
548,066
229
Total amount in our Consolidated Statements of Financial Condition. . . . . . . . . . . . . . .
$533,708
$548,295
157
Notes to Consolidated Financial Statements, continued
Note 15. Leases, continued
In addition to the table above, at November 30, 2022, we entered into a lease agreement that was signed but had
not yet commenced. This operating lease will commence in 2023 with a lease term of five years. Lease payments
for this lease agreement will be $1.2 million for the period from lease commencement to the end of the lease
term.
The following table presents our lease costs (in thousands):
Year Ended November 30,
2021
2022
2020
Operating lease costs (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Variable lease costs (2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Sublease income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$80,959
12,887
(4,507)
$79,701
11,168
(7,191)
$77,452
13,576
(7,590)
Total lease cost, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$89,339
$83,678
$83,438
(1) Includes short-term leases, which are not material.
(2) Includes property taxes, insurance costs, common area maintenance, utilities, and other costs that are not
fixed. The amount also includes rent increases resulting from inflation indices and periodic market rent
reviews.
Consolidated Statements of Cash Flows supplemental information was as follows (in thousands):
Year Ended November 30,
2021
2022
2020
Cash outflows – lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash – ROU assets recorded for new and modified leases. . . . . . . . . . . . . . .
$81,082
87,977
$79,437
30,246
$73,300
22,460
The amortization of the ROU assets is included within Other adjustments in the Consolidated Statements of Cash
Flows.
Note 16. Short-Term Borrowings
Short-term borrowings at November 30, 2022 and 2021 mature in one year or less and include the following (in
thousands):
November 30,
2022
2021
Bank loans (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed rate callable note (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Floating rate puttable notes (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$517,524
4,068
6,800
$215,063
–
6,800
Total short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$528,392
$221,863
(1) These Short-term borrowings are recorded at cost in our Consolidated Statements of Financial Condition,
which is a reasonable approximation of their fair values due to their liquid and short-term nature.
At November 30, 2022, the weighted average interest rate on short-term borrowings outstanding is 4.62% per
annum.
At November 30, 2022 and 2021, our borrowings under credit facilities classified within bank loans in Short-
term borrowings in our Consolidated Statements of Financial Condition were $517.0 million and $200.0 million,
158
Notes to Consolidated Financial Statements, continued
Note 16. Short-Term Borrowings, continued
respectively. Our borrowings include credit facilities that contain certain covenants that, among other things,
require us to maintain a specified level of tangible net worth, require a minimum regulatory net capital
requirement for our U.S. broker-dealer, Jefferies LLC, and impose certain restrictions on the future indebtedness
of certain of our subsidiaries that are borrowers. Interest is based on rates at spreads over the federal funds rate
or other adjusted rates, as defined in the various credit agreements, or at a rate as agreed between the bank and
us in reference to the bank’s cost of funding. At November 30, 2022, we were in compliance with all covenants
under these credit facilities.
Note 17. Long-Term Debt
The following summarizes our long-term debt carrying values (including unamortized discounts and premiums,
valuation adjustments and debt issuance costs, where applicable) (in thousands):
Maturity
Effective
Interest Rate
November 30,
2022
2021
Unsecured long-term debt
5.500% Senior Notes . . . . . . . . . . . . . . . . . . . . . . . . . . October 18, 2023
July 19, 2024
1.000% Euro Medium Term Notes . . . . . . . . . . . . .
4.500% Callable Note due 2025 . . . . . . . . . . . . . . .
July 22, 2025
5.000% Callable Note due 2026 . . . . . . . . . . . . . . . March 26, 2026
January 15, 2027
4.850% Senior Notes (1) . . . . . . . . . . . . . . . . . . . . . .
June 8, 2027
6.450% Senior Debentures . . . . . . . . . . . . . . . . . . . . .
June 16, 2027
5.000% Callable Note due 2027 . . . . . . . . . . . . . . .
February 17, 2028
5.000% Callable Note due 2028 . . . . . . . . . . . . . . .
4.150% Senior Notes . . . . . . . . . . . . . . . . . . . . . . . . . .
January 23, 2030
2.625% Senior Debentures (1) . . . . . . . . . . . . . . . . . October 15, 2031
2.750% Senior Debentures (1) . . . . . . . . . . . . . . . . . October 15, 2032
January 15, 2036
6.250% Senior Notes . . . . . . . . . . . . . . . . . . . . . . . . . .
6.500% Senior Notes . . . . . . . . . . . . . . . . . . . . . . . . . .
January 20, 2043
6.625% Senior Notes . . . . . . . . . . . . . . . . . . . . . . . . . . October 23, 2043
Floating Rate Senior Notes . . . . . . . . . . . . . . . . . . . . October 29, 2071
August 3, 2023
Unsecured Revolving Credit Facility . . . . . . . . . . .
Structured notes (2) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Various
Total unsecured long-term debt . . . . . . . . . . . . . .
Secured long-term debt
HomeFed EB-5 Program debt. . . . . . . . . . . . . . . . . .
HomeFed construction loans . . . . . . . . . . . . . . . . . . .
Secured Credit Facilities . . . . . . . . . . . . . . . . . . . . . . .
Secured Bank Loan . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total long-term debt (3) . . . . . . . . . . . . . . . . . . . . .
5.47% $ 393,048
519,970
1.00%
6,153
4.84%
8,554
5.52%
703,533
6.29%
363,915
5.46%
24,784
5.22%
9,888
5.29%
991,518
4.26%
911,777
3.90%
392,162
5.67%
497,681
6.03%
409,472
6.09%
246,954
6.61%
61,715
3.72%
349,578
5.29%
1,583,828
7,474,530
Various
$ 440,120
564,985
–
–
775,550
366,556
–
–
990,525
988,059
460,724
505,267
409,926
246,888
61,703
348,951
1,843,598
8,002,852
209,060
56,965
933,531
100,000
203,132
45,581
774,180
100,000
$8,774,086
$9,125,745
(1) The carrying values of these senior notes include net gains of $219.1 million and $58.5 million during the
years ended November 30, 2022 and 2021, respectively, associated with interest rate swaps based on
designation as fair value hedges. See Note 2, Summary of Significant Accounting Policies, and Note 5,
Derivative Financial Instruments, for further information.
(2) These structured notes contain various interest rate payment terms and are accounted for at fair value, with
changes in fair value resulting from a change in the instrument-specific credit risk presented in other
comprehensive income and changes in fair value resulting from non-credit components recognized in
159
Notes to Consolidated Financial Statements, continued
Note 17. Long-Term Debt, continued
Principal transactions revenues. A weighted average coupon rate is not meaningful, as all of the structured
notes are carried at fair value.
(3) The Total Long-term debt has a fair value of $8.46 billion and $9.85 billion at November 30, 2022 and
2021, respectively, which would be classified as Level 2 and Level 3 in the fair value hierarchy.
In connection with the merger of Jefferies Group LLC with and into Jefferies Financial Group Inc. on November
1, 2022, we assumed all of the debt obligations of Jefferies Group LLC, which had previously been non-recourse
to us.
During 2022, long-term debt decreased by $351.7 million to $8.77 billion at November 30, 2022, as presented in
our Consolidated Statements of Financial Condition. This decrease is primarily due to fair value changes in our
structured notes and gains on certain of our senior notes associated with interest rate swaps based on their
designation as fair value hedges, partially offset by structured notes issuances, net of
retirements, of
approximately $209.4 million and net issuances of approximately $176.7 million related to our secured credit
facilities.
During 2021, long-term debt increased by $774 million to $9.13 billion at November 30, 2021. This increase is
primarily due to our issuances of 2.625% senior notes with a principal amount of $1.0 billion, due 2031, and
floating rate senior notes with a principal amount of $62.3 million, due 2071, partially offset by the early
redemption of our 5.125% senior notes with a principal amount of $750.0 million, due January 20, 2023 and
partial repurchase of $308.3 million of our 5.500% senior notes, due October 18, 2023. The change was also due
to an increase of $349.0 million from borrowings under our senior unsecured revolving credit facility
(‘‘Unsecured Revolving Credit Facility’’), an increase of $484.3 million from secured long-term borrowings and
approximately $175.6 million of structured notes issuances, net of retirements.
