2023
Annual
Report
J A N U A R Y 8 , 2 0 2 4
Dear Fellow Shareholders,
2023 was a transition year in the economy, in
capital markets, in our industry and at Jefferies. It
was accompanied by the challenges and sadness
of geopolitical turmoil. In the face of this, Jefferies
performed reasonably well and eked out a modest
return on equity during what we believe to be the
bottom of the current cycle.
As we discussed last year, the process of
reestablishing real interest rates appears to have
been accomplished. We give credit to the Federal
Reserve for standing firm in the fight to calm inflation,
while also navigating a path that keeps unemployment
low and, for the most part, the economy maintaining
decent momentum. It’s quite a hat trick if it holds!
It isn’t surprising that some who thought the prior
ebullient “free money” period was “normal” did not
make it through the transition.
For Jefferies, the pain of this transition was felt
primarily in Investment Banking, where curtailed
new capital markets issuance was compounded
by a dampening of merger and acquisition activity
among our corporate and sponsor clients. Fortunately,
our Equities, Fixed Income and Asset Management
businesses performed well despite uncertainty, turmoil
and volatility.
Jefferies’ competitive playing field has changed
markedly again over these last several years.
Credit Suisse and several large U.S. regional banks
will no longer be with us. Beyond the Credit Suisse
collapse, other competitors face challenges with their
businesses. We believe this creates real opportunity for
Jefferies to continue our historical growth trajectory.
While we made some profit and were vigilant on
our risk during this complicated year, we are most
proud of our team, who focused on our clients
and enabled us to aggressively and strategically expand
our capabilities. We are able to play strong offense
in downturns because we have had a multi-decade
consistent strategy and a culture that encourages this
contrarian approach. It is one thing to make it through
a transition year(s) intact. It is entirely another to come
through such a period with a significantly enhanced
market position, broader geographic reach, a credit
rating upgrade, enhanced human capital and an even
stronger brand—all of which Jefferies achieved in 2023.
1
2023 ANNUAL REPORTJEFFERIES Our existing team has helped us recruit our new
partners. Politics and self-serving attitudes are not
tolerated. The common bond between our veterans and
new joiners is a shared belief in teamwork, prioritizing
clients, integrity, humility and work ethic. When you
join Jefferies, no matter how senior you are, you learn
quickly that your most important priority is figuring
out “what can you do to help our clients succeed and
enable Jefferies to become even more successful.”
With the long-term stability of our strategy and culture,
we have proven we can scale our operation significantly
over the decades without sacrificing the core values
that have made Jefferies special since inception.
We certainly do not want to jinx ourselves, and we
never provide guidance given the complicated world
in which we operate, but the two of us could not be
more excited to enter 2024 to experience what we
can accomplish as a global team. In our combined 55+
years at Jefferies, we have never seen our Firm better
positioned, and we have a straightforward path for
our unique global franchise to deliver excellent long-
term total returns to our shareholders, with lower-risk
Investment Banking revenue driving our growth, a
diversified sales, trading and research platform serving
our clients, and the foundation of a strong alternative
asset management business. Critically important,
our front-office effort is complemented by a solid and
experienced Support team. It is impossible to estimate
with clarity when our opportunity will fully normalize,
but it always does, and we are ready! Given the Fed’s
statement in December, it may even be sooner than we
had expected.
Investing in Our Opportunity
As we have repeatedly said over many years, the
strength of Jefferies’ culture allows us to identify the
right new partners, convince them to join us and then
integrate them into one unified Firm determined to best
serve our clients. We have pursued our investment
in talent on a global basis as we have expanded
throughout Europe, Asia-Pacific, South America,
Canada, and the Middle East, as well as in the United
States. While our recruiting efforts have largely been
in Investment Banking, we have also hired incremental
talent in Equities, Fixed Income, Research, Alternative
Asset Management and Support.
Specifically, over the last three years, we have added
from other firms and through internal promotion
182 Investment Banking Managing Directors, bringing
our total senior team to 344 MDs as of December 1,
2023 (and 364 today), which over the three years is up
2
2023 ANNUAL REPORTJEFFERIES 61% overall, 48% in the Americas, 78% in Europe and
the Middle East, and 150% in Asia-Pacific.
Some examples of the “even newer and more
improved” Jefferies include the 40 professionals in
Equities, Research and Investment Banking arriving in
our new offices in Canada; our newly hired 13-person
not-for-profit Municipal Healthcare Investment Banking
team; the addition of 90 professionals to our Industrial
and Energy Investment Banking team, including
increasing our MD headcount in that major sector
by 15% year-over-year; the addition of 4 MDs to our
34 MD-led Financial Sponsors team; the addition of
a 25-person Private Fund Group focused on private
capital fundraising; the expansion of our Investment
Banking presence in Italy from 8 to 18 professionals;
a similar expansion in Southeast Asia from 9 to 31
professionals; and the addition in 2023 of Investment
Banking capability on the ground in Brazil, Israel, South
Korea and the UAE. There may have been a slowdown
in capital formation during these past two years, but
there has been no resting at Jefferies.
As we said above, our confidence to make this large
investment in additional talent is fueled by the reality
of the competition we face. Our industry has been
consolidating since 1975 (deregulation of equity
commissions in the U.S.), spurred along further by
the Fed’s unleashing the commercial banks onto
Wall Street in 1996, as well as the aftermath of the
2008 bank crisis. In these last three years, this trend
and reality accelerated further into what could be the
“endgame” in terms of our competitive environment.
There are only a few truly global and full-service
competitors still standing, and several of them are
showing signs of stress or de-prioritization in areas
where we focus. We humbly marvel that we are among
these scarce remaining players with global presence
and all the hallmarks of a premier investment banking
and capital markets firm, including the ability to advise
clients strategically, to raise capital, to execute in the
capital markets daily and to be informed by the capital
markets in all we do. What does this mean for our
future? We see our current moment as a generational
opportunity to serve our clients, build an evermore
durable firm and set the stage to win for decades
to come.
Trough Results, Hopefully
We are hopeful that 2023’s results will represent a
trough year and, as such, it wasn’t too bad. Our total net
revenues of $4.7 billion and net income attributable to
common shareholders of $263 million, or a 3.7% return
on tangible equity, are an acceptable showing at the
bottom of the cycle, even though they are far from our
goals or long-term expectations.
“We see our current moment as a
generational opportunity to serve
our clients, build an evermore
durable firm and set the stage to
win for decades to come.”
3
2023 ANNUAL REPORTJEFFERIES 2023
2019
2.3BInvestment Banking net revenues
2.2B
Equities and Fixed Income net revenues
1.6BInvestment Banking net revenues
1.5B
Equities and Fixed Income net revenues
Our Investment Banking net revenues were $2.3 billion,
and our Equities and Fixed Income revenues were
$2.2 billion, while our Asset Management and Other
net revenues totaled about $200 million. These results
pale in comparison to the heady period of 2020-21
that represented the height of free money and strong
stimulus. We did remind everyone at the time that those
results were unique and reflected that passing moment,
rather than our new run rate. However, if you go back to
2019, which is more indicative of the last “normal” year
in our industry, our current results compare strongly
with Investment Banking net revenues of $1.6 billion in
2019 and Equities and Fixed Income net revenues of
$1.5 billion.
Our goal (not guidance) is for our investments and
progress of the last several years to position us to
eventually achieve the level of results we achieved
during the unique period of free money and strong
stimulus, but on a durable basis, without relying on
excessive “froth” in the system. We have our work
cut out to achieve this, but that is the direction
and objective we are all driving toward.
Returning Capital to Shareholders
Returning capital to shareholders remains one of our
overriding priorities. In 2023, we returned an aggregate
of $986 million to common shareholders in the form of
$816 million in dividends (inclusive of the Vitesse spin-
off) and the repurchase of 5 million shares for a total of
$169 million, or $34.66 per share repurchased.
We have returned $6 billion in total capital to
shareholders over the last six years, representing over
78% of tangible book value at January 1, 2018.
252 million fully diluted shares remain outstanding
today versus 373 million six years ago.
We are appreciative of our recent upgrade to BBB+
by Fitch and will constantly strive to improve in this
important fundamental measure with the three major
ratings agencies.
With the ongoing wind down of our legacy merchant
banking portfolio, as well as our expectation of better
results over the next several years, we expect Jefferies
to continue to return capital to shareholders through
cash dividends and share repurchases.
4
2023 ANNUAL REPORTJEFFERIES It’s Been a Journey!
One of us joined Jefferies 34 years ago, the other a
mere 22 years ago, and we have had a long journey
together building a leading global investment banking
and capital markets firm. Needless to say, there have
been ups and downs and twists and turns. Along
the way, we have heard competitors brag of things
like being “bulge bracket” (today, an unambiguous
anachronism) or an “elite independent boutique”
(whatever that is independent of or elite to). People
seem to always want to put labels on themselves
that signify they are “in the club,” to the exclusion
of others. None of that has ever made any sense to
us. We prefer to be “in the club” of those constantly
striving to be better at serving our clients. Let’s call
it the “Clients First, Always” club. Maybe not as elite
or catchy, but that is where we choose to live. Of the
dozens and dozens of somewhat name brand firms
(“bulge,” “major,” “regional,” “boutique”) with which we
competed along the way, we never imagined the vast
preponderance would no longer be with us or, in some
cases, a fraction of what they once were. We will never
allow the “arrogance of a label” or the “false prestige of
an elite club” to distract us from our mission to build a
firm that will make us all proud.
We have long believed that the essence of a great
Wall Street firm is the culture of partnership and
collaboration–nothing more, nothing less.
Our culture starts with our selecting the right people
to join Jefferies. Intellect and capabilities matter, but
we particularly emphasize finding people who are
passionate and committed to what we do, aspire to
succeed in the long term, are self-motivated and value
being the best. Integrity is never to be compromised.
Our team sees their colleagues as collaborators and
additive to their personal opportunity. Our own job is
to support the team that does the heavy lifting, inspire
them to be the best they can be and treat them fairly
in all regards. We aren’t perfect and have, at one time
or another, made every mistake in the book and then
some, but we skip to work each day to further the
success of Jefferies and every person who is part
of Jefferies.
Becoming Truly Global
Jefferies began 61 years ago in Los Angeles as an
equities broker serving institutions in a differentiated
manner. From our historically American roots, we went
from being a branch operator in a few countries 15-30
years ago, to being “global enough” with a presence in
14 countries four years ago, to a truly global presence
today with operations across 44 offices in 20 countries.
We are now present in all major developed economies,
as well as the major emerging markets. Our coverage
footprint runs throughout the Americas, Europe, the
Middle East and Asia-Pacific.
Global Growth–Number of Countries Where We Operate
2004
2019
2024
3
14
20
5
2023 ANNUAL REPORTJEFFERIES “We believe that by attracting
and retaining a purposeful team
of people who want to do right by
society, each of our stakeholders
will be rewarded in the long term.
If our team has purpose, Jefferies
has purpose.”
As two kids from New Jersey (shout out to Bruce
Springsteen, who is the hardest working rock star and
driven to never disappoint his fans), we particularly
marvel at our global reality and are proud that we feel
the Jefferies vibe when we visit our offices thousands
of miles from our home base. When we visit these
offices, we see the very same Jefferies culture and
passion that exist in our primary hubs in NYC, London
and Hong Kong. It is magic seeing our local leadership
around the globe embrace our core values, priorities
and teamwork. They know how and are eager to
leverage the entire Firm for our clients’ benefit, and this
serves to bring the Jefferies capabilities to our clients
around the globe as One Firm, Always.
Expanding Our Alliance With SMFG
In July 2021, we entered a Strategic Alliance with
Sumitomo Mitsui Financial Group (SMFG) to
collaborate on future corporate and investment banking
business opportunities. At that time, SMFG provided
us and our equity joint venture, Jefferies Finance, with
$2.25 billion in long-term financing and purchased in
the open market approximately 4.5% of the issued and
outstanding common shares of Jefferies. The initial
focus of the Alliance was expanding our leveraged
finance origination business, Japanese cross-border
M&A and testing the potential for a joint focus on
investment grade companies.
In April 2023, Jefferies and SMFG announced the
significant expansion of our Strategic Alliance to
support the continued growth of SMFG and Jefferies’
global Commercial Banking and Investment Banking
franchises. Included in that expansion is SMFG’s plan
to increase its economic ownership in Jefferies to up
to 15% on a fully diluted basis through open-market
purchases, which will result in SMFG becoming
Jefferies’ largest shareholder. SMFG presently holds a
9.1% equity interest in Jefferies on an outstanding share
basis and 8.3% on an as-converted, fully diluted basis.
Once the 10% threshold is reached, we will be pleased
to welcome an SMFG nominee to our Board.
This significant expansion of the Alliance broadens
the scope of our collaboration in both M&A advisory
services and across the Firms’ Equities and Debt
6
2023 ANNUAL REPORTJEFFERIES Capital Markets businesses. The expanded Alliance
also includes joint coverage of designated investment
grade clients that already have banking relationships
with SMFG and will also have dedicated Jefferies
Investment Banking coverage. The goal of this
important next step in our path together is to further
coordinate Jefferies’ extensive sector and capital
markets knowledge with SMFG’s deep banking and
primary investment grade capital markets expertise.
Jefferies has already closed several deals that wouldn’t
have happened without our relationship with SMFG,
and many more are ahead. We expect this Alliance
to produce meaningful, tangible results in 2024
and beyond.
On a very sad note, Jun Ohta, who served as President
and Group CEO of SMFG since April 1, 2019, and who
was SMFG’s architect of our Alliance, passed away in
late November at the age of 65. Ohta-san was a great
leader with deep vision and courage, and a person
with endless decency and kindness. We cherished
our friendship with him and dedicate the ongoing
success of our partnership with SMFG to his memory.
Ohta-san was succeeded by his close colleague, Toru
Nakashima. Nakashima-san was deeply involved in the
discussions that led to our Alliance with SMFG and has
stated his commitment to further continuing the vision
established by Ohta-san. We look forward to continuing
to build our relationship with Nakashima-san and to
much success and growth together.
7
2023 ANNUAL REPORTJEFFERIES “It is magic seeing our local
leadership around the globe
embrace our core values,
priorities and teamwork.
They know how and are
eager to leverage the entire
Firm for our clients’ benefit
and this serves to bring the
Jefferies capabilities to our
clients around the globe
as One Firm, Always.”
8
2023 ANNUAL REPORTJEFFERIES Our Purpose
Annual Meeting and Investor Meeting
Our goal is to continue to build a premier and trusted
global investment banking and capital markets firm
by delivering outstanding insight, advice and execution
to the best businesses and investors around the
world. However, we believe a great firm must also
have a broader societal purpose and stand for
something important.
Thanks for hearing us out and for the support all of
us at Jefferies feel from our shareholders and every
other stakeholder. Our leadership at Jefferies has a
solid, realistic grip on our competitive playing field and
sees every challenge with honesty and respect. We are
optimists at heart, yet realists with a keen sense
of urgency.
We are incredibly proud that the people of Jefferies
consistently stand up and give back to society and
especially to those less fortunate and in great need.
Our Firm leads with honesty, transparency and
respect for all. When we give back, we do not do
it after we assess the political winds or decide if
there is something short term “in it” for Jefferies’
businesses. We believe that by attracting and retaining
a purposeful team of people who want to do right by
society, each of our stakeholders will be rewarded
in the long term. If our team has purpose, Jefferies
has purpose. And with that purpose we will create
something very special for the long term, and the
ultimate benefactors will be our clients, employees,
shareholders and all other stakeholders.
And if it isn’t crystal clear at this point, while we have
a keen sense of urgency at Jefferies, our priority will
always be on the long term. We thank our clients,
team, directors, shareholders and bondholders for
all being aligned in this regard.
Evidencing our complete alignment with our
shareholders, the two of us, our Chairman, Joe
Steinberg, our longstanding strategic partner, Mass
Mutual, and our newest strategic partner, SMFG,
together will own over 27% of Jefferies. When SMFG
increases its stake to 15%, this collective ownership
will approach 34%. We have all enthusiastically
chosen to put our money where our mouths are
because we believe in our team and our mission.
We are committed and deeply motivated to serve every
constituency to the very best of our abilities,
and our priority is to deliver long-term value to you,
our shareholders.
We look forward to answering any further questions
you may have at our upcoming Annual Meeting on
March 28, 2024. We will also hold our annual Jefferies
Investor Meeting on October 17, 2024, 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, trust and support.
Sincerely,
Richard B. Handler
Chief Executive Officer
Brian P. Friedman
President
9
2023 ANNUAL REPORTJEFFERIES Now, for a further specific update on each of
our businesses:
Investment Banking
As discussed above, 2023 presented us with a rare
opportunity to meaningfully scale our Investment
Banking team. With global investment banking fee pools
at their lowest since 2012, idiosyncratic issues at several
of our competitors presented us with the opportunity to
add 68 new partners, many of whom have long held #1
market positions in their respective fields and have an
average investment banking tenure of over 20 years.
The result of these investments is that Jefferies today
stands among a small group of global, full-service
investment banks that can offer our clients best-in-
class sector expertise, scaled local country teams
across every major economy, and differentiated capital
markets underwriting and distribution–all delivered
with our unique culture of immediacy and high-touch
client service that our primary bank holding company
competitors struggle to replicate. The expansion of our
Strategic Alliance with SMFG in April further enhanced
our distinct offering, with SMFG serving as a lender and
long-term partner to many of our corporate and private
equity clients.
As new partners who have joined us over the last
few years (as well as our homegrown and promoted
Managing Directors) settle in and their productivity
matures, we expect to continue our long-standing
track record of expanding our market share and
growing our results. In 2023, we sustained the
enhanced market position that we have earned in
recent years, as Jefferies ranked 7th in Global M&A
and ECM. Despite the strength of our market share
and overall franchise, our absolute results declined,
consistent with the ongoing contraction in global
fee pools. Our ECM revenues of $560 million were
broadly consistent with our results in 2022, in line
with overall fee pools, and our advisory revenues of
$1.2 billion declined by 33%, again consistent with
broader market trends. Leveraged Finance revenues
of $211 million were broadly flat versus 2022, while fee
pools in the U.S. (our primarily addressable financing
market) declined by 24%, reflecting the strength of
our franchise as well as our long-standing, disciplined
approach to underwriting and managing risk. While our
aggregate $2.3 billion of Investment Banking revenues
represented a 21% decline relative to 2022, our results
nevertheless represented our third-best year ever, and
an increase of 44% relative to $1.6 billion of investment
banking revenues in 2019.
“2023 presented us with a rare
opportunity to meaningfully scale
our Investment Banking team, and
we added 68 new partners, many
of whom had long held #1 market
positions in their respective fields
and have an average investment
banking tenure of over 20 years.”
10
2023 ANNUAL REPORTJEFFERIES Jefferies Finance
Berkadia
Jefferies Finance (JFIN), our 50/50 leveraged
finance credit joint venture with Mass Mutual, faced
a challenging operating environment in 2023, as the
Leveraged Loan market was in the doldrums. Although
arrangement fees are a pivotal performance driver,
JFIN maintains a balanced and diverse revenue mix,
also generating significant net interest margin and a
growing base of asset management fees. As a result,
income contribution from core operations reached
nearly $100 million, allowing absorption of several
non-cash charges that reduced net income to a level
slightly below breakeven.
During 2023, JFIN made significant progress in growing
its Asset Management business, having successfully
closed several direct lending vehicles, including its first
Business Development Company (BDC), which became
operational last month. In total, JFIN now manages
more than $17 billion of assets, comprising both
proprietary and third-party capital, with a very strong
pipeline to expand its geographic reach. Overall, JFIN is
positioned for continued success and expects to grow
market share in both the syndicated loan and private
credit markets as it benefits from the competitive
advantages it holds thanks to its affiliation with the
Jefferies Investment Banking platform.
Berkadia, our commercial real estate finance and
investment sales 50/50 joint venture with Berkshire
Hathaway, generated $122 million of pretax income
and $197 million of cash earnings for 2023. Following
a robust period for multi-family transactions, fueled
by low interest rates, rate hikes in 2022 and 2023
slowed debt origination and investment sales volume,
while increasing Berkadia’s interest income. Net
interest income increased 95% to $226 million, partially
offsetting a 22% decline in total revenue to $1.0 billion.
Despite reduced originations, Berkadia’s loan-servicing
portfolio grew to a new record $402 billion, up 3%
from the prior year. The market for debt origination
slowed from record levels resulting in Berkadia’s total
debt volume declining by 47% to $21 billion. Debt
origination volumes with Freddie Mac, Fannie Mae and
HUD were $13.3 billion, down 29% from the prior year.
Investment sales transactions also slowed from record
levels as financing cost uncertainty created a valuation
gap between buyers and sellers.