At November 30, 2022 and 2021, our borrowings under several credit facilities classified within Long-term debt
in our Consolidated Statements of Financial Condition amounted to $933.5 million and $774.1 million,
respectively. Interest on these credit facilities are based on adjusted London Interbank Offered Rate (‘‘LIBOR’’)
rates, Secured Overnight Financing Rate (‘‘SOFR’’) plus a spread or other adjusted rates, as defined in the
various credit agreements. The credit facility agreements contain certain covenants that, among other things,
require us to maintain specified levels of tangible net worth and liquidity amounts, and impose certain
restrictions on future indebtedness of and require specified levels of regulated capital and cash reserves for
certain of our subsidiaries. At November 30, 2022, we were in compliance with all covenants under theses credit
facilities, except for certain facilities secured by automobile loans with an amount outstanding of $112.9 million
for which technical covenant violations have occurred that are in the process of being resolved with the lenders.
In addition, one of our subsidiaries has a Loan and Security Agreement with a bank for a term loan (‘‘Secured
Bank Loan’’). At November 30, 2022 and 2021, borrowings under the Secured Bank Loan amounted to
$100.0 million and are also classified within Long-term debt in our Consolidated Statements of Financial
Condition. The Secured Bank Loan matures on September 13, 2024 and is collateralized by certain trading
securities with an interest rate of 1.25% plus LIBOR. The agreement contains certain covenants that, among
other things, restricts lien or encumbrance upon any of the pledged collateral. At November 30, 2022, we were
in compliance with all covenants under the Secured Bank Loan.
HomeFed funds certain of its real estate projects in part by raising funds under the Immigrant Investor Program
administered by the U.S. Citizenship and Immigration Services pursuant to the Immigration and Nationality Act
(‘‘EB-5 Program’’). This debt is secured by certain real estate of HomeFed. At November 30, 2022, HomeFed
was in compliance with all debt covenants which include, among other requirements, limitations on incurrence of
debt, collateral requirements and restricted use of proceeds. Primarily all of HomeFed’s EB-5 Program debt
matures in 2024 through 2026.
160
Notes to Consolidated Financial Statements, continued
Note 17. Long-Term Debt, continued
At November 30, 2022, HomeFed has construction loans with an aggregate committed amount of $101.9
million. The proceeds are being used for construction at certain of its real estate projects. The outstanding
principal amount of the loans bears interest based on the 30 day LIBOR or the SOFR, plus spreads of 1.35% to
3.00%, subject to adjustment on the first of each calendar month. At November 30, 2022, the weighted average
interest rate on these loans was 6.07%. The loans mature between October 2023 and May 2024 and are
collateralized by the property underlying the related project with a guarantee by HomeFed. At November 30,
2022 and 2021, $57.0 million and $45.6 million, respectively, was outstanding under the construction loan
agreements.
Note 18. Mezzanine Equity
Redeemable Noncontrolling Interests
At November 30, 2022 and 2021, redeemable noncontrolling interests include other redeemable noncontrolling
interests of $6.5 million and $25.4 million, respectively, primarily related to our oil and gas exploration and
development businesses.
Mandatorily Redeemable Convertible Preferred Shares
Our 125,000 callable mandatorily redeemable cumulative convertible preferred shares (‘‘Preferred Shares’’) are
callable beginning January 2023 at a price of $1,000 per share, plus accrued interest and are mandatorily
redeemable in 2038 for $125.0 million. The Preferred Shares have a dividend rate equal to the sum of 3.25%
annual, cumulative cash dividend, plus an additional quarterly payment based on the amount by which our
common stock dividends exceed $0.0625 per common share. At November 30, 2022, the Preferred Shares are
convertible into 4,440,863 common shares, an effective conversion price of $28.15 per share. Based on the
current quarterly dividend of $0.30 per common share,
the effective rate on these Preferred Shares is
approximately 6.6%. In connection with the Vitesse Energy spin-off, the number of common shares into which
the Preferred Shares will convert may be adjusted based on subsequent trading prices, which may increase the
number of Preferred Shares convertible into common shares.
161
Notes to Consolidated Financial Statements, continued
Note 19. Common Shares and Earnings Per Common Share
Basic and diluted earnings per common share amounts were calculated by dividing net earnings by the weighted-
average number of common shares outstanding. The numerators and denominators used to calculate basic and
diluted earnings per share are as follows (in thousands):
Year Ended November 30,
2021
2022
2020
Numerator for earnings per common share:
Net earnings attributable to Jefferies Financial Group Inc. . . . . . . . . . . . .
Allocation of earnings to participating securities (1) . . . . . . . . . . . . . . . . .
Net earnings attributable to Jefferies Financial Group Inc. common
shareholders for basic earnings per share . . . . . . . . . . . . . . . . . . . . . . .
Adjustment to allocation of earnings to participating securities related
to diluted shares (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mandatorily redeemable convertible preferred share dividends . . . . . . . .
Net earnings attributable to Jefferies Financial Group Inc. common
shareholders for diluted earnings per share . . . . . . . . . . . . . . . . . . . . .
$777,168
(3,015)
$1,667,403
(9,961)
$769,605
(4,795)
774,153
1,657,442
764,810
29
8,281
207
6,949
23
5,634
$782,463
$1,664,598
$770,467
Denominator for earnings per common share:
Weighted average common shares outstanding . . . . . . . . . . . . . . . . . . . . . . .
Weighted average shares of restricted stock outstanding with future
service required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average RSUs outstanding with no future service required . .
Denominator for basic earnings per common share – weighted
average shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock options and other share-based awards . . . . . . . . . . . . . . . . . . . . . . . . .
Senior executive compensation plan RSU awards . . . . . . . . . . . . . . . . . . . .
Mandatorily redeemable convertible preferred shares . . . . . . . . . . . . . . . . .
Denominator for diluted earnings per common share . . . . . . . . . . . . . .
234,258
246,991
268,518
(1,330)
14,450
(1,567)
18,171
(1,785)
18,960
247,378
1,518
2,234
4,441
255,571
263,595
1,203
2,262
4,441
271,501
285,693
–
356
4,441
290,490
Earnings per common share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$3.13
$3.06
$6.29
$6.13
$2.68
$2.65
(1) Represents dividends declared during the period on participating securities plus an allocation of undistributed
earnings to participating securities. Net losses are not allocated to participating securities. Participating
securities represent restricted stock and RSUs for which requisite service has not yet been rendered and
amounted to weighted average shares of 991,400, 1,586,500 and 1,801,700 for
the years ended
November 30, 2022, 2021 and 2020, respectively. Dividends declared on participating securities were
$1.1 million, $1.4 million and $1.0 million during the years ended November 30, 2022, 2021 and 2020,
respectively. Undistributed earnings are allocated to participating securities based upon their right to share in
earnings if all earnings for the period had been distributed.
Our Board of Directors from time to time has authorized the repurchase of our common shares. In January 2022,
the Board of Directors increased the share repurchase authorization by $87.5 million. In March 2022, the Board
of Directors increased the share repurchase authorization by $250.0 million. In June 2022, the Board of Directors
increased the share repurchase authorization by $250.0 million. In September 2022, the Board of Directors
increased the share repurchase authorization by $145.9 million back to a total authorized repurchase amount of
$250.0 million.
162
Notes to Consolidated Financial Statements, continued
Note 20. Accumulated Other Comprehensive Income (Loss)
Activity in accumulated other comprehensive income (loss) is reflected in the Consolidated Statements of
Comprehensive Income (Loss) and Consolidated Statements of Changes in Equity but not in the Consolidated
Statements of Operations. A summary of accumulated other comprehensive income (loss), net of taxes is as
follows (in thousands):
2022
November 30,
2021
2020
Net unrealized gains (losses) on available for sale securities . . . . . . . . . . .
Net unrealized foreign exchange losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized losses related to instrument specific credit risk . . . . . . . . . .
Net minimum pension liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . .
$
$ (5,892) $
(220,071)
(104,526)
(48,930)
513
269
(156,718)
(166,499)
(71,151)
(153,672)
(61,561)
(52,241)
$(379,419) $(372,143) $(288,917)
Significant amounts reclassified out of accumulated other comprehensive income (loss) to net earnings are as
follows (in thousands):
Details about Accumulated Other
Comprehensive Income (Loss)
Components
Amount Reclassified from
Accumulated
Other Comprehensive Income
(Loss)
Year Ended November 30,
2020
2021
2022
Affected Line Item in the
Consolidated Statements of
Earnings
Net unrealized gains (losses) on instru-
ment specific credit risk at fair
value, net of income tax benefit
(expense) of $41, $(599), and
$(146), respectively . . . . . . . . . . . . . . . . $ (129) $ 1,861 $
397 Principal transactions revenues
Amortization of defined benefit pen-
sion plan actuarial losses, net of
income tax benefit of $845, $1,054,
and $957, respectively . . . . . . . . . . . . . .