Berkadia’s investment sales volumes were $8.5 billion,
down 70% from the prior year. Berkadia continues
to build a leading servicing, mortgage banking and
investment sales franchise that is well positioned to
serve the multi-family market when financing and
transaction activity return to normal levels.
11
2023 ANNUAL REPORTJEFFERIES “Jefferies is now among a select
few leaders in global Equities and
continues to gain market share
across all regions in 2023.”
Capital Markets
Alternative Asset Management
Our Leucadia Asset Management effort continues to
grow its overall fee base and increase its reach. 2023
was a particularly challenging fundraising environment,
with many institutional investors experiencing losses
across their equities, fixed income and privates
portfolios in 2022, which had a carryover effect into
2023. Total assets under management of our affiliated
managers slightly decreased from $29.8 billion to
$28.5 billion (excluding Jefferies Credit Partners), a
4% decrease year-over-year mainly due to redemptions
in external revenue sharing strategies. Our marketing
team raised $2.3 billion, including capital raised for
Jefferies Finance and the launch of its BDC. Our
participation in management fees increased 9% to
$55 million, and we are well positioned for future growth.
We have seen particular interest in private credit
vehicles, such as Point Bonita and Jefferies Credit
Partners (part of Jefferies Finance), and other managers
with niche offerings. It has been a more challenging
market for traditional hedge funds, particularly those
in the multi-manager space, with fierce competition
for talent. Overall, most of our affiliated managers
performed well on a relative and absolute basis, which
positions us well to maintain our history of growth.
Jefferies is now among a select few leaders in global
Equities and continues to gain market share across all
regions in 2023. Our net revenues of $1.1 billion were
fueled by our core pillars of advisory and insight, driven
by our equity and macro research, differentiated global
distribution and cutting-edge execution capabilities.
While encouraged by our results to date, we are
enthusiastic about the opportunity available to us to
expand revenues as we continue to build additional
product capabilities.
Our Fixed Income revenues in 2023 increased 37%
against 2022, the second-highest year since 2009.
These results reflect the impact of the long-term
investments we have made across our franchise,
leading to consistent performance over the last five
years, despite dramatic changes in market conditions
over this period. The intense focus on our strategy over
recent years has enabled us to grow into a more global
and diversified Fixed Income business, which–together
with our continued emphasis on risk, capital and
balance sheet discipline–has led to greater durability
of revenues and risk-adjusted returns. Our key strength
lies in our dedicated focus on credit-related products
that are directly aligned with our origination capabilities
in Investment Banking. Our results were driven by
strong revenues in these businesses both in the U.S.
and EMEA, reflecting a disciplined execution of our
client-driven strategy. Looking forward, we see further
opportunities to expand our product offering globally
and continue to grow our market share, with particular
focus on our technology-enabled trading capabilities
and alternative funding solutions.
12
2023 ANNUAL REPORTJEFFERIES “We thank all of you–our
clients and customers,
employee-partners, fellow
shareholders, bondholders,
vendors and all others
associated with our
businesses–for your
continued partnership,
trust and support.”
13
2023 ANNUAL REPORTJEFFERIES Appendix
Reconciliation of Return on Adjusted Tangible Equity
($ 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
Adjusted tangible shareholders’ equity
(non-GAAP)
$
$
$
$
Return on adjusted tangible shareholders’ equity
(non-GAAP)
(Unaudited)
Year Ended
11/30/2023
263
7
270
11/30/2022
10,233
(1,876)
(388)
(733)
7,237
3.7%
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)
12/31/2017
10,106
(2,463)
7,643
$
$
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)
$
$
(Unaudited)
Year Ended
11/30/2023
122
(166)
225
16
197
The 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.
Additional Shareholder Letter Notes
Dealogic
• 7th globally in Mergers and Acquisitions and Equity Capital
Markets (excluding China)
• Lowest fee pools since 2012 for global mergers and
acquisitions, equity capital markets (excluding China)
and leveraged finance
• Fee pool for U.S. Leveraged Finance declined by 24%
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).
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended November 30, 2023
OR
For the transition period from to
Commission file number 1-5721
JEFFERIES FINANCIAL GROUP INC.
(Exact name of registrant as specified in its charter)
New York
(State or other jurisdiction of
incorporation or organization)
520 Madison Avenue,
New York, New York
(Address of principal executive offices)
13-2615557
(I.R.S. Employer
Identification No.)
10022
(Zip Code)
Registrant’s telephone number, including area code: (212) 284-2300
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
5.875% Senior Notes Due 2028
2.750% Senior Notes Due 2032
JEF
JEF 27A
JEF 28
JEF 32A
New York Stock Exchange
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 ý No ☐
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 ☐ No ý
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 ý No ☐
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 ý No ☐
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
Non-accelerated filer
☒
☐
Accelerated filer ☐
Smaller reporting company ☐
Emerging growth company ☐
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. ☐
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. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing
reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by
any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ý
Aggregate market value of the voting stock of the registrant held by non-affiliates of the registrant at May 31, 2023 (computed by reference to the last reported
closing sale price of the Common Shares on the New York Stock Exchange on such date): $5,982,957,927.
On January 18, 2024, the registrant had outstanding 211,936,646 Common Shares.
Certain portions of the registrant's Definitive Proxy Statement pursuant to Regulation 14A of the Securities Exchange Act of 1934 in connection with the 2024
Annual Meeting of Shareholders are incorporated by reference into Part III of this Form 10-K.
DOCUMENTS INCORPORATED BY REFERENCE:
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
INDEX TO ANNUAL REPORT ON FORM 10-K
November 30, 2023
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 Estimates ...................................................................................................................................................................................
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 .............................................................................................................................................................
Page
3
11
20
20
21
21
22
23
24
25
25
26
32
33
34
36
49
60
61
61
62
63
66
67
68
69
70
73
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ......................................................................
156
Item 9A. Controls and Procedures .................................................................................................................................................................................
156
Item 9B. Other Information ............................................................................................................................................................................................
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. ......................................................................................................
156
156
1
Table of Contents
PART III. OTHER INFORMATION
Item 10. Directors, Executive Officers and Corporate Governance ............................................................................................................................
156
Item 11. Executive Compensation ..................................................................................................................................................................................
156
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ...............................................
157
Item 13. Certain Relationships and Related Transactions, and Director Independence ..........................................................................................
157
Item 14. Principal Accountant Fees and Services .........................................................................................................................................................
157
PART IV. EXHIBITS AND SIGNATURES
Item 15. Exhibits and Financial Statement Schedules ..................................................................................................................................................
157
Item 16. Form 10-K Summary ........................................................................................................................................................................................
159
Signatures ..........................................................................................................................................................................................................................
160
2
JEFFERIES FINANCIAL GROUP INC.
Table of Contents
PART I
Item 1. Business
Introduction
Jefferies Financial Group Inc. (“Jefferies,” “we,” “us” or “our”) is a U.S.-headquartered global full-service investment banking
and capital markets 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 full-service investment banking business, enhancing our capital
markets sales and trading 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.
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-Pacific. 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”) and our commercial real estate finance joint venture (“Berkadia
Commercial Holding LLC” or “Berkadia”).
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.
3
Table of Contents
Our Businesses
JEFFERIES FINANCIAL GROUP INC.
Investment Banking and Capital Markets
Jefferies is one of the world’s leading full-service investment banking and capital markets firms. Our Investment Banking and
Capital Markets segment focuses on Investment Banking, Equities and Fixed Income. We primarily serve businesses and their
owners, institutional investors, 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 relentless client focus, our differentiated insights and a flat and nimble operating
structure.
Our investment banking professionals operate in the Americas, Europe and the Middle East and Asia-Pacific, and are organized
into industry, product and geographic coverage groups. Our industry coverage groups include: Consumer; Energy and Power;
Financial Services; Financial Sponsors; Healthcare; Industrials; Infrastructure; Municipal Finance; Real Estate, Gaming and
Lodging; and Technology, Media and Telecom. Our product coverage groups include advisory (which includes mergers and
acquisitions, sponsor coverage, private capital and restructuring and recapitalization expertise), equity underwriting and debt
underwriting. Our geographic coverage groups include teams based in major cities in the United States as well as London,
Hong Kong, Amsterdam, Dubai, Frankfurt, Madrid, Melbourne, Milan, Mumbai, Paris, São Paulo, Singapore, Stockholm,
Sydney, Tel Aviv, Tokyo, and Toronto. We continue to invest in our investment banking division expanding our professional
talent base and growing our international presence.
Advisory Services
We provide mergers and acquisition, debt advisory and restructuring and private capital advisory services to companies,
financial sponsors and government entities. In the mergers and acquisitions area, we advise business owners, private equity
firms and corporations on mergers and acquisitions, divestitures, cross-border transactions, strategic ventures and corporate
defense activities. In the debt advisory and restructuring area, we provide companies, bondholders, creditors and lenders a full
range of both in-court and out-of-court advisory capabilities. As part of our private capital advisory business, we advise
financial sponsors and their investors on the creation and structuring of funds and fund offerings and primary and secondary
capital raising. 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 and equity capital solutions to businesses and their owners. These
capabilities include private placements of equity, initial public offerings, follow-on offerings, rights-offerings, at the market
offerings, block trades, private placements, corporate derivatives and equity-linked products.
Debt Underwriting
We provide a wide range of debt capital raising and acquisition financing capabilities to businesses, 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 help our clients
access alternative and structured finance solutions that optimize terms and minimize risk.
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 line involves the management of a diversified portfolio of assets
under management composed of portions of loans it has originated or arranged, as well as loan positions that it has purchased in
the primary and secondary markets. Jefferies Credit Partners, together with its subsidiaries Apex Credit Partners and Jefferies
Credit Management, serve as a private credit platform managing proprietary and third-party capital across comingled funds,
business development companies, separately managed accounts and collateralized loan obligations. Additionally, Jefferies
Credit Partners launched its first business development company in December 2023. Jefferies Finance, Jefferies Credit Partners,
Jefferies Credit Management and Apex Credit Partners are registered investment advisors.
4
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
Berkadia Commercial Mortgage Holding LLC is our commercial real estate finance and investment sales joint venture with
Berkshire Hathaway, Inc. Berkadia originates commercial real estate loans, primarily in respect of multifamily housing units,
that are sold to U.S. government agencies or other investors 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. In addition, 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 performs primary, master and special servicing functions.
Strategic Alliance with SMBC Group
In July 2021, we entered into a strategic alliance with Sumitomo Mitsui Financial Group, Inc., Sumitomo Mitsui Banking
Corporation (“SMBC”) and SMBC Nikko Securities Inc. (together referred to as “SMBC Group”) to collaborate on corporate
and investment banking business opportunities, with an initial focus on leveraged finance and cross-border mergers and
acquisitions involving Japanese companies.
In April 2023, we announced a significant expansion of this alliance. This relationship provides us with enhanced client
capabilities and supports the continued growth of our global investment banking and capital markets business. We aim to,
among other things, coordinate efforts in leveraged finance to expand and scale existing offerings, seek cross-border mergers
and acquisition advisory opportunities involving Japanese companies, and jointly pursue investment banking, capital markets
and financing opportunities by leveraging our shared strengths and relationships. At November 30, 2023, SMBC owns 9.1% of
our common stock on an as-converted basis and 8.3% on a fully-diluted, as-converted, basis.
Equities
Equities Research, Capital Markets
We provide our clients leading advisory and execution capabilities through equities research, sales and trading across global
equities markets with key capabilities in cash equities, electronic trading, equity derivatives, convertibles and corporate access.
We deliver high touch services and act as agent, principal or market maker to provide clients with execution quality in varying
liquidity situations—providing clients with bespoke insights and execution informed by our sector expertise. Our equities
electronic trading business provides our clients with expertise and innovative electronic sales and trading solutions, including
customizable algorithms. We bring full a full-service coverage model and customized solutions in equity derivatives and our
convertibles platform is a market leading franchise incorporating a cutting-edge asset class platform for pricing and analysis for
all convertible securities.
Commissions or spread revenue is earned 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 the Americas, Europe and the
Middle East and Asia-Pacific and we continue to strengthen our global footprint throughout these regions. 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.
Prime Services
Our Prime Services business provides a full-service offering that include: financing, business consulting and capital
introduction services, a robust technology platform, outsourced trading solutions for both start-up and existing managers,
strategic content and thought leadership and other prime brokerage services. Our prime brokerage services in the U.S. provide
hedge funds, money managers and registered investment advisors with execution, financing, clearing, financing, swaps,
outsourced trading and reporting and administrative services. Our platform is fully self-clearing and provides global access to
markets across the world. 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.
5
Table of Contents
Wealth Management
JEFFERIES FINANCIAL GROUP INC.
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 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
Jefferies’ global fixed income platform provides clients with distinctive solutions, service, and execution. Our deep client
relationships coupled with our strong core credit trading, research and origination capabilities, enable us to provide distinctive
opportunities and value-added insights across our business. We offer clients real-time event-driven ideas, outstanding high and
low touch execution, and consistent, comprehensive liquidity across our expanding global platform. Our product capabilities
include investment grade, high yield and distressed debt securities, U.S. and European government and agency securities,
municipal bonds, leveraged loans, emerging markets debt, and interest rate and credit index derivative products. In addition, we
have a strong securitized markets presence across trading and structuring, including asset-backed securities, collateralized loan
obligations (CLOs), commercial mortgage-backed securities, European prime and non-conforming residential mortgage-backed
securities, marketplace lending and U.S. agency and non-agency residential mortgage-backed securities. Jefferies is also
designated as a Primary Dealer for U.S. government securities as well as designated in similar capacities for several European
countries. Additionally, through the use of repurchase agreements, we act as an intermediary between borrowers and lenders of
short-term funds and obtain funding for various of our inventory positions. Our strategists and economists provide ongoing
commentary and analysis of the global fixed income markets as well as providing 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 and offers investors opportunities
to invest alongside us. Our products are currently offered to pension funds, insurance companies, sovereign wealth funds, and
other institutional investors globally. The investment products under LAM range from multi-manager 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.
Merchant Banking
Our legacy merchant banking portfolio, managed by the co-heads of Asset Management, includes Stratos Group International,
LLC (“Stratos”) (formerly FXCM Group, LLC, or “FXCM”), provider of online foreign exchange trading services; OpNet
S.p.A. (“OpNet,” formerly known as “Linkem”), a fixed wireless broadband service provider in Italy, which also owns 59.3%
of Tessellis S.p.A. (“Tessellis”), a telecommunications company publicly listed on the Italian stock exchange; HomeFed LLC
(“HomeFed”), 100% (real estate); investments in certain public equity securities; and other investments in private companies
and asset management funds.
Human Capital
Our people make up the fabric of our firm, which is comprised of 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, clients, employees, communities in which we live and work, and society as a whole. Instrumental to all of this is
our culture.
We have employees located throughout the world. As of November 30, 2023, we had 7,564 employees globally across all of
our consolidated subsidiaries within our Investment Banking and Capital Markets and Asset Management reportable segments.
Approximately 51.3%, 37.9% and 10.9% of our workforce distributed across the Americas, Europe and the Middle East and
Asia-Pacific, respectively. Included within our global headcount, in addition to our broker-dealer subsidiaries through which we
conduct our Investment Banking advisory and underwriting businesses and Fixed Income and Equities capital markets
businesses, are 2,296 employees of our Stratos, OpNet, HomeFed, Foursight Capital LLC and M Science subsidiaries.
During fiscal 2023, our overall employee count increased by 40.6%, primarily as a result of increases related to obtaining
control of Stratos and OpNet as the employees of those subsidiaries are now included in our overall headcount, as well as
opportunistic hiring in new regions, slightly offset by a decrease in headcount as a result of the spin-off of our interests in
Vitesse Energy in January 2023. In 2023, we expanded our global footprint by hiring professionals into new locations,
including Dubai, São Paolo, Tel Aviv, and Toronto.
6
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
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 core workforce is predominately composed of employees in roles such as investment bankers,
sales, trading, research professionals and other revenue producing or support personnel. During 2023, our headcount increased
by 2,183 related primarily to hiring of professionals globally as well as the addition of professionals as a result of our
acquisitions of Stratos and OpNet. While our investment is largely in Investment Banking, there has also been meaningful
additional investments in Equities, Fixed Income, Research, Support and Alternative Asset Management. Within our
Investment Banking and Capital Markets segment, our voluntary turnover rate was 7.9%, 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
compensation, and our continued evolution and growth contribute to our success in attracting and retaining strong talent.
We are focused on broadening the pipeline from which we recruit and hire 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 and
experiences. In 2023, we welcomed 374 interns globally from 154 different colleges, universities and business schools. For all
roles, we recommend both a diverse slate of candidates as well as a diverse panel of interviewers. Interviewing guides, training
and other resources are provided to hiring managers to support inclusive hiring.
We offer two targeted recruiting programs aimed at diversifying the pipeline of our lateral hires, including a career relaunch
program (jReturns), 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 2023.
In 2023, we launched an Investment Banking MBA Fellowship Program to support Summer Associates based on their
outstanding achievements and financial need. Each Fellow is paired with a Managing Director-level mentor and provided
developmental support.
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 offer customized, year-long training curriculums across all
divisions and title levels globally, focused on upskilling, professional development, and management best practices. We also
offer mentoring initiatives, including our firmwide Cross-Divisional Mentoring Program, Career Advisory Program, and New
Hire Buddy Program. Our Women in Leadership Series provides learning and development, and networking opportunities to
position our female leaders for success, and our jWIN Career Catalyst Program offers development and networking
opportunities to VP promotes. 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.
Wellness
In addition to training and development programs, we continue to be incredibly focused on the mental and physical well-being
of our employees. We host frequent global wellness webinars led my mental health experts, provide confidential, 1:1 wellness
and nutritional counseling and offer a variety of tailored wellness content for “Mental Health Awareness Month” in May and
“World Mental Health Day” in October. The events for these two initiatives include training sessions with world-class
psychologists and nutritionists on healthy eating habits, managing stress and well-being, emotional regulation, mindfulness and
physical fitness initiatives such as group classes. Throughout the year, we’ve also conducted small-group wellness discussion
surrounding topical events. We also 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 (“DE&I”), which is
summed up in our Corporate Social Responsibility Principle: Respect People. We embrace diversity, 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 in eight global 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.
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 DE&I strategy focuses on fostering inclusive leadership, building diverse and inclusive teams, developing our
leaders, fostering community and belonging, and client and community engagement. In 2023, we extended Inclusive
7
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
Leadership training to all employees, and achieved 100% completion. We continue to require Unconscious Bias Training and
Inclusive Leadership Training for all new hires. 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 employees to provide feedback on an anonymous basis. We have also launched a Self-ID campaign to increase
the collection of demographic data internally.
Our Board has 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, support and retain employees by providing employees and their spouses, partners and
families with health and wellness programs (medical, dental, vision and behavioral), retirement wealth accumulation, paid time
off, income replacement (paid sick and disability leaves and life insurance) and family-oriented benefits (parental leaves and
child care assistance). In 2022, we rolled out a new benefit for employees to support inclusive fertility health and family-
forming benefits to all employees. This year, we continued to broaden our inclusive benefits offering by adding menopause
support. We also endeavor to provide location specific health club, transportation and employee discounts.
Giving Back to Community
The firm is committed to giving back to our communities. In 2023, we donated $17.6 million to approximately 447
organizations across two “Doing Good” trading days and a number of other Jefferies-supported charitable initiatives.
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
Regulation in the United States. The financial services industry in which we operate is subject to extensive regulation. As a
publicly traded company and through our investment bank and investment management businesses in the U.S., we are subject
to the jurisdiction of the Securities and Exchange Commission (“SEC”). 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”) which is the
federal agency responsible for 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 our financial services
businesses (securities businesses in the case of FINRA and commodities/futures businesses in the case of the NFA). Broker-
dealers that conduct securities activities involving municipal securities are also 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, security-based swap dealers (“SBS dealers”) and over the counter derivatives dealer (“OTCDD”). 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, SBS dealers and OTCDD must also comply with the rules
and regulation of clearing houses, exchanges, swap execution facilities and trading platforms of which they are a member.
8
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
Broker-dealers are subject to SEC, FINRA, MSRB and state securities regulations that cover all aspects of the securities
business, including sales and trading methods, 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. 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 may conduct administrative proceedings or initiate civil litigation that can
result in adverse consequences for Jefferies LLC, its affiliates, including affiliated investment advisors, as well as its and their
officers and employees (including, without limitation, injunctions, censures, fines, suspensions, directives that impact business
operations (including proposed expansions), membership expulsions, or revocations of licenses and registrations).
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.
The investment advisers responsible for the Company’s investment management businesses are all registered as investment
advisers with the SEC or rely upon the registration of an affiliated adviser, and all are currently exempt from registration as
Commodity Pool Operators and Commodity Trading Advisors.
Registered investment advisers are subject to the requirements of the Advisers Act and the regulations promulgated thereunder.