Total reclassifications for the period,
(2,483)
(3,138)
(2,872)
Compensation and benefits expenses.
See Note 14, Benefit Plans for
information on this component.
net of tax . . . . . . . . . . . . . . . . . . . . . . . $(2,612) $(1,277) $(2,475)
163
Notes to Consolidated Financial Statements, continued
Note 21. Income Taxes
The provision for income tax expense consists of the following components (in thousands):
Year Ended November 30,
2021
2022
2020
Current:
U.S. Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. state and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$198,507
67,236
78,505
$322,551
70,370
86,918
$ 90,350
68,261
75,395
Total current. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
344,248
479,839
234,006
Deferred:
U.S. Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. state and local . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(61,303)
(17,010)
7,917
(70,396)
72,753
19,502
4,635
96,890
52,765
(1,288)
13,190
64,667
Total income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$273,852
$576,729
$298,673
The following table presents the U.S. and non-U.S. components of earnings before income tax expense (in
thousands):
U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-U.S. (1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 801,047
254,515
$1,970,625
283,480
$ 813,305
253,778
Earnings before income tax expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,055,562
$2,254,105
$1,067,083
Year Ended November 30,
2021
2022
2020
(1) For purposes of this table, non-U.S. income is defined as income generated from operations located outside
the U.S.
Income tax expense differed from the amounts computed by applying the U.S. Federal statutory income tax rate
of 21.0% to earnings before income taxes as a result of the following (dollars in thousands):
164
Notes to Consolidated Financial Statements, continued
Note 21. Income Taxes, continued
Computed expected federal income taxes. . . . . . .
Increase (decrease) in income taxes resulting
from:
State and local income taxes, net of Federal
2022
Year Ended November 30,
2021
2020
Amount
Percent
Amount
Percent
Amount
Percent
$221,668
21.0% $473,362
21.0% $224,087
21.0%
income tax benefit . . . . . . . . . . . . . . . . . . . . . . .
47,364
4.5
96,884
4.3
45,457
4.3
International operations (including foreign
rate differential). . . . . . . . . . . . . . . . . . . . . . . . . .
Non-deductible executive compensation . . . . . .
Foreign tax credits, net . . . . . . . . . . . . . . . . . . . . .
Employee share-based awards . . . . . . . . . . . . . . .
Regulatory Settlement . . . . . . . . . . . . . . . . . . . . . .
Change in unrecognized tax benefits related
to prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest on unrecognized tax benefits . . . . . . . .
Other, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total income tax expense. . . . . . . . . . . . . . . . .
18,711
12,596
(20,368)
(37,988)
20,184
1.8
1.2
(1.9)
(3.6)
1.9
18,073
20,359
(13,963)
893
–
0.8
0.9
(0.6)
–
–
13,155
12,814
(8,654)
209
–
1.2
1.2
(0.8)
–
–
(16,915)
13,902
14,698
$273,852
(1.7)
1.3
1.4
(27,374)
8,651
(156)
25.9% $576,729
(1.2)
0.4
–
(4,522)
15,600
527
25.6% $298,673
(0.5)
1.5
0.1
28.0%
The following table presents a reconciliation of gross unrecognized tax benefits (in thousands):
Year Ended November 30,
2021
2022
2020
Balance at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increases based on tax positions related to the current period . . . . . . . . . .
Increases based on tax positions related to prior periods . . . . . . . . . . . . . . .
Decreases based on tax positions related to prior periods . . . . . . . . . . . . . .
Decreases related to settlements with taxing authorities . . . . . . . . . . . . . . . .
$339,036
30,690
5,902
(25,673)
–
$314,347
50,079
3,490
(24,180)
(4,700)
$260,138
41,114
22,328
(8,966)
(267)
Balance at end of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$349,955
$339,036
$314,347
The total amount of unrecognized benefits that, if recognized, would favorably affect the effective tax rate was
$276.5 million and $267.8 million (net of Federal benefit) at November 30, 2022 and 2021, respectively.
We recognize interest accrued related to unrecognized tax benefits and penalties, if any, as components of
Income tax expense. Net interest expense related to unrecognized tax benefits was $18.6 million, $10.8 million
and $19.9 million for the years ended November 30, 2022, 2021 and 2020, respectively. At November 30, 2022,
2021 and 2020, we had interest accrued of approximately $116.5 million, $97.9 million and $87.1 million,
respectively, included in Accrued expenses and other liabilities in our Consolidated Statements of Financial
Condition. No material penalties were accrued for the years ended November 30, 2022, 2021 and 2020.
165
Notes to Consolidated Financial Statements, continued
Note 21. Income Taxes, continued
The cumulative tax effects of temporary differences that give rise to significant portions of the deferred tax assets
and liabilities are presented below (in thousands):
November 30,
2022
2021
Deferred tax assets:
Compensation and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in associated companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sub-total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$250,096
133,250
47,535
166,564
11,931
609,376
$187,818
135,862
65,037
178,451
1,135
568,303
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6,266)
603,110
(11,922)
556,381
Deferred tax liabilities:
Operating lease right-of-use assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
118,567
62,670
34,011
215,248
126,150
62,123
40,561
228,834
Net deferred tax asset, included in Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$387,862
$327,547
The valuation allowance represents the portion of our deferred tax assets for which it is more likely than not that
the benefit of such items will not be realized. We believe that the realization of the net deferred tax asset of
$387.9 million at November 30, 2022 is more likely than not based on expectations of future taxable income in
the jurisdictions in which we operate.
At November 30, 2022, we had gross net operating loss carryforwards of $10.2 million, primarily related to
various state and local jurisdictions. This balance has been partially offset by a valuation allowance of $4.5
million. The remaining valuation allowance is attributable to deferred tax assets related to compensation and
benefits in the U.K.
We are currently under examination by a number of taxing jurisdictions. Though we do not expect that resolution
of these examinations will have a material effect on our consolidated financial position, they may have a material
impact on our consolidated results of operations for the period in which resolution occurs. It is reasonably
possible that, within the next twelve months, statutes of limitation will expire which would have the effect of
reducing the balance of unrecognized tax benefits by $26.3 million.
tax years that remain subject
to examination in the major tax
The table below summarizes the earliest
jurisdictions in which we operate:
Jurisdiction
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
New York State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
New York City . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hong Kong . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
166
Tax Year
2019
2001
2006
2021
2017
2016
2010
Notes to Consolidated Financial Statements, continued
Note 21. Income Taxes, continued
We will recognize any U.S. income tax expense we may incur on global intangible low-taxed income as income
tax expense in the period in which the tax is incurred.
On August 16, 2022, the Inflation Reduction Act of 2022 was signed into law. The Inflation Reduction Act of
2022 includes a 15% corporate alternative minimum tax (‘‘AMT’’) and a one percent excise tax on net stock
repurchases. The corporate AMT applies to corporations with average annual profits over $1 billion and is
calculated on their financial statement income, with certain adjustments, and will apply to our tax year beginning
December 1, 2023. The one percent excise tax on net stock repurchases is effective January 1, 2023. We do not
expect that these changes will have a significant effect on our future effective tax rate, but we will continue to
evaluate the nature and monitor the extent of the potential impacts.
Note 22. Commitments, Contingencies and Guarantees
Commitments
The following table summarizes our commitments at November 30, 2022 (in millions):
Equity commitments (1) . . . . . . . . . . . . . . . . . . .
Loan commitments (1). . . . . . . . . . . . . . . . . . . . .
Loans purchase commitments (2) . . . . . . . . . . .
Underwriting commitments. . . . . . . . . . . . . . . . .
Forward starting reverse repos (3) . . . . . . . . . .
Forward starting repos (3) . . . . . . . . . . . . . . . . .
Other unfunded commitments (1) . . . . . . . . . . .
Total commitments . . . . . . . . . . . . . . . . . . . . . .
Expected Maturity Date (fiscal years)
2025 and
2027 and
2028
2026
2024
2029 and
Later
Maximum
Payout
$
1.4
–
–
–
–
–
287.5
$288.9
$103.3
70.0
–
–
–
–
109.7
$283.0
$ 2.8
9.9
–
–
–
–
–
$12.7
$160.2
–
–
–
–
–
–
$160.2
$
292.9
351.4
2,363.9
62.3
8,470.9
4,213.7
397.3
$16,152.4
2023
$
25.2
271.5
2,363.9
62.3
8,470.9
4,213.7
0.1
$15,407.6
(1) Equity, loan and other unfunded commitments are presented by contractual maturity date. The amounts,
however, are available on demand.