Such requirements relate to, among other things, fiduciary duties to clients, maintaining an effective compliance program,
operational and marketing requirements, disclosure obligations, conflicts of interest, fees and prohibitions on fraudulent
activities.
The investment activities of our investment management businesses are also subject to regulation under the Securities Exchange
Act of 1934, as amended, the Securities Act of 1933, as amended, the Investment Company Act of 1940, as amended (the
“Investment Company Act”) and various other statutes, as well as the laws of the fifty states and the rules of various United
States and non-United States securities exchanges and self-regulatory organizations, including laws governing trading on inside
information, market manipulation and a broad number of technical requirements (e.g., options and futures position limits,
execution requirements and reporting obligations) and market regulation policies in the United States and globally. Congress,
regulators, tax authorities and others continue to explore and implement regulations governing all aspects of the financial
services industry. Pursuant to systemic risk reporting requirements adopted by the SEC, the Company's affiliated registered
investment advisers with private investment fund clients are required to report certain information about their investment funds
to the SEC.
9
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
Regulatory Capital Requirements. Several of our regulated entities are subject to financial capital requirements that are set by
applicable local regulations. 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 15c3-1 (the “Net Capital Rule”) which specifies the minimum level of net capital a broker-
dealer must maintain and also requires that a significant part of a broker-dealer's assets be kept in relatively liquid form. The
SEC and various self-regulatory organizations impose rules that require notification when net capital falls below certain
predefined criteria, limit the ratio of subordinated debt to equity in the regulatory capital composition of a broker-dealer and
constrain the ability of a broker-dealer to expand its business under certain circumstances. 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 similar
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 dealer and is required to comply with the SEC and CFTC capital rules for SBS 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 25, Regulatory 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-Pacific. As in the U.S., our international
subsidiaries are subject to extensive regulations proposed, promulgated and enforced by, among other regulatory bodies, the
European Commission and European Supervisory Authorities (including the European Banking Authority and European
Securities and Market Authority), U.K. Financial Conduct Authority, German Federal Financial Supervisory Authority
(“BaFin”), Canadian Investment Regulatory Organization, 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.
10
Table of Contents
Item 1A. Risk Factors
Factors Affecting Our Business
JEFFERIES FINANCIAL GROUP INC.
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.
Credit, 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.
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 significant 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 by changes in
market conditions. Market risk is inherent in the financial instruments associated with our 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 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. Increased market volatility may also impact our
revenues as transaction activity in our investment banking and capital markets sales and trading businesses can be negatively
impacted in a volatile market environment.
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.
11
Table of Contents
A credit-rating agency downgrade could significantly impact our business.
JEFFERIES FINANCIAL GROUP INC.
The cost and availability of financing generally are impacted by (among other things) our credit ratings. If any of 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.
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) are transitioning from the use of IBORs to alternative rates. These reforms have caused and may in the
future cause such rates to perform differently than in the past or have other consequences that are contrary to market
expectations. 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 and other IBOR-linked financial instruments.
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.
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, compliance, legal and operational
costs and risks associated with client disclosures, as well as systems 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.
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. Several of our subsidiaries, particularly 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
12
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
We may incur losses as a result of unforeseen or catastrophic events, including the emergence of a pandemic, cybersecurity
incidents and events, terrorist attacks, war, trade policies, military conflict, climate-related incidents, or other natural
disasters.
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, the spread of illnesses or pandemics such as the COVID-19
has, and could in the future, cause illness, quarantines, various shutdowns, reduction in business activity and financial
transactions, labor shortages, supply chain interruptions and overall economic and financial market instability. In addition,
geopolitical and military conflict and war between Russia and Ukraine and Hamas and Israel have and will continue to result in
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. Likewise, our investments and assets in our growing Israeli business could be negatively affected by consequences
from the geopolitical and military conflict in the region. 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, Hamas, or their 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 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.
Within the past year, concerns have arisen with respect to the financial condition of a number of banking organizations in the
United States, in particular those with exposure to certain types of depositors and large portfolios of investment securities. On
March 10, 2023, Silicon Valley Bank (“SVB”) was closed by the California Department of Financial Protection and Innovation.
On March 12, 2023, Signature Bank was closed by the New York State Department of Financial Services. On May 1, 2023,
First Republic was closed by the California Department of Financial Protection and Innovation. In each case, the Federal
Deposit Insurance Corporation (the “FDIC”) was appointed as receiver. While we do not have any exposure to SVB, Signature
Bank, or First Republic, we do maintain our cash at financial institutions, often in balances that exceed the current FDIC
insurance limits. If other banks and financial institutions enter receivership or become insolvent in the future due to financial
conditions affecting the banking system and financial markets, our ability to access our cash, cash equivalents and investments,
including transferring funds, making payments or receiving funds, may be threatened and could have a material adverse effect
on our business and financial condition. In addition, the operating environment and public trading prices of financial services
sector securities can be highly correlated, in particular in times of stress, which may adversely affect the trading price of our
common stock and potentially our results of operations.
13
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
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, and Hamas and
Israel, 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.
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
14
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
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 dissatisfaction, litigation and heightened regulatory scrutiny, all of which can lead to lost revenue,
higher 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 risk monitoring and risk mitigation techniques, those techniques and the judgments that accompany their 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.
Our ability to develop and retain our clients depends on the reputation, judgment, business generation 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.
15
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
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.
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, including through use of relatively new artificial
intelligence tools or methods. Retaliatory acts by Russia, Hamas or their allies in response to economic sanctions or other
measures taken by the global community arising from the Russia-Ukraine and Hamas-Israel conflicts 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 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
16
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
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 that may employ increasingly sophisticated methods such as new artificial
intelligence tools, 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 subject to regulatory sanctions and suffer serious
harm to our reputation, financial position, current client 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.
17
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
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 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”). Further enhancements (driven by regulation) are required in 2024 with respect to EMIR,
and affect our European entities.
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, reporting, investor protection-related and organizational 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. The European regulators continue to refine aspects of MiFID
with these changes now being rolled out separately in both the UK and Europe, and is a good example of an emerging
divergence in the roll out of new regulation in Europe post-Brexit.
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 were required to be implemented from 2023. In addition, new prudential
18
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
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 include a requirement that a certain amount of variable
remuneration for material risk takers be paid in non-cash instruments and have a deferral element. Consequently, we have
adapted our remuneration structures for those employees identified as material risk takers.
A key focus of the European regulators over the last couple of years has been emerging regulation with regards to Operational
Resilience, with regulators expecting investment firms like Jefferies to be able to assess (on an ongoing basis) their resilience
(measured by impact to Jefferies’ clients and market) on identified critical business services. This has brought our management
of third party risk, business continuity and the mitigation of cyber risk more firmly into focus with the regulators.
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.
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 (the “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.
The EU GDPR and UK GDPR impose a number of obligations on organizations to which they apply, 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 the relevant data supervisory authority and impacted individuals.
The EU GDPR and UK GDPR also include restrictions on the transfer of personal data from the EEA to jurisdictions that are
not recognized as having an adequate level of protection with regards to data protection laws. Obligations under the EU GDPR,
the UK GDPR and implementing EU Member State legislation continue to evolve through legislation and regulatory guidance,
for example imposing restrictions on use of the standard contractual clauses (“SCCs”) to transfer personal data to countries that
are not recognized as having an adequate level of data protection by requiring organizations 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 and UK GDPR
identify a list of points for the relevant data supervisory authority 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 receive compensation as a
result of infringement of the EU GDPR and/or UK GDPR for financial or non-financial losses.
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 EU GDPR and UK 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.
Our regulators supervise our business activities to monitor compliance with applicable laws, rules and regulations. In addition,
if there are instances in which our regulators question our compliance with laws, rules, or regulations, they may investigate the
19
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
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 that such investigations and similar reviews will not result in significant or material adverse
regulatory requirements, regulatory enforcement actions, fines or other adverse impact to the operation of our business.
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.
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-Pacific 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.
20
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
Additionally, we lease 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 17, Leases 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.
21
Table of Contents
PART II
JEFFERIES FINANCIAL GROUP INC.
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 18, 2024, there were approximately 1,293
record holders of the common shares.
The following table presents information on our dividends paid per common share during the years ended November 30, 2023,
2022 and 2021:
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2023
$0.30
$0.30
$0.30
$0.30
Year Ended November 30,
2022
$0.30
$0.30
$0.30
$0.30
2021
$0.20
$0.20
$0.25
$0.25
In January 2024, 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, 2023, we purchased a total of 4.9 million of our common shares for $169.4 million, or an
average price of $34.66 per share, including 2.1 million of our common shares in the open market for $65.1 million under our
Board of Director authorization, and 2.8 million shares of our common stock for $104.3 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 six
years, we returned $6.0 billion in total capital to shareholders, including 157.7 million shares repurchased at an average of
$23.91 per share.
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,
2023 (dollars in thousands, except per share amounts):
September 1, 2023 to September 30, 2023
October 1, 2023 to October 31, 2023
November 1, 2023 to November 30, 2023
Total
(a) Total
Number of
Shares
Purchased
(b) Average
Price Paid
per Share
— $
130,398 $
— $
130,398
—
31.68
—
(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)
— $
130,398 $
— $
130,398
250,000
245,869
245,869
(1) In January 2024, the Board of Directors increased the share repurchase authorization back up to $250.0 million.
22
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
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, 2018 to November 30, 2023. Index data was furnished by S&P Global Market Intelligence. The graph assumes
that $100 was invested on December 31, 2018 in each of our common stock, the S&P 500 Index and the S&P 500 Financials
Index and that all dividends, including quarterly and special dividends, were reinvested.
Item 6. [Reserved]
23
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
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;
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, 2023 (“2023”) and November 30, 2022 (“2022”) are discussed
below. For a discussion of our results of operations for the year ended November 30, 2021 (“2021”) and our 2022 results of
operations as compared with our 2021 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,
2022, which was filed with the SEC on January 27, 2023.
24
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
Consolidated Results of Operations
Overview
The following table provides an overview of our consolidated results of operations (dollars in thousands):
2023
$ 4,700,417
4,346,148
354,269
91,881
262,388
2022
$ 5,978,838
4,923,276
1,055,562
273,852
781,710
2021
$ 8,013,826
5,759,721
2,254,105
576,729
1,677,376
% Change from
Prior Year
2023
(21.4) %
(11.7) %
(66.4) %
(66.4) %
(66.4) %
2022
(25.4) %
(14.5) %
(53.2) %
(52.5) %
(53.4) %
(14,846)
(2,397)
3,850
519.4 %
N/M
(454)
14,616
(1,342)
8,281
(826)
6,949
(66.2) %
76.5 %
62.5 %
19.2 %
263,072
777,168
1,667,403
(66.1) %
(53.4) %
25.9 %
25.9 %
25.6 %
Net revenues
Non-interest expenses
Earnings before income taxes
Income tax expense
Net earnings
Net earnings (losses) attributable to noncontrolling
interests
Net losses attributable to redeemable
noncontrolling interests
Preferred stock dividends
Net earnings attributable to Jefferies Financial
Group Inc. common shareholders
Effective tax rate
N/M — Not Meaningful
Executive Summary
Consolidated Results
•
•
Net revenues were $4.70 billion for 2023, down 21.4% compared with $5.98 billion for 2022, substantially as a result
of reduced merchant banking net revenues within our asset management segment, which is largely attributable to
divestitures made in 2022 and 2023. In addition, Investment banking net revenues were lower compared to the prior
year, reflecting reduced industry-wide mergers and acquisitions, equity capital markets and leveraged finance activity.
These decreases were partially offset by favorable net revenues from our equities and fixed income capital market
businesses.
Earnings before income taxes of $354.3 million for 2023 were 66.4% lower than that of the prior year, with a large
portion of the decline attributable to a reduction in investment banking activity as well as the reduction in merchant
banking net revenues. Net earnings attributable to Jefferies Financial Group Inc. of $263.1 million for 2023 were lower
than that of the prior year by a similar percentage.
Business Results
•
•
•
Investment banking net revenues were $2.29 billion for 2023, compared to $2.89 billion for 2022. Advisory revenues
were $1.20 billion, compared to $1.78 billion for 2022, driven by fewer mergers and acquisitions completed during the
year and lower average fees per transaction. Industry-wide deal activity was reduced as compared to the prior year.
Underwriting net revenues of $970.5 million were down 5.8% from the prior year of $1.03 billion, due to reduced
industry-wide leveraged finance activity, while equity underwriting net revenues were slightly higher compared to the
prior year period.
Equities net revenues were $1.12 billion for 2023, up 6.6% compared with $1.05 billion for 2022, on stronger results
in our U.S. cash equity, convertibles and equity ETF businesses, partially offset by lower securities finance net
revenues.
Fixed income net revenues were $1,092.7 million, up 36.5% compared with $800.5 million for 2022, reflecting strong
results across a number of our businesses attributable to more stable market conditions. In addition, losses in our
CMBS business were substantially reduced from the prior year primarily due to a more stable interest rate environment
and overall lower risk profile.
25
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
•
Asset management net revenues were $188.3 million, compared with $1.24 billion in 2022 with substantially all of the
decline attributable to the decline in our merchant banking revenues due to divestitures made in 2022 and 2023.
Investment return net revenues for 2023 were solid driven by improved performance across multiple investment
strategies and funds, favorably comparing to net revenues for the prior year which include a gain of $175.1 million
related to the sale of our interests in Oak Hill. In addition, merchant banking revenues for the prior year included a
gain of $122.0 million associated with the sale of a completed HomeFed multi-family real estate project.
Non-interest Expenses
•
•
•
Non-interest expenses were $4.35 billion for 2023, a decrease of $577.1 million, or 11.7%, compared with $4.92
billion for 2022. The decrease is primarily due to lower cost of sales and depreciation expense related to our
significantly reduced merchant banking portfolio primarily as a result of divestitures made within the last two years
including the sale of Idaho Timber in August 2022 and spin-off of Vitesse Energy in January 2023.
Compensation and benefits expense was $2.54 billion for 2023, a decrease of $53.8 million, or 2.1%, compared with
$2.59 billion for 2022. Compensation and benefits expense as a percentage of Net revenues was 53.9% for 2023,
compared with 43.3% for 2022, reflecting a much higher proportion of merchant banking revenues during 2022 within
our asset management segment, which have much lower compensation rates. Refer to Note 15, Compensation Plans
included in this Annual Report on Form 10-K for further details.
Non-compensation expenses for 2023 were $1.81 billion, a decrease of $523.4 million, or 22.4%, compared with $2.33
billion for 2022, as a result of decreases in costs of sales and depreciation expense primarily attributable to divestitures
within our merchant banking portfolio made within the last two years. In addition, non-compensation expenses for
2022 included an $80.0 million combined regulatory settlement with the U.S. Securities and Exchange Commission
and the U.S. Commodity Futures Trading Commission. These decreases were partially offset by higher technology,
communications and business development expenses; professional fees, largely related to an increase in legal costs
associated with capital markets transactions and litigation; bad debt expenses and loss reserves.
Headcount
•
•
At November 30, 2023, we had 7,564 employees globally across all of our consolidated subsidiaries within our
Investment Banking and Capital Markets and Asset Management reportable segments, an increase of 2,183 employees
from our headcount of 5,381 at November 30, 2022. Included within our global headcount, in addition to our broker-
dealer subsidiaries through which we conduct our Investment Banking advisory and underwriting businesses and Fixed
Income and Equities capital markets businesses, are 2,296 employees of our Stratos, OpNet, HomeFed, Foursight
Capital LLC and M Science subsidiaries.
Of the headcount increase, 1,903 relates to obtaining control of Stratos and OpNet as the employees of those
subsidiaries are now included in our overall headcount. Our headcount was also impacted slightly as employees of
Vitesse Energy are no longer part of our headcount upon the spin-off of Vitesse Energy in January 2023. During 2023,
we have increased the number of our Investment Banking Managing Directors and related staff along with additional
technology and corporate staff to support our growth and strategic priorities.
Revenues by Source
We present our results as two reportable business segments: Investment Banking and Capital Markets and Asset Management.
Additionally, corporate activities are fully allocated to each of these reportable business segments. We believe this presentation
aligns with the manner in which we manage our business activities and is consistent 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 significant portions of our legacy
merchant banking portfolio.
Net revenues presented for our Investment Banking and Capital Markets reportable segment 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. During 2023, we refined our allocated net
interest methodology to better reflect net interest expense across our business units based on use of capital. Historical periods
have been recast to conform with the revised methodology.
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 the subcategory “merchant banking.”
26
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
Foreign currency transaction gains or losses, debt valuation adjustments on derivative contracts, gains and losses on
investments held in deferred compensation or certain other 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 following provides a summary of “Net Revenues by Source” (dollars in thousands):
2023
2022
2021
% Change from
Prior Year
Amount
% of Net
Revenues
Amount
% of Net
Revenues
Amount
% of Net
Revenues
2023
2022
$ 1,198,916
25.5 % $ 1,778,003
29.7 % $ 1,873,204
23.4 % (32.6) %
(5.1) %
560,243
410,208
970,451
118,799
2,288,166
1,123,477
1,092,736
2,216,213
11.9
8.7
20.6
2.5
48.6
23.9
23.2
47.1
538,947
490,873
1,029,820
78,882
2,886,705
1,054,064
800,492
1,854,556
9.0
8.2
17.2
1.3
48.2
17.6
13.4
31.0
1,557,364
935,131
2,492,495
284,681
4,650,380
1,294,392
984,540
2,278,932
19.4
11.7
31.1
3.7
58.2
16.2
12.3
28.5
4,504,379
95.7
4,741,261
79.2
6,929,312
86.7
93,678
154,461
(10,275)
(49,519)
188,345
7,693
2.0
3.3
(0.2)
(1.1)
4.0
0.3
89,127
156,594
1,052,199
(54,429)
1,243,491
(5,914)
1.5
2.6
17.6
(0.9)
20.8
—
120,733
260,316
756,482
(52,776)
1,084,755
(241)
1.5
3.2
9.4
(0.7)
13.4
(0.1)
4.0
(16.4)
(5.8)
50.6
(20.7)
6.6
36.5
19.5
(5.0)
5.1
(1.4)
(65.4)
(47.5)
(58.7)
(72.3)
(37.9)
(18.6)
(18.7)
(18.6)
(31.6)
(26.2)
(39.8)
N/M 39.1
(9.0)
(84.9)
N/M
3.1
14.6
2,353.9
$ 4,700,417
100.0 % $ 5,978,838
100.0 % $ 8,013,826
100.0 % (21.4) % (25.4) %
Advisory
Equity underwriting
Debt underwriting
Total underwriting
Other investment banking
Total Investment Banking
Equities
Fixed income
Total Capital Markets
Total Investment Banking and Capital
Markets (1)
Asset management fees and revenues
Investment return (2)
Merchant banking, inclusive of net interest
Allocated net interest (2)
Total Asset Management
Other
Net Revenues
N/M — Not Meaningful
(1) Allocated net interest is not separately disaggregated for Investment Banking and Capital Markets. This presentation is
aligned to our Investment Banking and Capital Markets internal performance measurement.
(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.
Investment Banking Revenues
Investment banking is composed of revenues from:
•
•
•
•
•
•
advisory services with respect to mergers and acquisitions, debt financing, restructurings and private capital
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 43.6% share of net earnings from our commercial real estate joint venture, Berkadia (which includes commercial
mortgage origination and servicing);
Foursight, our wholly-owned subsidiary engaged in the lending and servicing of automobile loans (agreement reached
in November 2023 to sell our interests, with transaction expected close in the first quarter of 2024); and
securities and loans received or acquired in connection with our investment banking activities.
27
Table of Contents
The following table sets forth our investment banking revenues (dollars in thousands):
JEFFERIES FINANCIAL GROUP INC.
Advisory
Equity underwriting
Debt underwriting
Total underwriting
Other investment banking
Total investment banking
2021
2023
2022
$ 1,198,916 $ 1,778,003 $ 1,873,204
1,557,364
935,131
2,492,495
284,681
$ 2,288,166 $ 2,886,705 $ 4,650,380
538,947
490,873
1,029,820
78,882
560,243
410,208
970,451
118,799
% Change from
Prior Year
2023
(32.6) %
4.0 %
(16.4) %
(5.8) %
50.6 %
(20.7) %
2022
(5.1) %
(65.4) %
(47.5) %
(58.7) %
(72.3) %
(37.9) %
The following table sets forth our investment banking activities (dollars in billions):
Deals Completed
Aggregate Value
2023
2022
2021
2023
2022
2021
Advisory transactions
Public and private equity and convertible
offerings
Public and private debt financings
287
182
699
364
166
653
315 $
259.1 $
336.7 $
380.4
426
812
59.6
213.6
37.8
250.6
145.6
390.9
Investment banking revenues were $2.29 billion for 2023, compared with $2.89 billion for 2022, reflecting the reduction in
industry-wide mergers and acquisition, initial public offerings and leveraged finance activity while Other investment banking
revenues increased on improved performance from Jefferies Finance partially offset by reduced revenues from Berkadia.
Advisory revenues were $1.20 billion for 2023, down $579.1 million, or 32.6%, from 2022, and we have continued to maintain
market share though deal volume and deal value across most sectors in the global mergers and acquisitions markets have
declined.
Underwriting revenues were $970.5 million for 2023, a decrease of $59.3 million, or 5.8%, from 2022, reflecting slightly higher
net revenues of $560.2 million in equity underwriting and lower net revenues of $410.2 million in debt underwriting. Equity
underwriting revenues increased modestly as the equity markets have become more active in 2023. The decline in debt
underwriting net revenues reflects a decline in new securitization issuance offset slightly by an improvement in other debt
underwriting markets once inflationary and interest rate concerns somewhat stabilized.
Other investment banking revenues were $118.8 million for 2023, compared with $78.9 million for 2022. Results from our
share of the net earnings of our Jefferies Finance joint venture increased driven by greater net interest income primarily due to
rising reference rates and losses on certain syndicated transactions and commitments in 2022 that were not repeated in 2023 due
to improving market conditions. Revenues from our share of the net earnings of our Berkadia joint venture were impacted by a
decline in mortgage origination volumes, partially offset by higher interest income on the loan servicing portfolio. Revenues
from our automobile lending and servicing business were relatively consistent as compared to the prior year.
Our investment banking backlog continues to strengthen from the levels at the end of the prior quarter. We have seen recent
signs of a further pickup in underwriting and mergers and acquisitions activity, although execution is always uncertain and
dependent on market conditions. Backlog snapshots are subject to limitations as 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.
We continue to make extensive investment in our investment banking franchise, including a significant number of professional
hires, including at the managing director level, increasing our headcount in the industrial and energy sectors, additions of a
municipal healthcare group and our private capital group as well as expansions in capabilities across Canada, South America,
continental Europe, the Middle East and Asia-Pacific. We believe that these investments create significant momentum for
strong investment banking results as our clients become more active.
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;
28
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
•
•
•
advisory services offered to clients;
financing, securities lending and other prime brokerage services offered to clients, including capital introductions and
outsourced trading; and
wealth management services.
Equities net revenues were $1.12 billion for 2023, an increase of 6.6%, compared with $1.05 billion in 2022, with strong results
and momentum across many equities business lines. Results in our global convertible business improved year over year as more
favorable market conditions for this asset class led to increased primary issuance and secondary trading. Additionally, net
revenues from our U.S. cash equities and equity ETF businesses increased, which was partially offset by lower securities
finance net revenues.
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;
interest rate derivatives and credit derivatives; and
financing services offered to clients.
Fixed income net revenues of $1.09 billion for 2023 were up 36.5% compared to 2022, primarily reflecting strong results across
our distressed trading, European corporates, loans, municipals, and U.S. rates businesses, partially offset by lower net revenues
from our emerging markets and U.S. high yield trading businesses. In addition, losses in our CMBS business were substantially
reduced from the prior year primarily due to a more stable interest rate environment and overall lower risk profile. The
significant volatility of interest rates and inflation that existed in 2022 began to normalize as 2023 progressed leading to an
overall improved operating environment.
Asset Management
We operate a diversified alternative asset management platform offering institutional clients a 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 in
August 2022 and our spin-off of our interest in Vitesse Energy in January 2023).
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 hurdle. These components can be
affected by financial markets, profits and losses in the applicable investment portfolios and client preferences for capital
allocation. 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.
29
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
The following summarizes the results of our Asset Management businesses by asset class (dollars in thousands):
2023
2022
2021
2023
2022
% 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, inclusive of net interest
Allocated net interest
Total Asset Management
$
3,785 $
7,198 $
30,082
33,867
59,811
93,678
16,327
23,525
65,602
89,127
154,461
156,594
(10,275) 1,052,199
6,927
7,909
14,836
105,897
120,733
260,316
756,482
(49,519)
(54,429)
(52,776)
(9.0) %
$ 188,345 $ 1,243,491 $ 1,084,755
(84.9) %
(47.4) %
3.9 %
84.2 % 106.4 %
44.0 %
(8.8) %
5.1 %
(1.4) %
N/M
58.6 %
(38.1) %
(26.2) %
(39.8) %
39.1 %
3.1 %
14.6 %
(1) These amounts include our share of fees received by affiliated asset management companies with which we have revenue
and profit share arrangements, as well as earnings on our ownership interest in affiliated asset managers.
Asset management fees and revenues were $93.7 million for 2023, compared with $89.1 million for 2022, reflecting higher
management and performance fees on funds managed by us, partially offset by a slight decline in performance and similar fees
and revenues earned through our strategic affiliates.
Investment return was $154.5 million for 2023, compared with $156.6 million for 2022, reflecting favorable returns generated
from new fund strategies launched during 2023 with sizable notional assets under management and meaningfully improved
performance across a large majority of our investment strategies and funds. In particular, our Asia-Pacific strategy funds
generated significantly improved performance. Net revenues for the prior year include a gain of $175.1 million related to the
sale of our interests in Oak Hill.
Negative revenues from merchant banking assets managed within our Asset Management business were $(10.3) million for
2023, compared with net revenues of $1.05 billion for 2022, which include revenues of $570.2 million from Idaho Timber (sold
in August 2022) and oil and gas revenues of $254.5 million from Vitesse Energy (spun-off in January 2023). Results from our
merchant banking activities for 2023 were impacted by net losses of $52.2 million and $57.5 million attributed to our
investments in OpNet and Golden Queen (sold in the fourth quarter of 2023), respectively, both legacy merchant banking
investments. In addition, merchant banking revenues for the prior year included $122.0 million of gains associated with the sale
of a completed HomeFed multi-family real estate project.
Assets under Management
We and our affiliated asset managers have aggregate net asset values or net asset value equivalent assets under management of
approximately $28.0 billion and $29.0 billion at November 30, 2023 and 2022, 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 $3.5 billion and $2.6 billion
at November 30, 2023 and 2022, 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 $1.8 billion and $1.5 billion at
November 30, 2023 and 2022, respectively, plus amounts financed of $1.8 billion and $0.9 billion at November 30,
2023 and 2022, respectively. Revenues related to the investments made by us are presented in Investment return within
the results of our asset management businesses.
Assets under management by affiliated asset managers with whom we have profit or revenue sharing arrangements
were $22.4 billion and $25.2 billion at November 30, 2023 and 2022, 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.
30
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
•
Third-party investments actively managed by our wholly-owned managers were $2.1 billion and $1.2 billion at
November 30, 2023 and 2022, 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.
Year-end assets under management by predominant asset class were as follows (in millions):
Assets under management:
Equities
Multi-asset
Total
Change in assets under management were as follows (in millions):
Assets under management:
Balance, beginning of period
Net cash inflows
Net market appreciation (depreciation)
Balance, end of period
November 30,
2023
2022
448 $
1,606
2,054 $
274
974
1,248
Year Ended November 30,
2022
2023
1,248 $
693
113
2,054 $
831
434
(17)
1,248
$
$
$
$
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):
Jefferies Financial Group Inc.; as manager:
Fund investments (1)
Separately managed accounts (2)
Total
Strategic affiliates; as manager:
Fund investments (1)
Separately managed accounts (2)
Investments in asset managers
Total
Total asset management investments
November 30,
2023
2022
$
$
$
$
$
179,533 $
187,350
366,883 $
936,743 $
458,894
40,363
1,436,000 $
1,802,883 $
182,792
129,430
312,222
1,022,029
214,387
52,357
1,288,773
1,600,995
(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, 2023 and 2022, $11.9 million and $9.7 million, respectively, represent 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.
31
Table of Contents
Other
JEFFERIES FINANCIAL GROUP INC.
Other revenues include foreign currency transaction gains or losses, debt valuation adjustments on derivative contracts, gains
and losses on investments held in deferred compensation or certain other 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.
Non-interest Expenses
Non-interest expenses were as follows (dollars in thousands):
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
Total non-interest expenses
Total Non-interest Expenses
2021
2023
2022
$ 2,535,272 $ 2,589,044 $ 3,554,760
301,860
117,572
388,134
106,254
109,772
215,761
157,420
470,870
337,318
$ 4,346,148 $ 4,923,276 $ 5,759,721
347,805
42,067
444,011
108,001
150,500
240,978
172,902
440,837
387,131
366,702
61,082
477,028
106,051
177,541
266,447
112,201
29,435
214,389
% Change from
Prior Year
2023
(2.1) %
5.4
45.2
7.4
(1.8)
18.0
10.6
(35.1)
(93.3)
(44.6)
(11.7) %
2022
(27.2) %
15.2
(64.2)
14.4
1.6
37.1
11.7
9.8
(6.4)
14.8
(14.5) %
Non-interest expenses were $4.35 billion for 2023, a decrease of $577.1 million, or 11.7%, compared with $4.92 billion for
2022. The decrease is primarily due to lower cost of sales and depreciation expense related to our significantly reduced
merchant banking portfolio primarily as a result of divestitures made in 2022 and 2023, including the sale of Idaho Timber in
August 2022 and the spin-off of Vitesse Energy in January 2023.
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 contain market and performance conditions and the awards are amortized over their service
periods.
Compensation and benefits expense was $2.54 billion for 2023 compared with $2.59 billion for 2022. A significant portion of
our compensation expense is highly variable with net revenues. Compensation and benefits expense as a percentage of Net
revenues was 53.9% for 2023 and 43.3% for 2022. The lower ratios for 2022 reflect a much higher proportion of merchant
banking revenues within our asset management segment, which have much lower compensation rates.
Compensation expense related to the amortization of share- and cash-based awards amounted to $370.0 million for 2023
compared with $240.5 million for 2022.
32
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
At November 30, 2023, we had 7,564 employees globally across all of our consolidated subsidiaries within our Investment
Banking and Capital Markets and Asset Management reportable segments,, an increase of 2,183 employees from our headcount
of 5,381 at November 30, 2022. Included within our global headcount, in addition to our broker-dealer subsidiaries through
which we conduct our Investment Banking advisory and underwriting businesses and Fixed Income and Equities capital
markets businesses, are 2,296 employees of our Stratos, OpNet, HomeFed, Foursight Capital LLC and M Science subsidiaries.
Of the headcount increase, 1,903 relates to obtaining control of Stratos and OpNet as the employees of those subsidiaries are
now included in our overall headcount. Our headcount was also impacted slightly as employees of Vitesse Energy are no longer
part of our headcount upon the spin-off of our interests in Vitesse Energy in January 2023. During 2023, we have increased the
number of our Investment Banking Managing Directors and related staff along with additional technology and corporate staff to
support our growth and strategic priorities.
Refer to Note 15, 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 38.5% and 39.0% for 2023
and 2022, respectively, and was impacted by the following:
•
•
•
•
•
Cost of sales and depreciation and amortization expenses were significantly lower reflecting the sale of Idaho Timber
in August 2022 and the spin-off of Vitesse Energy in January 2023.
Technology and communication expenses were higher related to the development of various trading and management
systems and increased market data costs.
Business development expenses were higher as business travel, conferences and other events have returned to normal
levels. Also, additions of investment banking professionals during 2023 lead to higher business development activity
with a commensurate increase in expenses.
Professional services expenses were higher primarily on increased transaction related legal fees associated with capital
markets transaction and litigation as well as consulting fees related to strategic technology investment initiatives.
Other expenses were lower as non-compensation expenses for 2022 included an $80.0 million combined regulatory
settlement with the U.S. Securities and Exchange Commission and the U.S. Commodity Futures Trading Commission.
This decrease was partially offset by higher bad debt expense and loss reserves.
Income Taxes
•
•
•
The provision for income taxes was $91.9 million for 2023, equating to an effective tax rate of 25.9%, compared with
$273.9 million for 2022, equating to an effective tax rate of 25.9%. The rate for the two comparable periods was
unchanged.
In August 2022, the Inflation Reduction Act was signed into law. The Inflation Reduction Act imposes a corporate
alternative minimum tax (“CAMT”) of 15% on corporations with three-year average annual adjusted financial
statement income exceeding $1.0 billion, as well as a 1% excise tax on corporate stock repurchases made after
December 31, 2022. CAMT became applicable to us beginning December 1, 2023. We are continuing to evaluate the
impact of this new tax, but we do not expect a material impact on our tax provision for the year ended November 30,
2024.
The Organization for Economic Co-operation and Development (“OECD”) Pillar Two Model Rules (“Pillar Two”) for
a global 15% minimum tax are in the process of being adopted in a number of jurisdictions in which we operate. Pillar
Two is expected to be applicable to us beginning December 1, 2024. We are continuing to evaluate the impact of
proposed and enacted legislative changes as new guidance becomes available.
Refer to Note 23, Income Taxes in our consolidated financial statements included in this Annual Report on Form 10-K, for
further details on income taxes.
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.
33
Table of Contents
Critical Accounting Estimates
JEFFERIES FINANCIAL GROUP INC.
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 liability in an orderly transaction
between market participants at the measurement date (the exit price). 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 6, 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
trading activity for a financial instrument has decreased and when certain factors suggest that observed 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.
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 judgment. See Note 2, Summary of Significant Accounting Policies and Note 6,
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.
For information on the composition of our Financial instruments owned and Financial instruments sold, not yet purchased
recorded at fair value and the composition of activity of our Level 3 assets and Level 3 liabilities, see Note 6, 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.
34
Table of Contents
Income Taxes
JEFFERIES FINANCIAL GROUP INC.
Significant judgment is required in estimating our provision for income taxes. 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 and 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 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 generally obtain from such
investee updated cash flow projections and obtain other relevant information related to assessing the overall valuation of the
investee. Utilizing this information, we assess whether the investment is considered to be other-than-temporarily impaired. To
the extent an investment is deemed to be other-than-temporarily impaired, an impairment charge is recognized for the amount,
if any, by which the investment’s book value exceeds our estimate of the investment’s fair value.
In the first quarter of 2023, we performed a valuation of our equity method investment in Golden Queen as forecasts of the
expected future production of gold and silver from its mine had declined from previous periods. Our estimate of fair value was
based on a discounted cash flow analysis, which included management’s projections of future Golden Queen cash flows and a
discount rate of 11.0%. The estimated fair value of our investment in Golden Queen was $24.2 million, which was $22.1
million lower than our prior carrying value at November 30, 2022. As a result, an impairment loss of $22.1 million was
recorded in Other income in the Consolidated Statements of Earnings for the three months ended February 28, 2023. During the
three months ended May 31, 2023, we recognized an additional impairment loss of $7.3 million primarily due to further
declines in cash flows at Golden Queen resulting in a carrying value our investment of $16.8 million at May 31, 2023. During
the three months ended August 31, 2023, we recognized an additional impairment loss of $27.8 million, which reduced the
carrying value of our investment to zero and also reduced the carrying value of shareholder loans to Golden Queen to $8.8
million at August 31, 2023. The impairment for the three months ended August 31, 2023 was primarily based on our estimate of
what could be recognized in a sale transaction for the investment. In the fourth quarter of 2023, we sold Golden Queen and
recognized a gain of $1.7 million on the sale.
We had an equity method interest in Stratos with rights to a majority of all distributions in respect of Stratos. In the fourth
quarter of 2022, we had a triggering event to test our investment in Stratos for impairment. We estimated the fair value of our
equity interest in Stratos based primarily on a discounted cash flow valuation model. The discounted cash flow valuation model
used inputs including management’s projections of future Stratos cash flows and a discount rate of 23.0%. The estimated fair
value of our equity investment in Stratos 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 the decline in fair value was other than temporary and as result
incurred a $25.3 million impairment charge. During 2023, we obtained 100% of the interests in Stratos and now account for
Stratos as a wholly owned subsidiary. Refer to Note 4, Business Acquisitions in our consolidated financial statements included
in this Annual Report on Form 10-K.
35
Table of Contents
Goodwill
JEFFERIES FINANCIAL GROUP INC.
At November 30, 2023, goodwill recorded in our Consolidated Statements of Financial Condition is $1.85 billion (3.2% of total
assets). The nature and accounting for goodwill is discussed in Note 2, Summary of Significant Accounting Policies, and Note
13, 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. 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. The valuation methodology for our reporting units is 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. 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.
The carrying values of goodwill by reporting unit at November 30, 2023 are as follows: $700.2 million in Investment Banking,
$255.3 million in Equities and Wealth Management, $576.6 million in Fixed Income, $143.0 million in Asset Management and
$172.8 million attributed to various individual legacy merchant banking investments. The increase in goodwill related to legacy
merchant banking investments was primarily due to the acquisition of OpNet. Refer to Note 4, Business Acquisitions and Note
13, Goodwill and Intangible Assets in our consolidated financial statements included in this Annual Report on Form 10-K for
further details on goodwill.
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. During 2023, we have substantially reduced our merchant banking portfolio through a variety of strategic actions.
We are continuing the process of further liquidating a significant portion of this portfolio with the intention of selling to third
parties or distributing to shareholders this portfolio in an orderly manner over the next few years.
In keeping with our strategy of returning excess liquidity to shareholders, during the year ended November 30, 2023, we
returned an aggregate of $985.8 million to common shareholders primarily in the form of $278.6 million in cash dividends and
dividends in the form of distribution of capital of $527.0 million with the distribution of our ownership interests in Vitesse
Energy on a tax-free pro rata basis to all shareholders. Additionally, we repurchased 4.9 million common shares for a total of
$169.4 million at a weighted average price of $34.66 per share.
36
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
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.
The following table provides detail on selected balance sheet items (dollars in millions):
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
Securities borrowed
Securities purchased under agreements to resell
Total securities borrowed and securities purchased under
agreements to resell
Securities loaned
Securities sold under agreements to repurchase
Total securities loaned and securities sold under agreements to
repurchase
November 30,
2023
2022
% Change
$
57,905.2 $
51,057.7
8,526.4
9,703.1
1,414.6
21,747.5
11,251.2
680.6
7,192.1 $
5,950.5
957.3
18,666.3
11,056.5
791.5
5,831.1
4,546.7
13,142.6 $
10,377.8
1,840.5 $
10,920.6
1,366.0
7,452.3
$
$
$
13.4 %
(12.1)
47.8
16.5
1.8
(14.0)
23.3 %
30.9
26.6 %
34.7 %
46.5
$
12,761.1 $
8,818.3
44.7 %
Total assets at November 30, 2023 and 2022 were $57.91 billion and $51.06 billion, respectively, an increase of 13.4%. During
2023, average total assets were approximately 5.5% higher than total assets at November 30, 2023.
Our total Financial instruments owned inventory was $21.75 billion and $18.67 billion at November 30, 2023 and 2022,
respectively. During the year ended November 30, 2023, our total Financial instruments owned increased primarily due to
increases in corporate debt and equity securities, and mortgage- and asset-backed securities. Financial instruments sold, not yet
purchased inventory was $11.25 billion at November 30, 2023, an increase of 1.8% from $11.06 billion at November 30, 2022,
with the increase primarily driven by increases in corporate debt and equity securities and sovereign obligations, partially offset
by decreases in derivative contracts and U.S. government and agency securities. Our overall net inventory position was $10.50
billion and $7.61 billion at November 30, 2023 and 2022, respectively, with the increase primarily due to increases in mortgage
and asset-backed securities and derivative contracts.
Our Level 3 financial instruments owned as a percentage of total Financial instruments owned declined to 3.1% at
November 30, 2023 from 4.2% at November 30, 2022, primarily due to decreases in investments at fair value and loans and
other receivables as certain historical positions in those categories are now eliminated upon the consolidation of Stratos and
OpNet. For additional details related to the consolidation of Stratos and OpNet refer to Note 4, Business Acquisitions in our
consolidated financial statements included in this Annual Report on Form 10-K. Additionally, we sold a portion of CMBS
during the fourth quarter of 2023 that previously were classified within Level 3 assets.
37
Table of Contents
The following table summarizes Level 3 assets by operating segment (in millions, except percentages):
JEFFERIES FINANCIAL GROUP INC.
Investment Banking
Equities and Fixed Income
Asset Management (1)
Total
November 30, 2023
129.3
$
337.2
214.1
680.6
$
Percent
November 30, 2022
124.7
360.7
306.1
791.5
19.0% $
49.5
31.5
100.0% $
Percent
15.8%
45.5
38.7
100.0%
(1) At November 30, 2023 and November 30, 2022, $121.4 million and $218.7 million, respectively, are attributed to merchant
banking investments within in our Asset Management operating segment.
Securities financing assets and liabilities include financing for our financial instruments trading activity and matched book
transactions. Matched book transactions accommodate customers by providing financing and access to securities. 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 2023 were 23.0% higher than the November 30, 2023 balance. Our average month end
balance of total repos and stock loans during 2023 were 19.7% higher than the November 30, 2023 balance.