(2) Loan purchase commitments comprise of unfunded commitments to acquire secondary market loans. For the
population of loans to be acquired under the loan purchase commitments, at November 30, 2022, Jefferies
had also entered into back-to-back committed sale contracts aggregating to $2.67 billion.
(3) At November 30, 2022, $7.73 billion within forward starting securities purchased under agreements to resell
and all except $2.6 million of forward starting securities sold under agreements to repurchase settled within
three business days.
Equity Commitments. Include a commitment to invest in our joint venture, Jefferies Finance, and commitments to
invest in private equity funds and in Jefferies Capital Partners, LLC, the manager of the private equity funds,
which consists of a team led by our President and a director. At November 30, 2022, our outstanding
commitments relating to Jefferies Capital Partners, LLC and its private equity funds were $10.6 million.
Additionally, at November 30, 2022, we had other outstanding equity commitments to invest up to
$230.1 million with strategic affiliates and $36.8 million to various other investments.
Loan Commitments. From time to time we make commitments to extend credit to clients and to strategic
affiliates. These commitments and any related drawdowns of these facilities typically have fixed maturity dates
167
Notes to Consolidated Financial Statements, continued
Note 22. Commitments, Contingencies and Guarantees, continued
and are contingent on certain representations, warranties and contractual conditions applicable to the borrower.
At November 30, 2022, we had $97.4 million of outstanding loan commitments to clients and $4.0 million to
strategic affiliates.
Loan commitments outstanding at November 30, 2022 also include our portion of the outstanding secured
revolving credit facility provided to Jefferies Finance, to support loan underwritings by Jefferies Finance.
Underwriting Commitments. In connection with investment banking activities, we may from time to time provide
underwriting commitments to our clients in connection with capital raising transactions.
Forward Starting Reverse Repos and Repos. We enter into commitments to take possession of securities with
agreements to resell on a forward starting basis and to sell securities with agreements to repurchase on a forward
starting basis that are primarily secured by U.S. government and agency securities.
Other Unfunded Commitments. Other unfunded commitments include obligations in the form of revolving notes,
warehouse financings and debt securities to provide financing to asset-backed and CLO vehicles. Upon
advancing funds, drawn amounts are collateralized by the assets of an entity.
Guarantees
Derivative Contracts. As a dealer, we make markets and trade in a variety of derivative instruments. Certain
derivative contracts that we have entered into meet the accounting definition of a guarantee under U.S. GAAP,
including credit default swaps, written foreign currency options and written equity put options. On certain of
these contracts, such as written interest rate caps and foreign currency options, the maximum payout cannot be
quantified since the increase in interest or foreign exchange rates are not contractually limited by the terms of the
contract. As such, we have disclosed notional values as a measure of our maximum potential payout under these
contracts.
The following table summarizes the notional amounts associated with our derivative contracts meeting the
definition of a guarantee under U.S. GAAP at November 30, 2022 (in millions):
Expected Maturity Date (Fiscal Years)
2023
2024
2025 and
2026
2027 and
2028
2029 and
Later
Notional/
Maximum
Payout
Guarantee Type:
Derivative contracts – non-credit related.
Written derivative contracts – credit
related . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$19,015.0
$6,933.1
$11,994.3
$850.3
$ –
$38,792.7
–
0.2
–
–
–
0.2
Total derivative contracts . . . . . . . . . . . .
$19,015.0
$6,933.3
$11,994.3
$850.3
$ –
$38,792.9
The derivative contracts deemed to meet the definition of a guarantee under U.S. GAAP are before consideration
of hedging transactions and only reflect a partial or ‘‘one-sided’’ component of any risk exposure. Written equity
options and written credit default swaps are often executed in a strategy that is in tandem with long cash
instruments (e.g., equity and debt securities). We substantially mitigate our exposure to market risk on these
contracts through hedges, such as other derivative contracts and/or cash instruments, and we manage the risk
associated with these contracts in the context of our overall risk management framework. We believe notional
amounts overstate our expected payout and that fair value of these contracts is a more relevant measure of our
obligations. At November 30, 2022, the fair value of derivative contracts meeting the definition of a guarantee is
approximately $702.1 million.
168
Notes to Consolidated Financial Statements, continued
Note 22. Commitments, Contingencies and Guarantees, continued
Berkadia. We have agreed to reimburse Berkshire Hathaway for up to one-half of any losses incurred under a
$1.5 billion surety policy securing outstanding commercial paper issued by an affiliate of Berkadia. At
November 30, 2022, the aggregate amount of commercial paper outstanding was $1.47 billion.
HomeFed. For real estate development projects, we are generally required to obtain infrastructure improvement
bonds at the beginning of construction work and warranty bonds upon completion of such improvements. These
bonds are issued by surety companies to guarantee a municipality satisfactory completion of a project. As the
planned area is developed and the municipality accepts the improvements, the bonds are released. At November
30, 2022, the aggregate amount of infrastructure improvement bonds outstanding was $70.7 million.
Standby Letters of Credit. At November 30, 2022, we provided guarantees to certain counterparties in the form
of standby letters of credit in the amount of $57.6 million, with a weighted average maturity of less than one
year. Standby letters of credit commit us to make payment to the beneficiary if the guaranteed party fails to
fulfill its obligation under a contractual arrangement with that beneficiary. Since commitments associated with
these collateral instruments may expire unused, the amount shown does not necessarily reflect the actual future
cash funding requirement.
Other Guarantees. We are members of various exchanges and clearing houses. In the normal course of business,
we provide guarantees to securities clearing houses and exchanges. These guarantees generally are required
under the standard membership agreements, such that members are required to guarantee the performance of
other members. Additionally, if a member becomes unable to satisfy its obligations to the clearing house, other
members would be required to meet these shortfalls. To mitigate these performance risks, the exchanges and
clearing houses often require members to post collateral. Our obligations under such guarantees could exceed the
collateral amounts posted. Our maximum potential liability under these arrangements cannot be quantified;
however, the potential for us to be required to make payments under such guarantees is deemed remote.
Accordingly, no liability has been recognized for
these arrangements. Additionally, we provide certain
indemnifications in connection with third-party clearing and execution arrangements whereby a third-party may
clear and settle transactions on behalf of our clients. These indemnifications generally have standard contractual
terms and are entered into in the ordinary course of business. Our obligations in respect of such transactions are
secured by the assets in our client’s account, as well as any proceeds received from the transactions cleared and
settled on behalf of our client. However, we believe that it is unlikely we would have to make any material
payments under these arrangements and no material
liabilities related to these indemnifications have been
recognized.
Note 23. Net Capital Requirements
As a broker-dealer registered with the SEC and a member firm of the Financial Industry Regulatory Authority
(‘‘FINRA’’), Jefferies LLC is subject to the SEC Uniform Net Capital Rule (‘‘Rule 15c3-1’’), which requires the
maintenance of minimum net capital, and has elected to calculate minimum capital requirements using the
alternative method permitted by Rule 15c3-1 in calculating net capital. Jefferies LLC, as a dually-registered U.S.
broker-dealer and futures commission merchant (‘‘FCM’’), is also subject to Rule 1.17 of the Commodity
Futures Trading Commission (‘‘CFTC’’), which sets forth minimum financial requirements. The minimum net
capital requirement in determining excess net capital for a dually-registered U.S. broker-dealer and FCM is equal
to the greater of the requirement under Rule 15c3-1 or CFTC Rule 1.17.
Jefferies Financial Services, Inc. (‘‘JFSI’’) is a registered swap dealer subject to the CFTC’s regulatory capital
requirements, is a registered security-based swap dealer with the SEC subject to the SEC’s security-based swap
dealer regulatory rules and is approved by the SEC as an OTC derivatives dealer subject to compliance with the
SEC’s net capital requirements. At November 30, 2022, JFSI is in compliance with these SEC and CFTC
requirements. Additionally, JFSI is subject to the net capital requirements of the National Futures Association
169
Notes to Consolidated Financial Statements, continued
Note 23. Net Capital Requirements, continued
(‘‘NFA’’), as a member of the NFA. JFSI is required to maintain minimum net capital, as defined under SEC
Rule 18a-1 of not less than the greater of 2% of the risk margin amount, as defined, or $20 million.
At November 30, 2022, Jefferies LLC and JFSI’s net capital and excess net capital were as follows (in
thousands):
Jefferies LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
JFSI. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net Capital
$903,349
436,681
Excess Net
Capital
$806,238
416,681
FINRA is the designated examining authority for Jefferies LLC and the NFA is the designated self-regulatory
organization for Jefferies LLC as an FCM.
Certain other U.S. and non-U.S. subsidiaries are subject to capital adequacy requirements as prescribed by the
regulatory authorities in their respective jurisdictions, including Jefferies International Limited which is subject to
the regulatory supervision and requirements of the Financial Conduct Authority in the U.K.
The regulatory capital requirements referred to above may restrict our ability to withdraw capital from our
regulated subsidiaries.
At November 30, 2022 and 2021, $5.77 billion and $6.07 billion, respectively, of net assets of our consolidated
subsidiaries are restricted as to the payment of cash dividends, or the ability to make loans or advances to the
parent company. At November 30, 2022 and 2021, $4.87 billion and $5.25 billion, respectively, of these assets
are restricted as they reflect regulatory capital requirements or require regulatory approval prior to the payment
of cash dividends and advances to the parent company.
Note 24. Segment Reporting
We operate in two reportable business segments: (1) Investment Banking and Capital Markets and (2) Asset
Management. The Investment Banking and Capital Markets reportable business segment includes our securities,
commodities, futures and foreign exchange capital markets activities and investment banking business, which is
composed of financial advisory and underwriting activities. The Investment Banking and Capital Markets
reportable business segment provides the sales, trading, origination and advisory effort for various fixed income,
equity and advisory products and services. The Asset Management reportable business segment provides
investment management services to investors in the U.S. and overseas and invests capital in hedge funds,
separately managed accounts and third-party asset managers.
Our reportable business segment information is prepared using the following methodologies:
• Net revenues and non-interest expenses directly associated with each reportable business segment are
included in determining earnings (loss) before income taxes.
• Net
revenues and non-interest expenses not directly associated with specific reportable business
including each reportable
segments are allocated based on the most relevant measures applicable,
business segment’s net revenues, headcount and other factors.
• Reportable business segment assets include an allocation of indirect corporate assets that have been fully
allocated to our reportable business segments, generally based on each reportable business segment’s
capital utilization.
170
Notes to Consolidated Financial Statements, continued
Note 24. Segment Reporting, continued
During the year ended November 30, 2022 and in connection with the merger of Jefferies Group LLC with and
into Jefferies Financial Group Inc., we transferred significantly all of our legacy merchant banking investments
to our Asset Management reportable segment. Certain other publicly traded equity investments related to
investment banking relationships were transferred from our Merchant Banking reportable segment
to our
Investment Banking and Capital Markets reportable segment. In addition, there were certain investments that
were held within the Investment Banking and Capital Markets reportable segment, which have been transferred
to the Asset Management reportable segment. These investments are now managed by the respective segment
managers and we have revised our
this
reorganization of our segments better aligns the manner in which we manage our business activities and is in
keeping with our fundamental long-term strategy of continuing to build out our investment banking effort,
enhancing our capital markets businesses and further developing our Leucadia Asset Management alternative
asset management platform as we continue to divest of significant portions of our legacy merchant banking
portfolio. Additionally, corporate activities are now fully allocated to either the Investment Banking and Capital
Markets reportable segment or the Asset Management reportable segment. Prior year amounts have been revised
to conform to current segment reporting.
reportable segment presentation accordingly. We believe that
Our net revenues, non-interest expenses and earnings (loss) before income taxes by reportable business segment
are summarized below (in millions):
Year Ended November 30,
2021
2022
2020
Investment Banking and Capital Markets:
Net revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-interest expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset Management:
Net revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-interest expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings (loss) before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total of Reportable Business Segments:
Net revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-interest expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reconciliation to consolidated amounts:
Net revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-interest expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings (loss) before income taxes (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total:
Net revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-interest expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total earnings before income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$4,726.2
3,950.9
775.3
$6,917.8
4,730.6
2,187.2
$5,029.5
3,920.7
1,108.8
1,257.7
967.0
290.7
5,983.9
4,917.9
1,066.0
1,092.6
1,025.7
66.9
8,010.4
5,756.3
2,254.1
814.6
858.7
(44.1)
5,844.1
4,779.4
1,064.7
(5.1)
5.3
(10.4)
3.4
3.4
–
6.4
4.0
2.4
5,978.8
4,923.2
$1,055.6
8,013.8
5,759.7
$2,254.1
5,850.5
4,783.4
$1,067.1
(1) Management does not consider certain foreign currency transaction gains or losses, fair value debt valuation
adjustments on derivative contracts, gains and losses on investments held in deferred compensation or certain
other immaterial corporate income and expense items in assessing the financial performance of operating
businesses. Collectively,
these items are included in the reconciliation of reportable business segment
amounts to consolidated amounts.
171
Notes to Consolidated Financial Statements, continued
Note 24. Segment Reporting, continued
The following table summarizes our total assets by reportable business segment (in millions):
Investment Banking and Capital Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$45,541.0
5,516.7
$50,912.3
5,195.0
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$51,057.7
$56,107.3
November 30,
2022
2021
Net Revenues by Geographic Region
Net revenues for the Investment Banking and Capital Markets reportable business segment are recorded in the
geographic region in which the position was risk-managed or, in the case of investment banking, in which the
senior coverage banker is located. For the Asset Management reportable business segment, net revenues are
allocated according to the location of the investment advisor or the location of the invested capital. Net revenues
by geographic region were as follows (in millions):
Year Ended November 30,
2021
2022
2020
Americas (1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe and the Middle East (2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asia. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$4,815.4
925.4
238.0
$6,748.8
1,045.7
219.3
$4,730.1
826.4
294.0
Net revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$5,978.8
$8,013.8
$5,850.5
(1) Substantially all relates to U.S. results.
(2) Substantially all relates to U.K. results.
Note 25. Related Party Transactions
Officers, Directors and Employees. The following sets forth information regarding related party transactions
with our officers, directors and employees:
• At November 30, 2022 and 2021, we had $17.7 million and $23.1 million, respectively, of loans
outstanding to certain of our officers and employees (none of whom are executive officers or directors)
that are included in Other assets in our Consolidated Statements of Financial Condition.
• On October 24, 2022, we repurchased 640,000 of our shares from one of our officers for approximately
$21.0 million.
• Receivables from and payables to customers include balances arising from officers’, directors’ and
employees’ individual security transactions. These transactions are subject to the same regulations as all
customer transactions and are provided on substantially the same terms.
• One of our directors had an investment in a hedge fund managed by us of approximately $0.8 million at
November 30, 2020. This investment was fully redeemed in February 2021.
Special Purpose Acquisition Companies. We earned investment banking revenues during the year ended
November 30, 2021 of $45.5 million for services provided to special purpose acquisition companies we have co-
sponsored.
172
Notes to Consolidated Financial Statements, continued
Note 25. Related Party Transactions, continued
Sale of Subsidiary. On November 3, 2020, we sold a wholly-owned subsidiary primarily invested in short-dated
receivables that related to an asset management strategy to an investment fund managed by us for approximately
$180.7 million. The gain on sale was not material.
See Note 8, Variable Interest Entities, and Note 22, Commitments, Contingencies and Guarantees, for further
information regarding related party transactions with our officers, directors and employees.
See Note 9, Investments for further information on transactions with our equity method investees.
Note 26. Subsequent Events
Management has evaluated events and transactions that occurred subsequent to November 30, 2022 through the
date these consolidated financial statements were issued.
On January 13, 2023, we completed the previously announced legal and structural separation and distribution to
our shareholders of all of the outstanding shares of Vitesse Energy that were held by us. The distribution was
made in the amount of one share of Vitesse Energy common stock for every 8.49668 common shares of Jefferies
Financial Group Inc. owned by our shareholders as of the close of business on December 27, 2022, the record
date of the distribution.
173
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
Our Management, under the direction of our Chief Executive Officer and Chief Financial Officer, evaluated the
effectiveness of our disclosure controls and procedures as of November 30, 2022. Based on that evaluation, our
Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of
November 30, 2022 are functioning effectively to provide reasonable assurance that the information required to
be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed,
summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated
and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as
appropriate to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance
that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance
that all control issues and instances of fraud, if any, within a company have been detected.
Internal Control over Financial Reporting
Management’s annual report on internal control over financial reporting is contained in Part II, Item 8 of this
Form 10-K.
Changes in Internal Control over Financial Reporting
No change in our internal control over financial reporting occurred during the quarter ended November 30, 2022
that has materially affected, or is reasonably likely to materially affect, our internal control over financial
reporting.
Item 9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Omitted pursuant to General Instruction I(2)(c) to Form 10-K.
Information with respect to this item will be contained in the Proxy Statement for the 2023 Annual Meeting of
Shareholders, which is incorporated herein by reference.