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):
Securities Purchased Under Agreements to Resell:
Year end
Month end average
Maximum month end
Securities Sold Under Agreements to Repurchase:
Year end
Month end average
Maximum month end
Year Ended
2023
2022
$
$
5,951 $
7,681
10,767
10,921 $
13,556
17,981
4,547
7,489
10,428
7,452
11,738
17,417
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. shareholders’ equity and tangible
Jefferies Financial Group Inc. shareholders’ equity with the resulting leverage ratios (dollars in millions):
Total assets
Total equity
Total Jefferies Financial Group Inc. shareholders’ equity
Deduct: Goodwill and intangible assets
Tangible Jefferies Financial Group Inc. shareholders’ equity
Leverage ratio (1)
Tangible gross leverage ratio (2)
$
$
$
$
$
November 30,
2023
2022
57,905 $
9,802 $
9,710 $
(2,045) $
7,665 $
5.9
7.3
51,058
10,295
10,233
(1,876)
8,357
5.0
5.9
(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. shareholders’ equity. The tangible gross leverage ratio is used by
rating agencies in assessing our leverage ratio.
38
Table of Contents
Liquidity Management
JEFFERIES FINANCIAL GROUP INC.
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 and idiosyncratic 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 Cash Capital Policy, our assessment of Modeled
Liquidity Outflow (“MLO”) and our Contingency Funding Plan (“CFP”).
Liquidity Management Framework. Our Liquidity Management Framework 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 including central counterparty clearing houses;
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 $17.70 billion at November 30, 2023 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.
39
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
A two-notch downgrade of our long-term senior unsecured credit ratings.
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, 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, 2023, we had sufficient
excess liquidity to meet all contingent cash outflows detailed in the MLO for at least 30 days without balance sheet reduction.
We regularly refine our model to reflect changes in market or economic conditions and our business mix.
CFP. Our CFP ensures the ability to access adequate liquid financial resources to meet liquidity shortfalls that may arise in
emergency situations. The CFP triggers the following actions:
•
•
•
•
•
•
Sets out the governance for managing liquidity during a liquidity crisis;
Identifies key liquidity and capital early warning indicators that will help guide the response to the liquidity crisis;
Identifies the actions and escalation procedures should we experience a liquidity crisis including coordination amongst
senior management and the Board of Directors;
Sets out the sources of funding available during a liquidity crisis;
Sets out the communication plan during a liquidity crisis for key external stakeholders including regulators,
relationship banks, rating agencies and funding counterparties; and
Sets out an action plan to source additional funding.
40
Table of Contents
Sources of Liquidity
JEFFERIES FINANCIAL GROUP INC.
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):
Cash and cash equivalents:
Cash in banks
Money market investments (2)
Total cash and cash equivalents
Other sources of liquidity:
November 30,
2023
Average Balance
Quarter Ended
November 30,
2023 (1)
November 30,
2022
$
2,606,673
$
3,570,487 $
2,541,021
5,919,690
8,526,363
4,568,342
8,138,829
7,162,088
9,703,109
Debt securities owned and securities purchased under agreements
to resell (3)
Other (4)
Total other sources
Total cash and cash equivalents and other liquidity sources
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
1,472,524
456,341
1,928,865
1,456,826
536,753
1,993,579
1,417,177
520,714
1,937,891
$ 10,455,228
$
10,132,408 $ 11,641,000
18.1 %
18.7 %
22.8 %
23.7 %
(1) Average balances are calculated based on weekly balances.
(2) At November 30, 2023 and 2022, $5.90 billion and $7.14 billion, respectively, was invested in U.S. government money
funds that invest primarily 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 balance at
November 30, 2023 and 2022 are primarily invested in AAA-rated prime money funds. The average balance of U.S.
government money funds for the quarter ended November 30, 2023 was $4.55 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, 2023, we had the ability to readily obtain
repurchase financing for 81.4% 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
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.
41
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
The following summarizes our financial instruments by asset class that we consider to be of a liquid nature and the amount of
such assets that have not been pledged as collateral at November 30, 2023 and 2022 (in thousands):
November 30,
2023
2022
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
$
$
Liquid Financial
Instruments
Unencumbered
Liquid Financial
Instruments (2)
Liquid Financial
Instruments
4,062,977 $
4,785,701
652,131 $
171,457
3,040,844 $
3,215,807
Unencumbered
Liquid Financial
Instruments (2)
846,520
34,405
3,852,232
1,562,346
3,220,918
210,373
17,694,547 $
111,423
1,120,074
—
—
2,055,085 $
4,032,215
1,679,573
2,514,773
111,681
14,594,893 $
59,909
803,738
—
—
1,744,572
(1) Consists solely of agency mortgage-backed securities issued by the Federal Home Loan Mortgage Corporation (“Freddie
Mac”), the Federal National Mortgage Association (“Fannie Mae”) and the 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. During 2023, an average of approximately 68.1% 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 repurchase agreements for non-clearing corporation
eligible funded inventory is approximately six months at November 30, 2023.
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, 2023, short-term borrowings,
which must be repaid within one year or less include bank loans, overdrafts and borrowings under revolving credit facilities.
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 $787.9 million for
2023.
42
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
At November 30, 2023 and 2022, our borrowings under credit facilities classified within bank loans in Short-term borrowings
in our Consolidated Statements of Financial Condition were $937.1 million and $517.0 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, 2023, we were in compliance with all
covenants under these credit facilities.
For additional details on our short-term borrowings, refer to Note 18, Short-Term Borrowings in our consolidated financial
statements included in this Annual Report on Form 10-K.
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, 2023, the outstanding notes were $1.43 billion, bear interest at a spread over the Secured
Overnight Funding Rate (“SOFR”) or the Euro Short-Term Rate (“ESTER”) and mature from December 2023 to July 2025.
For additional details on our repurchase agreement financing program, refer to Note 10, Variable Interest Entities in our
consolidated financial statements included in this Annual Report on Form 10-K.
Total Long-Term Capital
At November 30, 2023 and 2022, we had total long-term capital of $17.70 billion and $17.49 billion, respectively, resulting in a
long-term debt to equity capital ratio of 0.81:1 and 0.68:1, respectively. See “Equity Capital” herein for further information on
our change in total equity. Our total long-term capital base at November 30, 2023 and 2022 was as follows (in thousands):
Unsecured Long-Term Debt (1)
Total Mezzanine Equity
Total Equity
Total Long-Term Capital
November 30,
2023
7,902,079 $
406
9,802,135
17,704,620 $
2022
7,065,663
131,461
10,295,479
17,492,603
$
$
(1) The amounts at November 30, 2023 and 2022 exclude our secured long-term debt and exclude $51.0 million and $13.2
million, respectively, of structured notes that will mature within one year. Additionally, the amount at November 30, 2023
excludes $544.2 million of our 1.000% Euro Medium Term Notes as these are mature within one year. The amount at
November 30, 2022 excludes $393.0 million of our 5.500% Senior Notes as this note matured on October 18, 2023.
Long-Term Debt
During 2023, long-term debt increased by $924.7 million to $9.70 billion at November 30, 2023, as presented in our
Consolidated Statements of Financial Condition. This increase is primarily due:
•
•
$990.6 million from the issuance of our 5.875% Senior Notes with a principal amount of $1.0 billion, due 2028;
$290.2 million from additional issuances, net of repayments;
• Addition of $75.4 million of Tessellis debt due to the OpNet consolidation; and
•
Partially offset by decreases of $393.0 million from the maturity of our 5.500% Senior Note as well as the
reclassification of long-term debt to liabilities held for sale related to Foursight. For additional details related to
Foursight and OpNet, refer to Note 5, Assets Held for Sale in our consolidated financial statements included in this
Annual Report on Form 10-K.
At November 30, 2023 and 2022, our borrowings under several credit facilities classified within Long-term debt in our
Consolidated Statements of Financial Condition amounted to $735.2 million and $933.5 million, respectively. Interest on these
credit facilities is based on an adjusted 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, 2023, we were in compliance with all
covenants under theses credit facilities.
43
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
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, 2023, 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 SOFR plus 1.25%. The agreement contains certain
covenants that, among other things, restricts lien or encumbrance upon any of the pledged collateral. At November 30, 2023, 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, 2023, 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 2028.
At November 30, 2023, HomeFed has a construction loan with an aggregate committed amount of $62.0 million. The proceeds
are being used for construction at certain of its real estate projects. The outstanding principal amount of the loan bears interest
based on the SOFR plus 2.75%, subject to adjustment on the first of each calendar month. At November 30, 2023, the weighted
average interest rate on this loan was 8.07%. The loan matures in May 2024 and is collateralized by the property underlying the
related project with a guarantee by HomeFed. At November 30, 2023 and November 30, 2022, $48.2 million and $57.0 million,
respectively, was outstanding under the construction loan agreement.
At November 30, 2023, our unsecured long-term debt has a weighted average maturity of approximately 8.7 years.
For further information, see Note 19, Long-Term Debt, in our consolidated financial statements included in this Annual Report
on Form 10-K.
Our long-term debt ratings at November 30, 2023 are as follows:
Moody’s Investors Service
Standard & Poor’s
Fitch Ratings (1)
Rating
Baa2
BBB
BBB
Outlook
Stable
Stable
Positive
(1) On December 11, 2023, Fitch Ratings revised our rating of BBB to BBB+ and revised our rating outlook from positive to
stable.
At November 30, 2023, the long-term debt ratings on our principal subsidiaries, Jefferies LLC, Jefferies International Limited
(a U.K. broker-dealer) and Jefferies GmbH are as follows:
Jefferies LLC
Jefferies International
Limited
Jefferies GmbH
Moody’s Investors Service
Standard & Poor’s
Rating
Baa1
BBB+
Outlook
Stable
Stable
Rating
Baa1
BBB+
Outlook
Stable
Stable
Rating
Baa1
BBB+
Outlook
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.
44
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
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, 2023, 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 $58.3 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
Common Stock
At November 30, 2023 and 2022, we had 565,000,000 authorized shares of voting common stock with a par value of $1.00 per
share. At November 30, 2023, we had outstanding 210,626,642 common shares, 15,216,591 share-based awards that do not
require the holder to pay any exercise price and 5,064,740 stock options that require the holder to pay a weighted average
exercise price of $22.69 per share. The 15,216,591 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.
The table below presents information about common stock repurchases pursuant to our share repurchase program during the
year ended November 30, 2023 (in thousands, except share and per share amounts):
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 Authorized that May Yet Be Purchased Under the Plans or
Programs
Year Ended
November 30, 2023
$
$
$
2,130,398
65,074
30.55
245,869
In January 2024, the Board of Directors increased the share repurchase authorization back up to $250.0 million.
In February 2023, our mandatorily redeemable convertible preferred shares were converted into 4,654,362 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, 2023 and 2022.
Year Ended November 30, 2023
Declaration Date
January 9, 2023
March 28, 2023
June 27, 2023
September 27, 2023
Record Date
February 13, 2023
May 15, 2023
August 14, 2023
November 13, 2023
Payment Date
February 24, 2023
May 26, 2023
August 25, 2023
November 28, 2023
Year Ended November 30, 2022
Declaration Date
January 12, 2022
March 28, 2022
June 27, 2022
September 28, 2022
Record Date
February 14, 2022
May 16, 2022
August 15, 2022
November 14, 2022
Payment Date
February 25, 2022
May 27, 2022
August 26, 2022
November 29, 2022
Per Common Share
Amount
$0.30
$0.30
$0.30
$0.30
Per Common Share
Amount
$0.30
$0.30
$0.30
$0.30
On January 8, 2024, the Board of Directors declared a dividend of $0.30 per common share to be paid on February 27, 2024 to
common shareholders of record at February 16, 2024.
45
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
As compared to November 30, 2022, the decrease to total Jefferies Financial Group Inc. shareholders’ equity at November 30,
2023 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.
Non-Voting Common Stock
On June 28, 2023, shareholders approved an Amended and Restated Certificate of Incorporation, which authorized the issuance
of non-voting common stock with a par value of $1.00 per share (the “Non-Voting Common Shares”). The Non-Voting
Common Shares are entitled to share equally, on a per share basis, with the voting common stock, in dividends and
distributions. Upon the effectiveness of the Amended and Restated Certificate of Corporation on June 30, 2023, the number of
authorized shares of common stock remains at 600,000,000 shares, comprised of 565,000,000 shares of voting common stock
and 35,000,000 shares of Non-Voting Common Shares.
Series B Preferred Stock
On April 27, 2023, we established Series B Non-Voting Convertible Preferred Shares with a par value of $1.00 per share
(“Series B Preferred Stock”) and designated 70,000 shares as Series B Preferred Stock. The Series B Preferred Stock has a
liquidation preference of $17,500 per share and rank senior to our voting common stock upon dissolution, liquidation or
winding up of Jefferies Financial Group Inc. Each share of Series B Preferred Stock is automatically convertible into 500 shares
of non-voting common stock, subject to certain anti-dilution adjustments, three years after issuance. The Series B Preferred
Stock participates in cash dividends and distributions alongside our voting common stock on an as-converted basis.
Additionally, on April 27, 2023, we entered into an Exchange Agreement with Sumitomo Mitsui Banking Corporation
(“SMBC”), which entitles SMBC to exchange shares of our voting common stock for shares of the Series B Preferred Stock at a
rate of 500 shares of voting common stock for one share of Series B Preferred Stock. The Exchange Agreement is limited to
55,125 shares of Preferred Stock and SMBC will pay $1.50 per share of voting common stock so exchanged. During the third
quarter of 2023, SMBC exchanged 21.0 million shares of voting common stock for 42,000 shares of Series B Preferred Stock
and we received cash of $31.5 million in connection with the exchange. As a result of the exchange, our equity attributed to our
voting common stock decreased by $21.0 million, our equity attributed to the Series B Preferred Stock increased by $42,000
and additional paid-in capital increased by $52.4 million, resulting in a $31.5 million net increase in our shareholders’ equity, or
$0.12 per common share on an as-converted, fully-diluted, basis. During the year ended November 30, 2023, we paid $12.6
million of cash dividends on the Series B Preferred Stock.
Other
In January 2023, we distributed all of our ownership interests in Vitesse Energy on a tax-free pro rata basis to all of our
shareholders, resulting in a distribution of capital of $527.0 million. In addition, in February 2023, $125.0 million of
mandatorily redeemable convertible preferred shares were converted to 4,654,362 common shares.
Net Capital
Jefferies LLC is a broker-dealer registered with the SEC and a member firm of the Financial Industry Regulatory Authority
(“FINRA”) and 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 Regulation 1.17 of the Commodity Futures Trading Commission (“CFTC”) under the Commodity Exchange Act
(“CEA”), 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 SEA Rule 15c3-1 or
CFTC Regulation 1.17.
Jefferies Financial Services, Inc. (“JFSI”) is a registered swap dealer subject to the CFTC’s regulatory capital requirements and
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, 2023, JFSI is in compliance with these SEC and CFTC requirements. Additionally, JFSI is subject to the net
capital requirements of the National Futures Association (“NFA”), as a member of the NFA. JFSI is required to maintain
minimum net capital, as defined under SEA Rule 18a-1 of not less than the greater of 2% of the risk margin amount, as defined,
or $20 million. Under CFTC Regulation 23.101, JFSI is required to maintain minimum net capital of not less than the greater of
2% of the uncleared swap margin, as defined in CFTC Regulation 23.100, or $20 million.
46
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
At November 30, 2023, Jefferies LLC and JFSI’s net capital and excess net capital were as follows (in thousands):
Jefferies LLC
JFSI - SEC
JFSI - CFTC
Net Capital
Excess Net Capital
$
1,088,817 $
348,457
348,457
980,587
328,457
324,553
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.
Customer Protection and Segregation Requirement
As a registered broker dealer that clears and carries customer accounts, Jefferies LLC is subject to the customer protection
provisions under SEC Rule 15c3-3 and is required to compute a reserve formula requirement for customer accounts and deposit
cash or qualified securities into a special reserve bank account for the exclusive benefit of customers. At November 30, 2023,
Jefferies LLC had $640.9 million in cash and qualified U.S. Government securities on deposit in special reserve bank accounts
for the exclusive benefit of customers.
As a registered broker dealer that clears and carries proprietary accounts of brokers (commonly referred to as “PAB”), Jefferies
is also required to compute a reserve requirement for PABs pursuant to SEC Rule 15c3-3. At November 30, 2023, Jefferies had
$53.1 million in cash and qualified U.S. Government securities in special reserve bank accounts for the exclusive benefit of
PABs.
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 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 closely monitor the status of global sanctions and restrictions, trading conditions related
to Russian securities and the credit risk and nature of our counterparties.
In October 2023, Hamas attacked Israel. Our investments and assets in our growing Israeli business could be negatively
affected by consequences from the geopolitical and military conflict in the region. We continue to closely monitor the status of
global sanctions and restrictions arising from the conflict.
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.
47
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
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 6,
Fair Value Disclosures and Note 7, Derivative Financial Instruments in our consolidated financial statements included in this
Annual Report on Form 10-K.
Contractual Obligations
Subsequent to November 30, 2023 and on or before January 31, 2024, we expect to make cash payments of $1.36 billion related
to year-end compensation awards for fiscal 2023. See Note 15, Compensation Plans in our consolidated financial statements
included in this Annual Report on Form 10-K for further information.
48
Table of Contents
Risk Management
Overview
JEFFERIES FINANCIAL GROUP INC.
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, model and strategic risk. Legal,
compliance, new business and reputational risk are also included within our principal risks.
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.
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.
49
Table of Contents
Risk Committees
JEFFERIES FINANCIAL GROUP INC.
•
•
•
•
•
Risk Management Committee (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 other Committees including:
•
Credit Risk Committee - provides review and approval of counterparties and credit limits.
• Model Governance Committee - oversees all model risk matters throughout the model life cycle, from model
identification and initiation, model development, model validation/approval, and model risk control.
•
Stress Testing Committee - provides review and approval of, and oversees implementation of stress testing
framework and methodologies
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, which comprises stakeholders
represented by the CFO, Internal Audit, Risk Management and 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 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
50
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
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.
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):
Risk Categories:
Interest Rates and Credit
Spreads
Equity Prices
Currency Rates
Commodity Prices
Diversification Effect (2)
Firmwide VaR (3) (4)
VaR at
November 30,
2023
Daily Firmwide VaR (1)
Daily VaR for 2023
Average
High
Low
VaR at
November 30,
2022
Daily VaR for 2022
Average
High
Low
$
$
5.35 $
8.76
1.29
1.02
(4.23)
12.19 $
7.66 $
10.39
0.55
0.31
(5.34)
13.57 $
12.02 $
16.19
2.26
2.59
N/A
19.93 $
4.31 $
6.53
0.04
0.07
N/A
9.12 $
6.26 $
7.91
0.22
0.09
(3.12)
11.36 $
5.93 $
7.83
0.12
0.29
(3.13)
11.04 $
9.01 $
17.59
0.34
0.83
N/A
18.94 $
3.63
3.55
0.02
0.09
N/A
5.90
(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 the 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.
(4) At November 30, 2023 and for the period are inclusive of the trading portfolio of Stratos.
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)
VaR at
November 30,
2023
Daily Firmwide VaR (1)
Daily VaR for 2023
Average
High
Low
VaR at
November 30,
2022
Daily VaR for 2022
Average
High
Low
$
$
4.75 $
4.02
0.71
—
(2.88)
6.60 $
7.11 $
6.70
0.29
0.01
(4.98)
9.13 $
11.79 $
10.68
0.78
0.71
N/A
11.94 $
4.01 $
3.83
0.01
—
N/A
6.34 $
6.01 $
8.09
0.01
—
(2.48)
11.63 $
5.60 $
8.07
0.05
0.02
(4.54)
9.20 $
8.63 $
31.13
0.29
0.56
N/A
19.56 $
3.20
3.42
—
—
N/A
4.78
(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.
51
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
(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 increased to $13.57 million for 2023 from $11.04 million for 2022. The increase was
primarily driven by higher equity exposures in Asset Management from the launch of new funds and higher exposures related
to merchant banking activities, partially offset by an increase in the diversification effect. Average daily capital markets VaR
remained relatively stable with a slight decrease to $9.13 million for 2023 from $9.20 million for 2022.
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 2023, there were zero days when the aggregate net trading loss
exceeded the 95% one day VaR.
52
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
The chart below presents our daily firmwide VaR and capital markets VaR over the last four quarters. VaR steadily increased in
first quarter of 2023 driven by higher equity exposure mainly related to our asset management activities. VaR has remained
relatively stable throughout the remainder of 2023, with a modest increase in volatility for a brief period during the third quarter
of 2023.