We have a Code of Business Practice, which is applicable to all directors, officers and employees, and is
available on our website. We intend to post amendments to or waivers from our Code of Business Practice on
our website as required by applicable law.
174
Item 11. Executive Compensation
Omitted pursuant to General Instruction I(2)(c) to Form 10-K.
Information with respect to this item will be contained in the Proxy Statement for the 2023 Annual Meeting of
Shareholders, which is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Omitted pursuant to General Instruction I(2)(c) to Form 10-K.
Information with respect to this item will be contained in the Proxy Statement for the 2023 Annual Meeting of
Shareholders, which is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Omitted pursuant to General Instruction I(2)(c) to Form 10-K.
Information with respect to this item will be contained in the Proxy Statement for the 2023 Annual Meeting of
Shareholders, which is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services
Information with respect to aggregate fees billed to us by our principal accountant, Deloitte & Touche LLP
(PCAOB ID No. 34) will be contained in the Proxy Statement for the 2023 Annual Meeting of Shareholders,
which is incorporated herein by reference.
175
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a)1. Financial Statements
The financial statements required to be filed hereunder are listed on page S-1.
(a)2. Financial Statement Schedules
The financial statement schedules required to be filed hereunder are listed on page S-1.
(a)3. Exhibits
Exhibit No.
Description
3.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
Restated Certificate of Incorporation of Jefferies Financial Group Inc., is incorporated herein by
reference to Exhibit 3.1 to the Company’s Form 10-Q filed on August 1, 2018.*
Amended and Restated By-Laws of Jefferies Financial Group Inc. (effective September 30, 2021),
is incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K
filed on October 5, 2021.*
Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934.
Indenture, dated as of October 18, 2013, by and between Jefferies Financial Group Inc. (formerly
Leucadia National Corporation) and The Bank of New York Mellon, as trustee, is incorporated
herein by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed on
October 18, 2013.*
Indenture, dated as of March 12, 2002 (Senior Securities), by and between Jefferies Group LLC
(formerly Jefferies Group, Inc.) and The Bank of New York Mellon, as trustee, is incorporated
herein by reference to Exhibit 4.1 to Jefferies Group LLC’s and Jefferies Group Capital Finance
Inc.’s Form S-3 Registration Statement filed on February 1, 2019 (File Nos. 333-229494 and
333-229494-01).*
First Supplemental Indenture, dated as of July 15, 2003, to Indenture dated as of March 12, 2002 by
and between Jefferies Group LLC (formerly Jefferies Group, Inc.) and The Bank of New York
Mellon, as Trustee, is incorporated herein by reference to Exhibit 4.2 of Jefferies Group, Inc.’s
Form S-3 Registration Statement filed on July 15, 2003 (No. 333-107032).*
Second Supplemental Indenture, dated as of December 19, 2012, to the Indenture dated as of
March 12, 2002, by and between Jefferies Group LLC (formerly Jefferies Group, Inc.) and The
Bank of New York Mellon, as trustee,
is incorporated herein by reference to Exhibit 4.1 of
Jefferies Group, Inc.’s Form 8-K filed on December 20, 2012.*
Third Supplemental Indenture, dated as of March 1, 2013, to the Indenture dated as of March 12,
2002 by and between Jefferies Group LLC (formerly Jefferies Group, Inc.) and The Bank of
New York Mellon, as Trustee, is incorporated herein by reference to Exhibit 4.3 of Jefferies Group,
Inc.’s Form 8-K filed on March 1, 2013.*
Fourth Supplemental Indenture, dated as of November 1, 2022, among Jefferies Financial Group
Inc. and The Bank of New York Mellon, as trustee, to the Indenture, dated as of March 12, 2002, is
incorporated by reference to Exhibit 4.5 of the Company’s Current Report on Form 8-K filed on
November 1, 2022.*
Indenture, dated as of May 26, 2016 (the ‘‘Senior Debt Indenture’’), by and among Jefferies Group
LLC and Jefferies Group Capital Finance Inc. and The Bank of New York Mellon, as trustee, is
incorporated herein by reference to Exhibit 4.1 of the Form 8-A of Jefferies Group LLC and
Jefferies Group Capital Finance Inc. filed on January 17, 2017.*
176
4.9
4.10
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
First Supplemental Indenture, dated as of November 1, 2022, among Jefferies Financial Group Inc.
and The Bank of New York Mellon, as trustee, to the Senior Debt Indenture, dated as of May 26,
2016, is incorporated herein by reference to Exhibit 4.7 of the Company’s Current Report on Form
8-K filed on November 1, 2022.*
Other instruments defining the rights of holders of long-term debt securities of the Registrant and its
subsidiaries are omitted pursuant to Item 601(b)(4)(iii) of Regulation S-K. Registrant hereby agrees
to furnish copies of these instruments to the Commission upon request.
HomeFed Corporation Amended and Restated 1999 Stock Incentive Plan (as amended,
the
‘‘Jefferies Financial Group Inc. Amended and Restated 1999 Stock Incentive Plan (HomeFed)’’), is
incorporated herein by reference to Exhibit 99.1 to the Company’s Registration Statement on Form
S-8 (No. 333-232532) filed on July 3, 2019.* +
Amendment
to HomeFed Corporation Amended and Restated 1999 Stock Incentive Plan is
incorporated by reference to Exhibit 99.2 to the Company’s Registration Statement on Form S-8
(No. 333-232532) filed on July 3, 2019).* +
HomeFed Corporation 2017 RSU Opportunity Plan (as amended, the ‘‘Jefferies Financial Group
Inc. 2017 RSU Opportunity Plan (HomeFed)’’), is incorporated by reference to Exhibit 99.4 to the
Company’s Registration Statement on Form S-8 (No. 333-232532) filed on July 3, 2019.* +
to HomeFed Corporation 2017 RSU Opportunity Plan,
Amendment
is incorporated herein by
reference to Exhibit 99.5 to the Company’s Registration Statement on Form S-8 (No. 333-232532)
filed on July 3, 2019.* +
Jefferies Financial Group Inc. 2003 Incentive Compensation Plan as Amended and Restated, is
incorporated herein by reference to Exhibit 10.5 to the Company’s Annual Report on Form 10-K
filed on January 29, 2021.* +
Jefferies Financial Group Inc. Equity Compensation Plan, is incorporated herein by reference to
Appendix A to the Company’s Proxy Statement filed on February 12, 2021.* +
Form of Restricted Stock Units Agreement is incorporated herein by reference to as Exhibit 10.1 to
the Company’s Current Report on Form 8-K dated July 31, 2013).* +
Form of Restricted Stock Agreement, is incorporated herein by reference to Exhibit 10.2 to the
Company’s Current Report on Form 8-K dated July 31, 2013.* +
Form of Stock Option Agreement under the Company’s 2003 Stock Award and Incentive Plan, is
incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q
filed on April 8, 2021.* +
Form of Stock Appreciation Award Agreement, is incorporated herein by reference to Exhibit 10.2
to the Company’s Quarterly Report on Form 10-Q filed on April 8, 2021.* +
Form of Stock Option Agreement (Converted Stock Appreciation Award) under the Company’s
Equity Compensation Plan, is incorporated herein by reference to Exhibit 10.3 to the Company’s
Quarterly Report on Form 10-Q filed on April 8, 2021.* +
Leucadia National Corporation 1999 Directors’ Stock Compensation Plan, as amended and restated
on July 25, 2013,
to the 2013 Proxy
is incorporated herein by reference to Appendix II
Statement.* +
Agreement of Terms dated as of December 31, 2011 between Leucadia National Corporation and
Berkshire Hathaway Inc., is incorporated herein by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K filed on February 24, 2012.*
Form of Restricted Stock Units Agreement
Compensation Plan,
Quarterly Report on Form 10-Q filed on April 8, 2022.* +
is incorporated herein by reference to Exhibit 10.1 of
(Time-Based) under
the Company’s Equity
the Company’s
Form of Restricted Stock Units Agreement (Performance-Based) under the Company’s Equity
Compensation Plan, is incorporated herein by reference to Exhibit 10.2 of the Company’s Quarterly
Report on Form 10-Q filed on April 8, 2022.* +
177
10.16
10.17
10.18
18
21
23.1
31.1
31.2
32.1
32.2
101
Form of Restricted Stock Units Agreement (Leadership Continuity Grant) under the Company’s
Equity Compensation Plan, is incorporated herein by reference to Exhibit 10.3 of the Company’s
Quarterly Report on Form 10-Q filed on April 8, 2022.* +
Form of Restricted Stock / Deferred Share Agreement to Non-Employee Independent Directors. +
Agreement, between Teresa Gendron and the Company, is incorporated herein by reference to
Exhibit 99.1 of the Company’s Current Report on Form 8-K filed on July 19, 2022.* +
Preferability Letter provided by Deloitte & Touche LLP.
Subsidiaries of the registrant.
Consent of Deloitte & Touche LLP.
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.**
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.**
to Rule 405 of Regulation S-T, formatted in Inline Extensible
Interactive data files pursuant
Business Reporting language (iXBRL): (i) the Consolidated Statements of Financial Condition as of
November 30, 2022 and 2021; (ii) the Consolidated Statements of Earnings for the years ended
November 30, 2022, 2021 and 2020; (iii) the Consolidated Statements of Comprehensive Income
for the years ended November 30, 2022, 2021 and 2020; (iv) the Consolidated Statements of
Changes in Equity for the years ended November 30, 2022, 2021 and 2020; (v) the Consolidated
Statements of Cash Flows for the years ended November 30, 2022, 2021 and 2020; and (vi) the
Notes to Consolidated Financial Statements.
104
Cover page interactive data file pursuant to Rule 406 of Regulation S-T, formatted in iXBRL
(included in exhibit 101)
+ Management/Employment Contract or Compensatory Plan or Arrangement.
* Incorporated by reference.
** Furnished herewith pursuant to item 601(b) (32) of Regulation S-K.
Item 16. Form 10-K Summary
None.
178
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
JEFFERIES FINANCIAL GROUP INC.
/s/ MATT LARSON
Matt Larson
Executive Vice President and Chief Financial Officer
Dated: January 27, 2023
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities indicated, on the date set forth below.
Name
Title
Date
/S/ JOSEPH S. STEINBERG
Joseph S. Steinberg
Chairman of the Board of Directors
January 27, 2023
/S/ RICHARD B. HANDLER
Richard B. Handler
Chief Executive Officer and Director
(Principal Executive Officer)
January 27, 2023
/S/ MATT LARSON
Matt Larson
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
January 27, 2023
/S/ BRIAN P. FRIEDMAN
Brian P. Friedman
President and Director
January 27, 2023
/S/ MARK L. CAGNO
Mark L. Cagno
Vice President and Controller
(Principal Accounting Officer)
/S/ LINDA L. ADAMANY
Linda L. Adamany
/S/ BARRY J. ALPERIN
Barry J. Alperin
/S/ ROBERT D. BEYER
Robert D. Beyer
/S/ MATRICE ELLIS KIRK
Matrice Ellis Kirk
/S/ MARYANNE GILMARTIN
MaryAnne Gilmartin
/S/ THOMAS W. JONES
Thomas W. Jones
/S/ JACOB M. KATZ
Jacob M. Katz
/S/ MICHAEL T. O’KANE
Michael T. O’Kane
/S/ MELISSA V. WEILER
Melissa V. Weiler
Director
Director
Director
Director
Director
Director
Director
Director
Director
179
January 27, 2023
January 27, 2023
January 27, 2023
January 27, 2023
January 27, 2023
January 27, 2023
January 27, 2023
January 27, 2023
January 27, 2023
January 27, 2023
Jefferies Financial Group Inc.
Index to Financial Statements and
Financial Statement Schedules
Items (15)(a)(1) and (15)(a)(2)
Financial Statements
Management’s Report on Internal Control over Financial Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reports of Independent Registered Public Accounting Firms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Financial Condition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Changes in Equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
71
72
75
76
77
78
79
81
Financial Statement Schedules
Schedule I – Condensed Financial Information of Jefferies Financial Group Inc. (Parent Company
Only) at November 30, 2022 and 2021 and for each of the three fiscal years ended
November 30, 2022, 2021 and 2020. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
S-2 - S-7
S-1
Jefferies Financial Group Inc.
(Parent Company Only)
Condensed Statements of Financial Condition
(In thousands)
Assets
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and securities segregated and on deposit for regulatory purposes or
deposited with clearing and depository organizations . . . . . . . . . . . . . . . . . . . . . . . .
Financial instruments owned, at fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in and loans to related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment in subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advances to subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subordinated notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities and Equity
Short-term borrowings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial instruments sold, not yet purchased, at fair value . . . . . . . . . . . . . . . . . . . .
Advances from subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
November 30,
2022
2021
$ 2,411,270
$
640,985
57,876
97,870
637,302
7,567,225
3,486,572
3,867,931
821,634
$18,947,680
8,219
298,773
708,611
10,092,436
3,154,643
3,868,198
753,349
$19,525,214
$
10,868
4,873
430,846
668,717
7,474,530
8,589,834
$
6,800
3,491
402,786
430,530
8,002,852
8,846,459
Mezzanine Equity
Mandatorily redeemable convertible preferred shares. . . . . . . . . . . . . . . . . . . . . . . . . . .
125,000
125,000
Equity
Common shares, par value $1 per share, authorized 600,000,000 shares;
226,129,626 and 243,541,431 shares issued and outstanding, after deducting
90,334,082 and 72,922,277 shares held in treasury. . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Jefferies Financial Group Inc. common shareholders’ equity . . . . . . . . .
226,130
1,967,781
(379,419)
8,418,354
10,232,846
243,541
2,742,244
(372,143)
7,940,113
10,553,755
Total liabilities and equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$18,947,680
$19,525,214
See accompanying notes to condensed financial statements.
S-2
Jefferies Financial Group Inc.
(Parent Company Only)
Condensed Statements of Earnings and Comprehensive Income
(In thousands)
Year Ended November 30,
2021
2022
2020
Revenues:
Principal transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (61,407) $
317,020
(66,539)
189,074
317,916
Net revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(128,842)
98,373
213,910
101,203
413,486
318,138
95,348
$ 111,688
217,159
(43,375)
285,472
338,535
(53,063)
Non-interest expenses:
Total non-interest expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
69,962
147,761
85,339
Earnings (loss) before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings (loss) before undistributed earnings of subsidiaries . . . . . . .
Undistributed earnings of subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Preferred stock dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earnings attributable to Jefferies Financial Group Inc. . . . . . . . .
Other comprehensive income (loss), net of tax:
Currency translation and other adjustments . . . . . . . . . . . . . . . . . . . . . . . .
Change in fair value of instrument specific credit risk . . . . . . . . . . . . . .
Minimum pension liability adjustments, net of tax . . . . . . . . . . . . . . . . .
Unrealized gain (loss) on available-for-sale securities . . . . . . . . . . . . . . .
Total other comprehensive loss, net of tax. . . . . . . . . . . . . . . . . . . . . . .
Comprehensive income attributable to Jefferies Financial Group
Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(198,804)
(78,338)
(120,466)
905,915
785,449
8,281
777,168
(53,572)
49,146
3,311
(6,161)
(7,276)
(52,413)
(11,806)
(40,607)
1,714,959
1,674,352
6,949
1,667,403
(9,781)
(82,521)
9,320
(244)
(83,226)
(138,402)
(35,770)
(102,632)
877,871
775,239
5,634
769,605
35,991
(52,262)
21
372
(15,878)
$ 769,892
$1,584,177
$ 753,727
See accompanying notes to condensed financial statements.
S-3
Jefferies Financial Group Inc.
(Parent Company Only)
Condensed Statements of Cash Flows
(In thousands)
Cash flows from operating activities:
Net earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net earnings to net cash provided by
(used in) operating activities:
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share-based compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Undistributed earnings of subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . .
(Income) loss on investments in and loans to related parties. . . .
Other adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net change in assets and liabilities:
Financial instruments owned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial instruments sold, not yet purchased. . . . . . . . . . . . . . . . . .
Income taxes receivable/payable, net . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other liabilities. . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) operating activities . . . . . . . . . .
Cash flows from investing activities:
Contributions to investments in and loans to related parties. . . . . . .
Capital distributions from investments and repayments of loans
from related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advances on loan receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal collections of loan receivables . . . . . . . . . . . . . . . . . . . . . . . . .
Distribution (to) from subsidiaries, net . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales of subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by investing activities . . . . . . . . . . . . . . . . . . .
Cash flows from financing activities:
Proceeds from short-term borrowings. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments on short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of long-term debt, net of issuance costs . .
Repayments of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Advances (to) from subsidiaries, net . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issuances of common shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchase of common shares for treasury. . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in financing activities. . . . . . . . . . . . . . . . . . . . . . . .