Daily Net Trading Revenue
There were 26 days with firmwide trading losses out of a total of 251 trading days in 2023. The histogram below presents the
distribution of our actual daily net trading revenue for substantially all of our trading activities for 2023 (in millions):
Other Risk Measures
53
Daily Net Trading Revenue in $ MillionsNumber of DaysYear Ended November 30, 2023Distribution of Daily Net Trading RevenueFirmwide (Including Asset Management)Firmwide (Excluding Asset Management)<(20)(20)-(10)(10)-00-1010-2020-30>30020406080100120140160180200 Table of Contents
JEFFERIES FINANCIAL GROUP INC.
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 earnings
associated with a 10% stress of the fair value of the positions that are not included in the VaR model at November 30, 2023 (in
thousands):
Investment in funds (1)
Private investments
Corporate debt securities in default
Trade claims
10% Sensitivity
120,983
$
63,345
13,430
3,332
(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 6, 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, 2023, 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 presented in the table below (dollars in thousands).
For additional information, see Note 19, Long-Term Debt in our consolidated financial statements included in this Annual
Report on Form 10-K.
Expected Maturity Date (Fiscal Years)
2024
2025
2026
2027
2028
Thereafter
Total
Fair Value
Rate Sensitive Liabilities:
Fixed Interest Rate Borrowings
$ 141,000
$ 174,413
$ 102,572
$ 529,600
$ 1,083,018
$ 3,401,273
$ 5,431,876 $ 5,113,228
Weighted-Average Interest Rate
0.68%
4.59%
5.84%
5.25%
5.83%
5.36%
Variable Interest Rate Borrowings
$ 967,480
$ 387,953
$ 33,880
$ 680,410
$ 12,913
$ 1,312,271
$ 3,394,907 $ 3,092,980
Weighted-Average Interest Rate
7.36%
6.35%
6.83%
8.03%
7.37%
7.33%
Borrowings with Foreign Currency
Exposure
$ 544,500
$ 63,344
$ 54,564
$
—
$
—
$ 802,157
$ 1,464,565 $ 1,315,187
Weighted-Average Interest Rate
1.00%
4.90%
4.43%
—%
—%
7.73%
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.
54
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
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:
•
•
•
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 arise in connection with our portion of a Secured Revolving Credit Facility that is
with us and Massachusetts Mutual Life Insurance Company, to be funded equally, to support loan underwritings by
Jefferies Finance. For further information on this facility, refer to Note 11, Investments 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 27, Related Party Transactions in our consolidated financial statements included in this Annual
Report on Form 10-K.
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.
55
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
Current counterparty credit exposures at November 30, 2023 and 2022 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 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.
56
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
Counterparty Credit Exposure by Credit Rating
Securities and Margin
Finance
Loans and Lending
OTC Derivatives
At
At
At
Total
At
Cash and
Cash Equivalents
Total with Cash and
Cash Equivalents
At
At
November
30,
2023
November
30,
2022
November
30,
2023
November
30,
2022
November
30,
2023
November
30,
2022
November
30,
2023
November
30,
2022
November
30,
2023
November
30,
2022
November
30,
2023
November
30,
2022
AAA Range
$
—
$
—
$
15.1
$
2.0
$
—
$
$
15.1
$
2.1
$ 5,919.7
$ 7,162.1
$ 5,934.8
$ 7,164.2
75.1
—
250.0
38.0
341.1
70.1
1.8
251.1
61.6
377.8
113.3
884.2
81.6
16.1
—
142.7
575.1
155.3
22.1
—
0.9
293.1
50.4
65.6
7.5
0.1
3.9
189.3
207.8
1,177.3
(1.3)
44.0
—
382.0
119.7
348.6
216.7
784.7
405.1
127.7
377.8
4.4
4.7
193.7
221.4
2,502.1
2,114.1
3,679.4
2,898.8
100.2
419.3
—
—
—
2.9
482.2
119.7
348.6
824.4
127.7
380.7
$
704.2
$
762.4
$ 1,110.3
$
897.2
$
417.5
$
254.5
$ 2,232.0
$ 1,914.1
$ 8,526.4
$ 9,703.1
$ 10,758.4
$ 11,617.2
AA Range
A Range
BBB Range
BB or Lower
Unrated
Total
Counterparty Credit Exposure by Region
Loans and Lending
Securities and Margin
Finance
OTC Derivatives
At
At
At
Total
At
Cash and
Cash Equivalents
Total with Cash and
Cash Equivalents
At
At
November
30,
2023
November
30,
2022
November
30,
2023
November
30,
2022
November
30,
2023
November
30,
2022
November
30,
2023
November
30,
2022
November
30,
2023
November
30,
2022
November
30,
2023
November
30,
2022
Asia-Pacific/
Latin
America/
Other
Europe and the
Middle East
North America
$
15.8
$
15.8
$
57.8
$
56.3
$
3.2
$
0.3
$
76.8
$
72.4
$
378.2
$
283.0
$
455.0
$
355.4
—
688.4
1.7
744.9
482.1
570.4
273.2
567.7
92.6
321.7
35.2
219.0
574.7
310.1
43.3
43.9
618.0
354.0
1,580.5
1,531.6
8,104.9
9,376.2
9,685.4
10,907.8
Total
$
704.2
$
762.4
$ 1,110.3
$
897.2
$
417.5
$
254.5
$ 2,232.0
$ 1,914.1
$ 8,526.4
$ 9,703.1
$ 10,758.4
$ 11,617.2
Counterparty Credit Exposure by Industry
Loans and Lending
Securities and Margin
Finance
OTC Derivatives
At
At
At
Total
At
Cash and
Cash Equivalents
Total with Cash and
Cash Equivalents
At
At
November
30,
2023
November
30,
2022
November
30,
2023
November
30,
2022
November
30,
2023
November
30,
2022
November
30,
2023
November
30,
2022
November
30,
2023
November
30,
2022
November
30,
2023
November
30,
2022
Asset
Managers
Banks, Broker-
Dealers
Commodities
Corporates
As Agent
Banks
Other
Total
$
7.4
$
20.8
$
0.8
$
—
$
—
$
—
$
8.2
$
20.8
$ 5,919.7
$ 7,162.1
$ 5,927.9
$ 7,182.9
250.0
—
177.0
—
269.8
251.9
—
197.8
—
291.9
752.0
623.1
341.5
211.2
1,343.5
1,086.2
2,606.7
2,541.0
3,950.2
3,627.2
—
—
287.7
69.8
—
—
182.7
91.4
10.2
53.2
—
12.6
—
36.6
—
6.7
10.2
230.2
287.7
352.2
—
234.4
182.7
390.0
—
—
—
—
—
—
—
—
10.2
230.2
287.7
352.2
—
234.4
182.7
390.0
$
704.2
$
762.4
$ 1,110.3
$
897.2
$
417.5
$
254.5
$ 2,232.0
$ 1,914.1
$ 8,526.4
$ 9,703.1
$ 10,758.4
$ 11,617.2
For additional information regarding credit exposure to OTC derivative contracts, refer to Note 7, Derivative Financial Instruments in
our consolidated financial statements included in this Annual Report on Form 10-K.
57
Table of Contents
Country Risk Exposure
JEFFERIES FINANCIAL GROUP INC.
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, 2023 and 2022 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, 2023
Issuer Risk
Counterparty Risk
Issuer and 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
Excluding Cash
and Cash
Equivalents
Including Cash
and Cash
Equivalents
$
649.7 $
(428.0) $
(70.2) $
— $
183.6 $
6.0 $
— $
341.1 $
216.5
(168.5)
2.1
1,088.6
1,138.9
26.6
553.0
334.9
423.1
275.5
715.9
(621.6)
(840.1)
(33.1)
(401.8)
(251.9)
(353.5)
(245.6)
(631.2)
(244.8)
(75.0)
(1.3)
(50.1)
53.6
(2.4)
18.3
7.7
—
—
—
—
—
—
—
—
—
83.0
191.6
1.7
50.5
2.8
4.9
51.1
13.0
11.2
63.8
—
84.1
—
3.0
—
0.7
—
—
—
25.5
0.6
188.1
0.5
0.5
37.7
0.6
—
324.7
356.8
226.6
0.1
152.2
150.3
78.4
112.0
92.4
341.1
326.4
382.3
227.2
188.2
152.7
150.8
116.1
112.6
92.4
$
5,422.7 $
(3,975.3) $
(362.1) $
— $
463.9 $
285.4 $
255.2 $
1,834.6 $
2,089.8
November 30, 2022
Issuer Risk
Counterparty Risk
Issuer and 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
Excluding Cash
and Cash
Equivalents
Including Cash
and Cash
Equivalents
$
273.6 $
(98.3) $
(68.7) $
0.1 $
91.5 $
181.1 $
1.8 $
379.3 $
381.1
555.0
18.8
330.3
322.2
911.7
323.8
437.3
200.1
137.2
(350.1)
(46.7)
(239.7)
(212.4)
(674.8)
(381.5)
(376.9)
(129.3)
(61.3)
(117.5)
1.7
—
(42.8)
5.5
(133.3)
68.5
(38.0)
(6.3)
(16.7)
—
—
—
—
—
—
—
—
48.7
1.3
82.0
3.8
—
69.3
46.0
—
—
15.8
—
6.7
0.2
—
2.5
—
—
—
27.8
187.4
—
0.2
0.5
11.4
0.5
—
—
153.6
(26.6)
136.5
119.3
103.6
82.6
68.4
64.5
59.2
181.4
160.8
136.5
119.5
104.1
94.0
68.9
64.5
59.2
$
3,510.0 $
(2,571.0) $
(349.3) $
1.8 $
342.6 $
206.3 $
229.6 $
1,140.4 $
1,370.0
France
Canada
United
Kingdom
Italy
Hong Kong
Spain
Netherlands
Australia
Switzerland
China
Total
Canada
United
Kingdom
Hong Kong
France
Netherlands
Italy
Germany
Spain
China
Brazil
Total
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, 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.
58
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
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 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.
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.
59
Table of Contents
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
JEFFERIES FINANCIAL GROUP INC.
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.
60
Table of Contents
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
62
63
66
67
68
69
70
73
61
Table of Contents
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial 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.
Because of its inherent limitations, internal control over financial 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.
Management evaluated our internal control over financial reporting as of November 30, 2023. 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, 2023, 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 65.
62
Table of Contents
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, 2023 and 2022, the related consolidated statements of earnings,
comprehensive income, cash flows and changes in equity, for each of the three years in the period ended November 30,
2023, 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, 2023 and 2022, and the results of its operations and its cash flows for each of the three
years in the period ended November 30, 2023, 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, 2023, 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 26, 2024, expressed an unqualified opinion on the Company’s
internal control over financial reporting.
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.
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 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 measured at fair value on a recurring basis that incorporate significant
unobservable inputs or complex models/methodologies - Refer to Note 2 and Note 6 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 measured at fair value on a recurring basis 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.
63
Table of Contents
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures for financial assets and liabilities that incorporate significant unobservable inputs or complex
models/methodologies included the following procedures, among others:
• We tested the design and operating effectiveness of the Company’s valuation controls, including the:
◦
◦
Independent price verification controls.
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:
◦ Developing independent valuation estimates and comparing such estimates to management’s recorded
values.
◦
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
relevant transactions, when available.
/s/ Deloitte & Touche LLP
New York, New York
January 26, 2024
We have served as the Company’s auditor since 2017.
64
Table of Contents
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, 2023, 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, the
Company maintained, in all material respects, effective internal control over financial reporting as of November 30, 2023,
based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
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, 2023, of the Company
and our report dated January 26, 2024, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying 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.
Because of its inherent limitations, internal control over financial 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.
/s/ Deloitte & Touche LLP
New York, New York
January 26, 2024
65
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except share and per share amounts)
ASSETS
Cash and cash equivalents
Cash and securities segregated and on deposit for regulatory purposes or deposited with clearing and
depository organizations (includes $110,198 of securities at fair value at November 30, 2023)
Financial instruments owned, at fair value (includes securities pledged of $17,158,747 and $14,099,136)
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
Assets held for sale (includes assets pledged of $181,900 at November 30, 2023)
Other assets (includes assets pledged of $244,604 and $1,032,353)
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 $3,898 and $1,712 at fair value)
Obligation to return securities received as collateral, at fair value
Payables:
Brokers, dealers and clearing organizations
Customers
Lease liabilities
Liabilities held for sale
Accrued expenses and other liabilities
Long-term debt (includes $1,708,443 and $1,583,828 at fair value)
Total liabilities
MEZZANINE EQUITY
Redeemable noncontrolling interests
Mandatorily redeemable convertible preferred shares
EQUITY
Preferred shares, par value of $1 per share, authorized 70,000 shares; 42,000 shares issued and outstanding;
liquidation preference of $17,500 per share
Common shares, par value $1 per share, authorized 565,000,000 and 600,000,000 shares; 210,626,642 and
226,129,626 shares issued and outstanding, after deducting 110,491,428 and 90,334,082 shares held in
treasury
Non-voting common shares, par value $1 per share, authorized 35,000,000 shares; no shares issued and
outstanding
Additional paid-in capital
Accumulated other comprehensive loss
Retained earnings
Total Jefferies Financial Group Inc. shareholders’ equity
Noncontrolling interests
Total equity
Total liabilities and equity
See accompanying notes to consolidated financial statements.
66
November 30,
2023
2022
$
8,526,363 $
9,703,109
1,414,593
21,747,473
1,239,345
7,192,091
5,950,549
8,800
2,380,732
1,705,425
630,142
1,065,680
1,847,856
1,545,472
2,650,640
57,905,161 $
989,715 $
$
$
11,251,154
1,840,518
10,920,606
1,430,199
8,800
3,737,810
3,960,557
544,650
1,173,648
2,546,211
9,698,752
48,102,620
406
—
42
957,302
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
—
3,595,985
51,057,683
528,392
11,056,477
1,366,025
7,452,342
2,037,843
100,362
2,628,727
3,578,854
533,708
—
2,573,927
8,774,086
40,630,743
6,461
125,000
—
210,627
226,130
—
2,044,859
(395,545)
7,849,844
9,709,827
92,308
9,802,135
57,905,161 $
—
1,967,781
(379,419)
8,418,354
10,232,846
62,633
10,295,479
51,057,683
$
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share amounts)
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
Year Ended November 30,
2022
2023
2021
$ 2,169,366 $ 2,807,822 $ 4,365,699
1,413,283
905,665
82,574
2,868,674
1,837
7,441,399
2,740,982
4,700,417
833,757
925,494
80,264
1,183,638
1,318,288
7,149,263
1,170,425
5,978,838
1,617,336
896,015
72,084
956,318
1,038,012
8,945,464
931,638
8,013,826
2,535,272
2,589,044
3,554,760
366,702
61,082
477,028
106,051
177,541
266,447
112,201
29,435
214,389
4,346,148
354,269
91,881
262,388
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
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
Net earnings (losses) attributable to noncontrolling interests
Net losses attributable to redeemable noncontrolling interests
Preferred stock dividends
Net earnings attributable to Jefferies Financial Group Inc. common
(14,846)
(454)
14,616
(2,397)
(1,342)
8,281
shareholders
Earnings per common share:
Basic
Diluted
$
263,072 $
777,168 $ 1,667,403
$
$
1.12 $
1.10 $
3.13 $
3.06 $
6.29
6.13
See accompanying notes to consolidated financial statements.
67
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
Year Ended November 30,
2022
2023
2021
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 gains (losses) on available-for-sale securities
Total other comprehensive loss, net of tax (4)
Comprehensive income
Net earnings (losses) attributable to noncontrolling interests
Net losses attributable to redeemable noncontrolling interests
Preferred stock dividends
Comprehensive income attributable to Jefferies Financial Group Inc.
common shareholders
$
262,388 $
781,710 $ 1,677,376
57,530
(53,572)
(77,420)
2,467
1,297
(16,126)
49,146
3,311
(6,161)
(7,276)
(9,781)
(82,521)
9,320
(244)
(83,226)
246,262
774,434
1,594,150
(14,846)
(454)
14,616
(2,397)
(1,342)
8,281
3,850
(826)
6,949
$
246,946 $
769,892 $ 1,584,177
(1) Includes income tax benefits (expenses) of approximately $(3.1) million, $15.6 million and $0.6 million during the years
ended November 30, 2023, 2022 and 2021, respectively.
(2) The amounts include income tax benefits (expenses) of approximately $29.0 million, $(15.6) million and $26.7 million for
the years ended November 30, 2023, 2022 and 2021, respectively. Refer to Note 22, Accumulated Other Comprehensive
Income for additional information of fair value changes related to instrument-specific risk, which were reclassified to
Principal transactions revenues within the Consolidated Statements of Earnings.
(3) Refer to Note 22, Accumulated Other Comprehensive Income for additional information of pension liability adjustments
that were reclassified to Compensation and benefits expenses within the Consolidated Statements of Earnings.
(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.
68
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(In thousands, except share amounts)
Preferred shares $1 par value
Balance, beginning of period
Conversion of 21,000,000 common shares to 42,000 preferred shares
Balance, end of period
Common shares $1 par value
Balance, beginning of period
Purchase of common shares for treasury
Conversion of 125,000 preferred shares to common shares
Conversion of 21,000,000 common shares to 42,000 preferred shares
Other
Balance, end of period
Additional paid-in capital
Balance, beginning of period
Share-based compensation expense
Change in fair value of redeemable noncontrolling interests
Purchase of common shares for treasury
Conversion of 125,000 preferred shares to common shares
Dividend equivalents
Conversion of 21,000,000 common shares to 42,000 preferred shares
Change in equity interest related to consolidated subsidiaries
Other
Balance, end of period
Accumulated other comprehensive loss, net of tax
Balance, beginning of period
Other comprehensive loss, net of taxes
Balance, end of period
Retained earnings
Balance, beginning of period
Net earnings attributable to Jefferies Financial Group Inc.
Dividends ($1.20, $1.20, and $0.90 per common share, respectively)
Dividends - preferred shares
Cumulative effect of change in accounting principle for current expected credit losses, net of tax
Distribution of Vitesse Energy, Inc.
Other
Balance, end of period
Total Jefferies Financial Group Inc. shareholders’ equity
Noncontrolling interests
Balance, beginning of period
Net earnings (losses) attributable to noncontrolling interests
Contributions
Distributions
Deconsolidation of asset management entity
Change in equity interest related to Vitesse Energy, Inc.
Conversion of redeemable noncontrolling interest to noncontrolling interest
Other
Balance, end of period
Total equity
Year Ended November 30,
2023
2022
2021
$
$
$
— $
42
42 $
— $
—
— $
—
—
—
226,130 $
243,541 $
249,751
(4,887)
4,654
(21,000)
5,730
(25,595)
(8,643)
—
—
8,184
—
—
2,433
$
210,627 $
226,130 $
243,541
$
1,967,781 $
2,742,244 $
2,911,223
45,360
(390)
(164,515)
120,346
24,140
52,458
(6,307)
5,986
43,919
(1,147)
78,160
(6,216)
(833,998)
(260,757)
—
—
—
—
—
—
—
—
16,763
19,834
$
2,044,859 $
1,967,781 $
2,742,244
$
$
(379,419) $
(372,143) $
(288,917)
(16,126)
(7,276)
(83,226)
(395,545) $
(379,419) $
(372,143)
$
8,418,354 $
7,940,113 $
6,531,836
275,670
(290,135)
(12,600)
(14,813)
(526,964)
332
777,168
(298,927)
1,667,403
(239,211)
—
—
—
—
—
(19,915)
—
—
7,940,113
7,849,844 $
9,709,827 $ 10,232,846 $ 10,553,755
8,418,354 $
62,633 $
25,885 $
34,632
(14,846)
78,247
(31,433)
(14,895)
6,307
5,954
(2,397)
64,880
(2,629)
(23,107)
—
—
3,850
4,325
(16,263)
—
—
—
341
92,308 $
1
62,633 $
(659)
25,885
9,802,135 $ 10,295,479 $ 10,579,640
$
$
$
$
$
See accompanying notes to consolidated financial statements.
69
Table of Contents
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 (used in) operating
Year Ended November 30,
2022
2021
2023
$
262,388 $
781,710 $
1,677,376
activities:
Depreciation and amortization
Deferred income taxes
Share-based compensation
Net bad debt expense
(Income) losses 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
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
Originations and purchases of automobile loans, notes and other receivables
Principal collections of automobile loans, notes and other receivables
Net payments on premises and equipment, and other assets
Net cash acquired in business acquisitions
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
Net cash used in investing activities
Continued on next page.
70
113,473
10,462
45,360
67,009
192,197
58,336
—
(99,784)
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)
(110,198)
—
34,237
(436,029)
(480,487)
(103,870)
(1,307,125)
(2,843,554)
(1,263,278)
(551,926)
1,054,135
83,181
431,423
(8,894)
3,324,482
(52,129)
(318,798)
(1,933,626)
(251,751)
116,750
(441,583)
350,348
(1,155)
215,187
—
—
—
—
(12,204)
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)
(715,434)
1,804,847
(351,645)
286,578
(527,929)
434,487
(224,301)
—
333,149
(23,107)
3,588
8,641
(60,539)
(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
1,582,290
(2,339,447)
2,310,186
(611,486)
394,387
(165,605)
—
—
—
3,274
(1,174)
(409,865)
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS – CONTINUED
(In thousands)
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
Repayment of long-term debt
Proceeds from conversion of common to preferred shares
Purchase of common shares for treasury
Dividends paid to common and preferred shareholders
Net proceeds from (payments on) other secured financings
Net change in bank overdrafts
Proceeds from contributions of noncontrolling interests
Payments on distributions to noncontrolling interests
Other
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash, cash equivalents and restricted cash
Change in cash and cash equivalents and restricted cash reclassified from (to) assets
held for sale
Net increase (decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of period
Cash, cash equivalents and restricted cash at end of period
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest
Income taxes, net
Noncash investing activities:
Year Ended November 30,
2022
2021
2023
5,413,000 $
(5,010,868)
2,209,672
(1,282,369)
31,500
(169,402)
(278,595)
89,073
52,054
—
—
6,059
1,060,124
54,911
3,659,098 $
(3,338,000)
1,198,565
(824,894)
—
(859,593)
(280,104)
(2,448,731)
(14,569)
64,880
(2,629)
2,752
(2,843,225)
(22,143)
1,005,000
(1,556,090)
2,488,493
(1,646,224)
—
(269,400)
(222,798)
1,197,231
8,216
4,325
(16,263)
1,804
994,294
(3,387)
—
—
(45,691)
2,163,332
(1,121,060)
(830,795)
10,707,244
9,664,972
11,828,304
9,830,758 $ 10,707,244 $ 11,828,304
2,348,061 $
159,359
1,164,093 $
214,066
936,272
727,126
$
$
$
During the year ended November 30, 2023, we had non-cash investing activities of $30.6 million related to the acquisition of
Vitesse Oil, LLC.
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 4, Business Acquisitions for the noncash effects of our consolidations of Stratos and OpNet.
Refer to Note 5, Assets Held for Sale for the noncash effects of Foursight and OpNet.
Noncash financing activities:
During the year ended November 30, 2023, we had the following non-cash financing activities:
•
•
Capital distributions of $527.0 million and $31.4 million to our shareholders and noncontrolling interest holders,
respectively, related to the spin-off of Vitesse Energy, Inc.
Preferred shares of $125.0 million were converted to common shares.
71
Table of Contents
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,
2023
2022
$
8,526,363 $
9,703,109
1,304,395
—
957,302
46,833
$
9,830,758 $
10,707,244
See accompanying notes to consolidated financial statements.
72
Table of Contents
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. Business Acquisitions ............................................................................................................................................
Note 5. Assets Held for Sale ..............................................................................................................................................
Note 6. Fair Value Disclosures ...........................................................................................................................................
Note 7. Derivative Financial Instruments ...........................................................................................................................
Note 8. Collateralized Transactions ...................................................................................................................................
Note 9. Securitization Activities ........................................................................................................................................
Note 10. Variable Interest Entities .....................................................................................................................................
Note 11. Investments ..........................................................................................................................................................
Note 12. Credit Losses on Financial Assets Measured at Amortized Cost ........................................................................
Note 13. Goodwill and Intangible Assets ...........................................................................................................................
Note 14. Revenues from Contracts with Customers ..........................................................................................................
Note 15. Compensation Plans ............................................................................................................................................
Note 16. Benefit Plans ........................................................................................................................................................
Note 17. Leases ..................................................................................................................................................................
Note 18. Short-Term Borrowings .......................................................................................................................................
Note 19. Long-Term Debt ..................................................................................................................................................
Note 20. Preferred Shares ...................................................................................................................................................
Note 21. Common Shares and Earnings Per Common Share ............................................................................................
Note 22, Accumulated Other Comprehensive Income ......................................................................................................
Note 23. Income Taxes .......................................................................................................................................................
Note 24. Commitments, Contingencies and Guarantees ....................................................................................................
Note 25. Regulatory Requirements ....................................................................................................................................
Note 26. Segment Reporting ..............................................................................................................................................
Note 27. Related Party Transactions ..................................................................................................................................
Page
74
75
83
84
86
87
102
108
111
112
117
124
126
129
132
138
141
142
143
145
146
147
147
150
152
153
155
73
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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, “the “Company,” “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-Pacific. 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.
On January 13, 2023, our consolidated subsidiary, Vitesse Energy, Inc. (“Vitesse Energy”), issued shares measured at a total
consideration of $30.6 million in exchange for acquiring all of the outstanding capital interests of Vitesse Oil, LLC (“Vitesse
Oil”). Prior to the acquisition, Vitesse Oil was controlled by Jefferies Capital Partners V L.P. and Jefferies SBI USA Fund L.P.
(together, “JCP Fund V”), which are private equity funds managed by a team led by our President. Simultaneously, we
distributed all of our ownership interests in Vitesse Energy on a tax-free pro rata basis to all of our shareholders, resulting in a
distribution of capital of $527.0 million. The distribution of Vitesse Energy resulted in a reduction at the time of spin-off of
Total assets of $699.5 million, Total liabilities of $141.1 million and Total equity of $558.4 million inclusive of the distribution
of capital to noncontrolling interest holders.
During the year ended November 30, 2022, we sold all of our interests in Idaho Timber and Oak Hill investment management
company, a registered investment adviser and general partner entity.
During the fourth quarter of 2023, we acquired Stratos Group International (“Stratos”) (formerly FXCM Group, LLC, or
“FXCM”) and OpNet S.p.A. (“OpNet,” formerly known as “Linkem”), which are now consolidated subsidiaries. In November
2023, we entered into an agreement to sell all of our membership interest in Foursight Capital LLC (“Foursight”). Refer to Note
4, Business Acquisitions and Note 5, Assets Held for Sale for further information.
In connection with the merger of Jefferies Group LLC into Jefferies Financial Group Inc. on November 1, 2022, historical
periods as presented in our Consolidated Statements of Financial Condition and Consolidated Statements of Earnings reflect
certain reclassifications. All reclassifications were reflected in the prior period financial statements.
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 intangible assets 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.
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 (losses) attributable to noncontrolling interests in our Consolidated Statements of Earnings.
74
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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. We also earn commissions on execution services
provided to customers in facilitating foreign currency spot trades and prime brokerage services.
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 7, 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 incurred related to restructuring advisory engagements, are expensed as incurred.
All investment banking 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.
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.
75
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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.
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. Our derivative products are acquired or originated for trading purposes
and are included within operating activities on our Consolidated Statements of Cash Flows. 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.
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.
Level 3:
76
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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.
The valuation of financial instruments may include the use of valuation models and other techniques. 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 Statements 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 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.
77
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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.
Refer to Note 7, Derivative Financial Instruments, and Note 8, Collateralized Transactions for further information.
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.
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
11, Investments, and Note 27, Related Party Transactions for additional information regarding certain of these investments.
78
Table of Contents
Credit Losses
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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 is 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 units include market valuation methods that
incorporate price-to-earnings and price-to-book multiples of 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 certain events or circumstances exist. For
intangible assets deemed to be impaired, an impairment loss is 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 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 13, 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 include 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, 2023 and 2022, furniture, fixtures and equipment amounted to $908.3 million and $730.1 million,
respectively, and leasehold improvements amounted to $253.5 million and $245.1 million, respectively. Accumulated
depreciation and amortization was $551.5 million and $524.6 million at November 30, 2023 and 2022, respectively.
Depreciation and amortization expense amounted to $112.2 million, $172.9 million and $157.4 million for the years ended
November 30, 2023, 2022 and 2021, respectively.
79
Table of Contents
Leases
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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 Statements 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 Statements 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 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, 2023, 2022 and 2021, capitalized interest of $12.9 million, $13.5 million and $9.0 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.
Assets Held for Sale
We classify assets and related liabilities as held for sale when: (i) management has committed to a plan to sell the assets, (ii) the
net assets are available for immediate sale, (iii) there is an active program to locate a buyer and (iv) the sale and transfer of the
net assets is probable within one year. Assets and liabilities held for sale are presented separately on our Consolidated
Statements of Financial Condition with a valuation allowance, if necessary, to recognize the net carrying amount at the lower of
cost or fair value, less costs to sell. Depreciation of property, plant and equipment and amortization of finite-lived intangible
assets and right-of-use assets are not recorded while these assets are classified as held for sale. For each period that assets are
classified as being held for sale, they are tested for recoverability. Refer to Note 5, Assets Held for Sale for additional
information.
80
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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 is 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 tax return results.
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 calculated using the two-class method and 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 calculated under both the two-class and treasury stock methods, and the more dilutive amount is
reported. Diluted earnings per share is computed by taking the sum of net earnings available to common shareholders,
dividends on preferred shares and dividends on dilutive mandatorily redeemable convertible preferred shares, divided 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.
Preferred shares and 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 15, Compensation Plans for more information regarding the senior
executive compensation plan.
Refer to Note 21, Common Shares and Earnings Per Common Share for further information.
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.
81
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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 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 Condition. 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 Condition.
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 7, 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.
82
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Note 3. Accounting Developments
Accounting Standards to be Adopted in Future Periods
Segment Reporting. In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2023-07 (“ASU
2023-07”), Improvements to Reportable Segment Disclosures. The guidance primarily will require enhanced disclosures about
significant segment expenses. The amendments in ASU 2023-07 are effective for fiscal years beginning after December 15,
2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted, and are to be
applied on a retrospective basis. We are evaluating the impact of the standard on our segment reporting disclosures.
Income Taxes. In December 2023, the FASB issued ASU No. 2023-09 (“ASU 2023-09”), Improvements to Income Tax
Disclosures. The guidance is intended to improve income tax disclosure requirements by requiring (i) consistent categories and
greater disaggregation of information in the rate reconciliation and (ii) the disaggregation of income taxes paid by jurisdiction.
The guidance makes several other changes to the income tax disclosure requirements. The amendments in ASU 2023-09 are
effective for fiscal years beginning after December 15, 2024, with early adoption permitted, and is required to be applied
prospectively with the option of retrospective application. We are evaluating the impact of the standard on our income tax
disclosures.
Adopted Accounting Standards
Reference Rate Reform. The FASB has issued guidance which provides optional exceptions for applying U.S. GAAP to certain
contract modifications, hedge accounting relationships or other transactions affected by reference rate reform. There was no
impact to our financial statements as a result of this guidance upon the completion of our transition away from the London
Interbank Offered Rate (“LIBOR”) on June 30, 2023.
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. On
January 1, 2023, Berkadia, our equity method investee, adopted this guidance and applied a modified retrospective approach
through a cumulative-effect adjustment to retained earnings upon adoption. At transition on January 1, 2023, the new
accounting guidance’s adoption resulted in a decrease in retained earnings of $14.8 million, net of tax attributable to an increase
in the allowance for credit losses. Our equity method investee, Jefferies Finance, will adopt the guidance on December 1, 2023,
and the impact on our consolidated financial statements is not expected to be material.
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.
83
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Goodwill. In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment, which
simplified 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.
Note 4. Business Acquisitions
We acquired Stratos and OpNet during the fourth quarter of 2023. Stratos is a global provider of online foreign exchange
services. OpNet is a fixed wireless broadband service provider in Italy and also owns 59.3% of the common shares of Tessellis
S.p.A. (“Tessellis”), a telecommunications company publicly listed on the Italian stock exchange. These transactions have been
accounted for under the acquisition method of accounting which requires that the assets acquired, including identifiable
intangible assets, and liabilities assumed to be recognized at their respective fair values as of the acquisition date.
A statement of the fair value of assets acquired and liabilities assumed on the acquisition dates are presented below (in
thousands):
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
Receivables:
Brokers, dealers and clearing organizations
Fees, interest and other
Property and equipment, net
Goodwill (1)
Assets held for sale (2)
Other assets (3)
Total assets acquired
Financial instruments sold, net yet purchased, at fair value
Payables:
Brokers, dealers and clearing organizations
Customers payables
Short-term borrowings
Lease liabilities
Liabilities held for sale (2)
Accrued expenses and other liabilities
Long-term debt
Total liabilities assumed
Net assets acquired
Noncontrolling interests
$
$
$
$
$
Stratos
OpNet
Total
83,006 $
7,875 $
90,881
124,306
53,028
—
113,750
4,745
31,830
5,463
—
31,135
447,263 $
—
—
6,644
—
14,728
111,458
127,051
578,820
98,278
944,854 $
124,306
53,028
6,644
113,750
19,473
143,288
132,514
578,820
129,413
1,392,117
31,293 $
— $
31,293
236
297,494
—
9,308
—
18,011
—
356,342 $
—
—
7,137
23,040
303,447
176,308
75,437
585,369 $
236
297,494
7,137
32,348
303,447
194,319
75,437
941,711
90,921 $
359,485 $
450,406
— $
42,168 $
42,168
(1) All goodwill is attributed to the Asset Management reportable segment.
(2) Relates to the net operating assets of the wholesale operations of OpNet.
(3) Includes intangible assets acquired as part of the OpNet acquisition in the form of purchased technology, trademarks and
trade names, and customer relationships. These intangible assets are being amortized over a finite life of up to 20 years.
84
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Stratos Acquisition
We have historically held a 49.9% voting interest in Stratos. In March 2023, certain noteholders of Global Brokerage Inc.
(“GLBR”) filed an involuntary bankruptcy petition against GLBR and its subsidiary, Global Brokerage Holdings LLC
(“Holdings”), which holds a 50.1% voting equity interest in Stratos. On September 14, 2023, we completed a foreclosure on the
collateral that GLBR had pledged to secure its obligations under a credit facility, which consisted of GLBR’s equity interest in
Stratos. As a result of the foreclosure, we own 100% of the outstanding interests of Stratos; and Stratos has become a
consolidated subsidiary. As of September 14, 2023, the assets, liabilities and results of operations of Stratos are included in our
consolidated financial statements.
In connection with the acquisition of the additional 50.1% interests in Stratos, we extinguished our senior secured term loan to
Stratos of $39.2 million and recognized a gain of $5.6 million reflected in Principal transactions revenues. Additionally, we
remeasured our previously existing 49.9% interest at fair value and recognized a loss of $4.7 million, in Other revenues,
representing the excess of the carrying value of the 49.9% interest of our $47.9 million equity method investment over its fair
value at the date of acquisition. The fair value of the previously existing equity interest was measured using an income approach
based on estimates of future expected cash flows applying a risk-adjusted discount rate of 24.5%. Critical estimates to derive
future expected cash flows includes the use of projected revenues and expenses, applicable tax rates and depreciation factors
with the risk-adjusted discount rate based upon an estimated weighted average cost of capital for the acquired business.
No consideration, other than the nonmonetary exchange of our senior secured term loan, was transferred in connection with the
foreclosure, which resulted in us obtaining 100% ownership of the outstanding interests of Stratos. In applying acquisition
accounting, we estimated the overall enterprise fair value of Stratos consistent with the methodology utilized to fair value our
previously existing 49.9% equity interest. The enterprise fair value was allocated based on the fair values of the acquired assets
and assumed liabilities resulting in a gain of $0.9 million and goodwill of $5.5 million.
The results of Stratos’ operations have been included in our Consolidated Statements of Earnings for the period from the date of
acquisition of September 14, 2023 through the year ended November 30, 2023 and constitute net revenues and net losses of
$21.2 million and $(1.3) million, respectively.
OpNet Acquisition
We own 47.4% of the common shares and 50.0% of the voting rights of OpNet and various classes of convertible preferred
stock issued by OpNet (the “preferred shares”). On November 30, 2023, we provided notice of our intent to convert certain
classes of our preferred shares into common shares and, as a result, we will obtain control of OpNet. Upon the conversion, we
will hold in excess of 50.0% of OpNet’s common shares and the aggregate voting rights over OpNet. Additionally, in
December 2023, we exchanged €115.1 million of our shareholder loans for additional preferred shares at a price per share of
€10.00.
OpNet has been considered to be a variable interest entity. As of November 30, 2023, we have determined that we are the
primary beneficiary of OpNet and, accordingly, consolidate OpNet. The assets and liabilities of OpNet are included in our
consolidated financial statements at November 30, 2023. The initial consolidation of a variable interest entity is accounted for
under the acquisition method of accounting and at November 30, 2023, we remeasured our previously existing interests at fair
value and recognized a gain of $115.8 million, representing the excess of the fair value of our previously existing interests over
the carrying value of our investment of $201.6 million at November 30, 2023. The fair value of the previously existing interests
was measured based on an estimate of what could be recognized in a sale transaction for certain net operating assets of OpNet
which have been classified as held for sale and OpNet’s percentage ownership of Tessellis common shares based on the
publicly listed exchange price of Tessellis on November 30, 2023. No consideration was transferred in connection with the
consolidation.
The remaining identifiable assets and assumed liabilities of OpNet primarily represent the assets and liabilities of Tessellis. An
enterprise value for Tessellis was estimated based on its market capitalization at November 30, 2023, which was then allocated
to the identifiable assets, including intangible assets, liabilities, and noncontrolling interests of the entity using an income
approach, which calculates the present value of the estimated economic benefit of future cash flows, in order to determine the
fair value of the identified customer relationships and Tessellis trade name. Property and equipment and developed technology
assets were valued using a replacement cost methodology. Critical estimates included future expected cash flows, including
forecasted revenues and expenses, and applicable discount rates. Discount rates used to compute the present value of expected
net cash flows were based upon estimated weighted average cost of capital. The allocation of the purchase price resulted in the
recognition of goodwill relating to Tessellis of $127.1 million. We are in the process of obtaining additional information
relating to the intangible assets identified for Tessellis and may adjust amounts allocated to these assets and the goodwill
recognized upon completion of our assessment in subsequent reporting periods.
85
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Note 5. Assets Held for Sale
Foursight
On November 20, 2023, we entered into an agreement to sell all of our membership interests in Foursight. We expect the sale to
close during January 2024. At November 30, 2023, all of the assets and liabilities of Foursight have been classified as held for
sale and consist of the following major classes of assets and liabilities (in thousands):
Assets held for sale:
Cash and cash equivalents
Other receivables
Premises and equipment, net
Operating lease assets
Goodwill (1)
Other assets (2)
Total assets held for sale
Liabilities held for sale:
Other secured financings
Lease liabilities
Accrued expenses and other liabilities
Long-term debt
Total liabilities held for sale
November 30, 2023
$
$
$
$
3,555
1,478
1,175
7,635
24,000
928,808
966,651
700,615
8,821
11,503
149,262
870,201
(1) Goodwill was allocated based on the relative fair values of the applicable reporting units prior to being reclassified as held
for sale.
(2) Includes $850.8 million of automobile loan receivables and $42.1 million in deposits required under Foursight’s warehouse
credit facilities and amounts collected on pledged automobile loan receivables yet to be distributed.
OpNet
At November 30, 2023, we have classified certain net operating assets of OpNet as held for sale in our Consolidated Statements
of Financial Condition. The net operating assets that are classified as held for sale are recognized at their estimated fair values
at November 30, 2023 pursuant to the step-acquisition accounting related to our interests in OpNet. See Note 4, Business
Acquisitions for further information.
The major components of the held for sale assets and liabilities in the disposal group primarily consist of intangible assets
relating to radio frequency networks, customer relationships and other branding rights. The liabilities held for sale consist
primarily of OpNet’s outstanding publicly listed notes with an estimated fair value of $159.0 million. The fair value of the
intangible assets is based on the estimated sale price of the disposal group and the fair value of the publicly listed notes are
based on observations of quoted transaction prices at November 30, 2023.
Effective with the designation of the disposal group as held for sale on November 30, 2023, we suspended recording
depreciation of property, plant and equipment and amortization of finite-lived intangible assets and right-of-use assets while
these assets are classified as held for sale.