Net increase (decrease) in cash and cash equivalents and
Year Ended November 30,
2021
2020
2022
$
785,449
$ 1,674,352
$
775,239
(38,875)
43,919
1,322
(905,915)
71,405
(560,325)
200,903
129,322
1,382
(158,732)
233,217
(196,928)
(118)
22
–
–
2,921,528
–
–
2,921,432
4,068
–
400,059
(202,172)
30,428
2,752
(859,593)
(280,104)
(904,562)
27,933
78,160
(24,379)
(1,714,959)
(101,302)
(203,947)
(76,852)
(171,933)
3,491
(62,531)
(126,894)
(698,861)
(1,787)
40,038
(36,708)
(877,871)
42,412
187,486
78,592
(4,069)
(2,307)
65,057
446,386
712,468
–
(50,000)
50,000
(50,000)
–
456,220
–
(611)
455,609
–
(23,000)
23,000
441,063
180,664
–
571,727
–
(5,090)
1,681,058
(1,256,495)
(341,327)
2,107
(269,400)
(222,798)
11,820
(20,263)
1,169,722
(1,494,696)
1,159,495
1,034
(816,871)
(160,940)
(411,945)
(150,699)
restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash, cash equivalents and restricted cash at beginning of period .
Cash, cash equivalents and restricted cash at end of period . . . . . . .
1,819,942
649,204
$ 2,469,146
(655,197)
1,304,401
649,204
$
1,133,496
170,905
$ 1,304,401
S-4
Jefferies Financial Group Inc.
(Parent Company Only)
Condensed Statements of Cash Flows, continued
(In thousands)
Year Ended November 30,
2021
2022
2020
Supplemental disclosures of cash flow information:
Cash paid (received) during the period for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$484,349
124,516
$381,117
625,072
$324,782
1,811
Non-cash investing activities:
Investments contributed to subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends received from subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
–
–
$ 5,451
1,970
$ 51,190
40,805
The following presents the Parent Company’s cash, cash equivalents and restricted cash by category within the
Condensed Statements of Financial Condition (in thousands):
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and securities segregated and on deposit for regulatory purposes with clearing
and depository organizations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
November 30,
2022
2021
$2,411,270
$640,985
57,876
8,219
Total cash, cash equivalents and restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,469,146
$649,204
See accompanying notes to condensed financial statements.
S-5
Jefferies Financial Group Inc.
(Parent Company Only)
Notes to Condensed Financial Statements
Note 1. Introduction and Basis of Presentation
The accompanying condensed financial statements (the ‘‘Parent Company Financial Statements’’), including the
notes thereto, should be read in conjunction with the consolidated financial statements of Jefferies Financial
Group Inc. (the ‘‘Company’’) and the notes thereto found in the Company’s Annual Report on Form 10-K for
the year ended November 30, 2022. For purposes of these condensed financial statements, the Company’s
wholly-owned and majority owned subsidiaries are accounted for using the equity method of accounting
(‘‘equity method subsidiaries’’).
On November 1, 2022, Jefferies Group LLC was merged into the Company with the Company as the surviving
entity. Prior to the merger, Jefferies Group LLC was a direct wholly-owned subsidiary of the Company. Upon the
merger, the Company recognized the assets and liabilities of Jefferies Group LLC transferred into the Company
at their carrying amounts. The merger of Jefferies Group LLC into the Company is deemed a transfer between
entities under common control and constitutes a change in the reporting entity of the Company. Accordingly, the
financial statements of the Company are combined retrospectively as if the merger of Jefferies Group LLC with
and into the Company had occurred as of December 1, 2019. The transfer of the net assets of Jefferies Group
LLC into the Company resulted in an increase in total assets of $8.06 billion and an increase in total liabilities of
$8.06 billion at November 30, 2021. There was no impact to total common shareholders’ equity, net earnings
attributable to the Company or comprehensive income attributable to the Company as a result of the net transfer.
The Parent Company Financial Statements have been prepared in accordance with U.S. generally accepted
accounting principles (‘‘U.S. GAAP’’) for financial information. The significant accounting policies of the Parent
Company Financial Statements are those used by the Company on a consolidated basis, to the extent applicable.
For further information regarding the significant accounting policies refer to Note 2, Summary of Significant
Accounting Policies, in the Company’s consolidated financial statements included in the Annual Report on
Form 10-K for the year ended November 30, 2022.
The Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities
and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with
U.S. GAAP. The most
important of these estimates and assumptions relate to fair value measurements,
compensation and benefits, goodwill and intangible assets, the ability to realize deferred tax assets and the
recognition and measurement of uncertain tax positions. Although these and other estimates and assumptions are
based on the best available information, actual results could be materially different from these estimates.
Note 2. Transactions with Subsidiaries
The Parent Company has transactions with its consolidated subsidiaries and certain other affiliated entities
determined on an agreed upon basis and has guaranteed certain unsecured lines of credit and contractual
obligations of certain equity method subsidiaries.
Note 3. Guarantees
In the normal course of its business, the Parent Company issues guarantees in respect of obligations of certain of
its wholly-owned subsidiaries under trading and other financial arrangements, including guarantees to various
trading counterparties and banks. The Parent Company records all derivative contracts and Financial instruments
owned and Financial instruments sold, not yet purchased at fair value in its Consolidated Statements of Financial
Condition.
Certain of the Parent Company’s equity method subsidiaries are members of various exchanges and clearing
houses. In the normal course of business, the Parent Company provides guarantees to securities clearinghouses
S-6
Notes to Condensed Financial Statements, continued
Note 3. Guarantees, continued
and exchanges. These guarantees generally are required under the standard membership agreements, such that
members are required to guarantee the performance of other members. Additionally, if a member becomes unable
to satisfy its obligations to the clearinghouse, other members would be required to meet these shortfalls. To
mitigate these performance risks, the exchanges and clearinghouses often require members to post collateral. The
Parent Company’s obligations under such guarantees could exceed the collateral amounts posted. The maximum
potential liability under these arrangements cannot be quantified; however, the potential for the Parent Company
to be required to make payments under such guarantees is deemed remote. Accordingly, no liability has been
recognized for these arrangements.
The Parent Company guarantees certain financing arrangements of subsidiaries. The maximum amount payable
under these guarantees is $876.2 million at November 30, 2022. For further information, refer to Note 16, Short-
Term Borrowings, and Note 17, Long-Term Debt, in the Company’s consolidated financial statements included
in the Annual Report on Form 10-K for the year ended November 30, 2022.
S-7
Our Leadership
DIRECTORS
OFFICERS
Joseph S. Steinberg
Chairman
Richard B. Handler
Chief Executive Officer
Brian P. Friedman
President
Linda L. Adamany (Lead Director)1, 3, 4
Retired Group Vice President of BP plc
Barry J. Alperin1, 2, 3, 4
Retired Vice Chairman of Hasbro, Inc.
Richard B. Handler
Chief Executive Officer
Brian P. Friedman
President
Joseph S. Steinberg
Chairman
Teresa S. Gendron
Executive Vice President
and Co-Chief Financial Officer
Matthew S. Larson
Executive Vice President
and Co-Chief Financial Officer
Robert D. Beyer 2, 5
Chairman of Chaparal Investments LLC
Michael J. Sharp
Executive Vice President and General Counsel
Matrice Ellis Kirk 3, 4, 5
CEO of Ellis Kirk Group
Mark L. Cagno
Vice President and Co-Controller
MaryAnne Gilmartin 2, 3, 4, 5
Founder and CEO of MAG Partners LP
John M. Dalton
Vice President and Co-Controller
Thomas W. Jones 1, 3, 4, 5
Founder and Senior Partner of TWJ Capital LLC
John Stacconi
Vice President and Global Treasurer
Jacob M. Katz1, 3, 5
Retired Chairman and Global Leader of
Financial Services of Grant Thornton LLP
Michael T. O’Kane 2, 4
Retired Senior Managing Director of TIAA
Melissa V. Weiler 1, 2, 5
Retired Managing Director of Crescent
Capital Group
1Audit Committee 2Compensation Committee 3ESG, Diversity, Equity and Inclusion Committee 4Nominating and Corporate Governance Committee
5Risk and Liquidity Oversight Committee
PRINCIPAL EXECUTIVE OFFICE
Jefferies Financial Group Inc.
520 Madison Avenue
New York, New York 10022
212.284.2300
jefferies.com
REGISTRAR AND TRANSFER AGENT
American Stock Transfer & Trust Company, LLC
6201 15th Avenue
Brooklyn, New York 11219-9821
800.937.5449
www.astfinancial.com
help@astfinancial.com
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
Deloitte & Touche LLP
30 Rockefeller Plaza
New York, New York 10112
Our common stock is listed on the
New York Stock Exchange (NYSE: JEF)