86
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Note 6. 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 $1.21 billion and $1.29 billion at November 30, 2023
and 2022, respectively, by level within the fair value hierarchy (in thousands):
Assets:
Financial instruments owned:
Corporate equity securities
Corporate debt securities
Collateralized debt obligations and 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, excluding
Investments at fair value based on NAV
Securities segregated and on deposit for regulatory
purposes or deposited with clearing and depository
organizations
Securities received as collateral
Liabilities:
Financial instruments sold, not yet purchased:
Corporate equity securities
Corporate debt securities
Collateralized debt obligations and collateralized loan
obligations
U.S. government and federal agency securities
Sovereign obligations
Residential mortgage-backed securities
Commercial mortgage-backed securities
Loans
Derivatives
Total financial instruments sold, not yet purchased
Other secured financings
Obligation to return securities received as collateral
Long-term debt
November 30, 2023 (1)
Level 1
Level 2
Level 3
Counterparty
and Cash
Collateral
Netting (2)
Total
$ 3,831,698 $
211,182 $
181,294 $
— $ 4,224,174
4,921,222
26,112
—
—
3,563,164
—
1,051,494
—
—
—
—
314
—
869,246
65,566
223,502
609,452
2,048,309
344,902
255,048
1,320,217
3,649,814
64,862
—
—
—
20,871
508
117,661
130,101
—
—
—
—
—
—
—
—
—
4,947,334
934,108
3,628,730
223,502
1,660,946
2,069,180
345,410
372,709
1,450,318
550,844
130,835
8,336
(3,107,620)
—
130,835
—
$ 8,446,670 $ 14,518,460 $
680,580 $
(3,107,620) $ 20,538,090
$
110,198 $
8,800
— $
—
— $
—
— $
110,198
—
8,800
$ 2,235,049 $
83,180 $
676 $
— $ 2,318,905
2,842,776
124
—
—
2,957,787
1,229,795
—
—
—
54
36
—
579,302
463
173,828
3,851,004
—
—
—
—
840
1,521
—
—
—
—
—
—
—
2,842,900
36
2,957,787
1,809,097
463
840
175,349
$ 6,422,685 $ 7,530,589 $
59,291
62,452 $
1,145,777
(2,764,572)
(2,764,572) $ 11,251,154
—
8,800
—
—
—
3,898
—
963,846
744,597
—
—
—
3,898
8,800
1,708,443
(1) Excludes amounts for financial instruments reclassified to Assets held for sale and Liabilities held for sale. See Note 5, Assets Held for
Sale.
(2) Represents counterparty and cash collateral netting across the levels of the fair value hierarchy for positions with the same counterparty.
87
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Assets:
Financial instruments owned:
Corporate equity securities
Corporate debt securities
Collateralized debt obligations and 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, excluding
Investments at fair value based on NAV
Securities received as collateral
Liabilities:
Financial instruments sold, not yet purchased:
Corporate equity securities
Corporate debt securities
U.S. government and federal agency securities
Sovereign obligations
Commercial mortgage-backed securities
Loans
Derivatives
Total financial instruments sold, not yet purchased
Other secured financings
Obligation to return securities received as collateral
Long-term debt
November 30, 2022
Level 1
Level 2
Level 3
Counterparty
and Cash
Collateral
Netting (1)
Total
$ 3,117,327 $
140,157 $
240,347 $
— $ 3,497,831
3,972,153
30,232
—
—
3,442,484
—
896,805
—
—
—
—
71,640
15,111
574,903
849,558
1,314,199
442,471
333,164
1,069,041
3,437
3,427,921
—
3,750
—
—
—
—
—
—
—
—
—
(3,093,244)
—
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
55,824
—
—
—
27,617
839
94,677
168,875
11,052
161,992
$ 7,460,053 $ 12,214,068 $
791,455 $
(3,093,244) $ 17,372,332
$
100,362 $
— $
— $
— $
100,362
$ 2,097,436 $
48,931 $
750 $
— $ 2,147,117
—
2,337,691
3,223,637
—
879,909
771,125
—
—
—
180,147
204
4,174,082
$ 6,201,186 $ 7,511,976 $
500
—
—
490
3,164
—
—
—
—
—
2,338,191
3,223,637
1,651,034
490
183,311
70,576
75,480 $
(2,732,165)
1,512,697
(2,732,165) $ 11,056,477
$
— $
— $
1,712 $
— $
1,712
100,362
—
—
—
922,705
661,123
—
—
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.
The following is a description of the valuation basis, including valuation techniques and inputs, used in measuring our financial
assets and liabilities that are accounted for at fair value on a recurring basis:
Cash and securities segregated and on deposit for regulatory purposes or deposited with clearing and depository organizations
Segregated 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.
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.
88
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
•
•
Non-Exchange-Traded Equity Securities: Non-exchange-traded equity securities are measured, where available, 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.
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 services, where
available, or recently executed independent transactions of comparable size. Sovereign government obligations, with
consideration given to the country of issuance, are generally categorized within Level 1 or Level 2 of the fair value hierarchy.
89
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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 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.
Commercial Mortgage-Backed Securities
•
•
Agency Commercial Mortgage-Backed Securities (“CMBS”): Government National Mortgage Association (“Ginnie
Mae”) project loan bonds are measured based on inputs corroborated from and 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 with similar collateral 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.
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.
90
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
•
•
•
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, the valuation models do not 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.
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 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.
91
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The following tables present information about our investments in entities that have the characteristics of an investment
company (in thousands):
November 30, 2023
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
Fair Value (1)
$
341,530 $
55,701
21,747
357,445
432,960
Unfunded
Commitments
—
37,534
—
—
132,662
170,196
$
1,209,383 $
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
(1) Where fair value is calculated based on NAV, fair value has been derived from each of the funds’ capital statements.
(2) 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, 2023 and 2022, approximately 49% and 58%, respectively, are
redeemable quarterly with 90 days prior written notice and 8% and 6%, respectively, are redeemable quarterly with 60 days
prior written notice. The remaining balance at November 30, 2023 and 2022, cannot be redeemed because these
investments include restrictions that do not allow for redemption before November 30, 2023 or August 31, 2025.
(3) Includes investments in equity funds that invest in the equity of various U.S. and foreign private companies in a broad
range of 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 eleven years.
(4) Includes investments in a hedge fund that invests, long and short, primarily in commodities. These investments are
redeemable quarterly with 60 days prior written notice.
(5) 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 November 30, 2023 and 2022, investments representing
approximately 83% and 78%, respectively, of the fair value of investments are redeemable monthly with 60 days prior
written notice. At November 30, 2023 and 2022, approximately 13% and 15%, respectively, of the fair value of
investments are redeemable quarterly with 90 days prior written notice.
(6) Primarily 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, as well as investments in a fund that
invests, long and short, in distressed and special situations credit strategies across sectors and asset types. Investments in
this category are primarily redeemable quarterly with 90 days prior written notice.
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.
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.
92
Table of Contents
Long-term Debt
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Long-term debt includes variable rate, fixed-to-floating rate, equity-linked notes, constant maturity swap, digital, callable,
collared floating rate 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.
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, 2023 (in thousands):
Total gains/
losses
(realized
and
unrealized)
(1)
Balance at
November
30, 2022
Purchases
Sales
Settlements
Issuances
For instruments still held at
November 30, 2023, changes
in unrealized gains/(losses)
included in:
Net
transfers
into/
(out of)
Level 3
Balance at
November
30, 2023
Earnings
(1)
Other
comprehensive
income (1)
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 financings
Long-term debt
30,232
55,824
27,617
839
94,677
168,875
161,992
750
500
490
3,164
59,524
1,712
661,123
$ 240,347
$
(65,037) $
7,865
$
(1,228) $
—
$
1,749
31,218
(5,709)
(331)
(17,800)
10,995
83,382
4,132
(18,325)
(200)
51,632
(3,199)
(56,624)
10
—
71,261
55,520
8,852
—
—
(37,088)
(42,999)
(15,080)
(247)
—
(26,936)
(46,383)
(107,963)
$
(653) $ 181,294
$
(11,007) $
8,524
(13,989)
(800)
—
26,112
64,862
20,871
508
(703)
(10,774)
(1,775)
(327)
33,547
117,661
(20,678)
(15,907)
130,101
(348)
130,835
4,168
(5,762)
$
348
$
(1,477) $
1,055
$
(35)
—
(187)
—
(114)
(1,655)
(10,405)
(527)
2,186
70,945
—
—
—
350
126
170
—
—
$
—
—
—
—
—
—
$
—
$
(154)
—
—
676
124
840
1,521
50,955
3,898
$
284
$
29
—
(992)
6,760
(2,186)
(28,327)
(3,496)
2,158
3,531
—
—
17,140
(4,611)
744,597
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(59,706)
(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 presented net of tax in our
Consolidated Statements of Comprehensive Income.
(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, 2023
During the year ended November 30, 2023, transfers of assets of $88.5 million from Level 2 to Level 3 of the fair value
hierarchy are primarily attributed to:
•
Other ABS of $57.8 million, loans and other receivables of $16.5 million, corporate debt securities of $8.9 million and
corporate equity securities of $5.3 million due to reduced pricing transparency.
During the year ended November 30, 2023, transfers of assets of $78.2 million from Level 3 to Level 2 are primarily attributed
to:
•
Loans and other receivables of $32.4 million, other ABS of $24.3 million, CDOs and CLOs of $14.0 and corporate
equity securities of $6.0 million due to greater pricing transparency.
During the year ended November 30, 2023, transfers of liabilities of $60.8 million from Level 2 to Level 3 of the fair value
hierarchy are primarily attributed to:
93
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
•
Net derivatives of $35.6 million and structured notes within long-term debt of $25.2 million due to reduced pricing and
market transparency.
During the year ended November 30, 2023, transfers of liabilities of $62.0 million from Level 3 to Level 2 of the fair value
hierarchy are primarily attributed to:
•
Net derivatives of $32.0 million and structured notes within long-term debt of $29.8 million due to greater pricing and
market transparency.
Net gains on Level 3 assets were $38.5 million and net losses on Level 3 liabilities were $62.9 million for the year ended
November 30, 2023. Net gains on Level 3 assets were primarily due to increased market values in investments at fair value,
CDOs and CLOs and loans and other receivables, partially offset by decreases in corporate equity securities and other ABS. Net
losses on Level 3 liabilities were primarily due to increased market valuations of certain structured notes within long-term debt,
partially offset by decreases in 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, 2022 (in thousands):
Total gains/
losses
(realized
and
unrealized)
(1)
Balance at
November
30, 2021
Purchases
Sales
Settlements
Issuances
For instruments still held at
November 30, 2022, changes
in unrealized gains/(losses)
included in:
Net
transfers
into/
(out of)
Level 3
Balance at
November
30, 2022
Earnings
(1)
Other
comprehensive
income (1)
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 financings
Long-term debt
$
118,489 $
(645) $ 171,700 $ (62,474) $
(298) $
— $ 13,575 $ 240,347 $
7,286 $
11,803
31,946
1,477
2,333
93,524
178,417
154,373
946
7,099
(13,210)
(733)
(6,467)
(1,912)
46,735
18,686
44,995
35,774
—
74,353
45,536
74,984
(23,964)
(22,600)
(372)
(749)
(20,362)
(33,692)
(74,742)
(9)
(16,634)
(240)
—
(39,647)
(48,218)
(15,951)
—
—
—
—
—
—
—
22,770
11,018
4,188
(12)
(6,724)
28,744
(23,407)
30,232
55,824
27,617
839
94,677
168,875
161,992
(2,087)
(10,938)
(7,728)
(703)
(26,982)
(11,610)
33,294
$
4,635 $
(3,611) $
(815) $
4,858 $
— $
— $
(4,317) $
750 $
2,382 $
482
210
9,925
67,769
25,905
88
—
1,197
(181,750)
(650)
881,732
(280,967)
(70)
—
(5,173)
(1,559)
—
—
—
280
—
1,285
—
—
—
—
96
—
—
—
—
—
—
(2,881)
28,436
145,343
(23,543)
—
—
500
490
3,164
59,524
1,712
(88)
—
(2,484)
168,304
650
(3,919)
83,874
(19,597)
661,123
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 presented net of tax in our
Consolidated Statements of Comprehensive Income.
(2) Net derivatives represent Financial instruments owned—Derivatives and Financial instruments sold, not yet purchased—Derivatives.
94
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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, investments 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 supporting classification into Level 2.
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.
95
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - 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, 2021 (in thousands):
Total
gains/
losses
(realized
and
unrealized)
(1)
Balance at
November 30,
2020
Purchases
Sales
Settlements
Issuances
Net
transfers
into/
(out of)
Level 3
Balance at
November 30,
2021
Earnings
(1)
Other
comprehensive
income (1)
For instruments still held at
November 30, 2021, changes
in unrealized gains/(losses)
included in:
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:
$
116,089 $
19,213 $
8,778 $ (34,307) $
(49) $
— $ 8,765 $
118,489 $
11,589 $
23,146
17,972
21,826
2,003
79,995
186,568
213,946
1,565
8,092
(243)
(1,694)
5,335
1,250
11,161
(7,978)
32,618
(27,332)
708
(1,183)
2,445
(393)
65,277
(21,727)
50,167
(55,848)
112,012
22,957
(47,243)
(1,417)
(5,042)
(354)
(13)
(45,397)
(20,442)
(9,809)
—
—
—
—
—
—
—
(14,674)
5,638
(19,277)
(15)
10,041
16,722
(137,490)
11,803
31,946
1,477
2,333
93,524
178,417
154,373
1,724
(4,390)
(131)
(733)
(14,471)
(4,905)
25,723
Corporate equity securities
$
4,434 $
(83) $
(21) $
318 $
— $
— $
(13) $
4,635 $
83 $
Corporate debt securities
CMBS
Loans
Net derivatives (2)
Other secured financings
Long-term debt
141
35
6,913
26,017
1,543
1,205
—
3,384
7,246
(649)
676,028
(22,132)
(815)
(35)
(469)
—
—
—
—
210
220
—
—
—
(49)
—
—
(1,491)
—
—
—
—
—
44,453
25,011
—
—
(123)
(8,456)
—
482
210
9,925
67,769
25,905
169,975
57,861
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 presented net of tax in our
Consolidated Statements of Comprehensive Income.
(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 price 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 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 are primarily
attributed to:
•
Net derivatives of $24.7 million due to greater pricing transparency.
96
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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.
Quantitative Information about Significant Unobservable Inputs used in Level 3 Fair Value Measurements at November 30,
2023 and 2022
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.
97
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Financial Instruments Owned
Corporate equity securities
Non-exchange-traded securities
Corporate debt securities
CDOs and CLOs
CMBS
Other ABS
Loans and other receivables
Derivatives
Equity options
Investments at fair value
Private equity securities
Fair Value
(in thousands)
Valuation Technique
Significant Unobservable
Input(s)
Input / Range
Weighted
Average
November 30, 2023
$
$
$
$
$
$
$
$
181,294
Market approach
26,112 Market approach
Price
Price
Discounted cash flows
Discount rate/yield
Scenario analysis
Estimated recovery percentage
$0 - $325
$40 - $94
11%
4%
64,862 Discounted cash flows
Constant prepayment rate
15%
- 20%
Constant default rate
Loss severity
Discount rate/yield
Market approach
Price
508 Scenario analysis
Estimated recovery percentage
102,423 Discounted cash flows
Discount rate/yield
Cumulative loss rate
Duration (years)
Market approach
130,101 Market approach
Price
Price
Scenario analysis
Estimated recovery percentage
2%
35%
- 40%
21%
- 26%
$48 - $100
28%
10%
- 21%
9%
- 32%
1.1
- 2.2
$100
$82
- $157
7%
- 73%
2,395
127,237
Volatility benchmarking Volatility
60%
$59
$50
—
—
19.2
—
36%
24%
$88
—
18%
25%
1.7
—
$127
40%
—
Market approach
Price
$1
- $6,819
$484
28%
$30,538,979
4%
$101
31%
- 87%
0.4
- 25.5
18%
- 73%
$57 - $114
€60 - €103
—
—
—
—
42%
17.9
53%
$78
€84
Financial Instruments Sold, Not Yet Purchased:
Corporate debt securities
$
Loans
Derivatives
Equity options
Embedded options
Other secured financings
Long-term debt
Structured notes
$
$
$
$
Discount rate/yield
Revenue
124 Scenario analysis
Estimated recovery percentage
1,521 Market approach
Price
56,779
Volatility benchmarking Volatility
Market approach
Basis points upfront
3,898 Scenario analysis
Estimated recovery percentage
744,597
Market approach
Price
Price
98
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Financial Instruments Owned:
Corporate equity securities
Non-exchange-traded securities
Corporate debt securities
CDOs and CLOs
CMBS
Other ABS
Loans and other receivables
Investments at fair value
Private equity securities
Financial Instruments Sold, Not Yet Purchased:
Derivatives
Equity options
Other secured financings
Long-term debt
Structured notes
$
$
$
November 30, 2022
Fair Value
(in thousands)
Valuation Technique
Significant Unobservable
Input(s)
Input / Range
Weighted
Average
$
$
$
$
$
$
$
240,347
Market approach
30,232 Market approach
Price
Price
Scenario analysis
Estimated recovery percentage
55,824 Discounted cash flows
Constant prepayment rate
EBITDA multiple
Constant default rate
Loss severity
Discount rate/yield
Price
Estimated recovery percentage
Market approach
Scenario analysis
839 Scenario analysis
Estimated recovery percentage
55,858 Discounted cash flows
Discount rate/yield
168,875 Market approach
Price
Cumulative loss rate
Duration (years)
$0 - $325
$48 - $82
4.2
7%
20%
2%
- 3%
30%
- 40%
18%
- 23%
$67 - $102
69%
45%
6%
- 20%
8%
- 22%
0.8 - 1.6
$1 - $150
Scenario analysis
Estimated recovery percentage
6%
- 78%
$43
$65
—
—
—
2%
32%
22%
$89
—
—
17%
19%
1.2
$82
30%
Market approach
Price
$0 - $14,919
$604
Discount rate/yield
Revenue
23%
$30,194,338
159,304
65,841
Volatility benchmarking
Volatility
26%
- 75%
1,712 Scenario analysis
Estimated recovery percentage
9%
- 30%
661,123
Market approach
Price
Price
$51
- $97
€59 - €99
—
—
51%
23%
$64
€77
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, 2023 and 2022, asset exclusions consisted of $45.6 million and $80.2 million, respectively, primarily composed
of RMBS, other ABS, certain derivatives and investments at fair value. At November 30, 2023 and 2022, liability exclusions
consisted of $4.0 million and $9.6 million, respectively, primarily composed of corporate equity securities, corporate debt
securities, CMBS, loans and certain derivatives.
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-exchange-traded securities, corporate
debt securities, CDOs and CLOs, other ABS, loans and other receivables 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 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 options.
99
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
•
•
•
Loans and other receivables, corporate debt securities, CDOs and CLOs, CMBS and other secured financings using
scenario analysis. A significant increase (decrease) in the possible recovery rates of the cash flow outcomes underlying
the financial instrument would result in a significantly higher (lower) fair value measurement for the financial
instrument.
CDOs and CLOs, corporate debt securities 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 increase
(decrease) in the discount rate/security yield would result in a significantly lower (higher) fair value measurement.
Derivative equity options 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 certain of our structured notes which are managed by our
investment banking and capital markets businesses and are included in Long-term debt 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 Long-term debt measured at fair
value under the fair value option (in thousands):
Financial instruments owned:
Loans and other receivables
Financial instruments sold, not yet purchased:
Loans
Other secured financings:
Other changes in fair value (2)
Long-term debt:
Changes in instrument-specific credit risk (1)
Other changes in fair value (2)
Year Ended November 30,
2022
2023
2021
$
46,421 $
(20,529) $
11,682
—
(2,186)
—
695
1,077
650
(106,801)
21,373
63,344
345,050
(113,027)
108,739
(1) Changes in fair value of structured notes related to instrument-specific credit risk are presented net of tax in our
Consolidated Statements of Comprehensive Income.
(2) Other changes in fair value are included in Principal transactions revenues in our Consolidated Statements of Earnings.
100
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The following is a summary of the amounts by which contractual principal is greater than (less than) fair value for loans and
other receivables, Other secured financings and Long-term debt measured at fair value under the fair value option (in
thousands):
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
Other secured financings
November 30,
2023
2022
$
2,344,468 $
2,144,632
259,354
294,356
1,377
181,766
369,990
3,563
(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 $187.4 million and $83.4 million at November 30, 2023 and 2022, respectively.
The aggregate fair value of loans and other receivables on nonaccrual status and/or 90 days or greater past due was $98.1
million and $69.2 million at November 30, 2023 and 2022, respectively, which includes loans and other receivables 90 days or
greater past due of $37.6 million and $65.1 million at November 30, 2023 and 2022, 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, 2023, 2022 and 2021 (in thousands):
November 30, 2023
Exchange ownership interests and registrations (1)
Investments in and loans to related parties (2)
Other assets (3)
November 30, 2022
Exchange ownership interests and registrations (1)
Investments in and loans to related parties (4)
Other assets (5)
$
$
Level 2
Level 3
— $
—
—
Impairment Losses
78
57,248
2,101
— $
—
1,755
Level 2
Level 3
— $
—
—
— $
106,172
1,709
Impairment Losses
39
27,119
6,701
November 30, 2021
Exchange ownership interests and registrations (1)
Level 2
Level 3
$
1,935 $
Impairment Losses
66
— $
(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 13, Goodwill and Intangible Assets.
(2) These impairment losses, which are related to an equity method investment, were recognized in Other revenues in our
Consolidated Statements of Earnings and the asset was in the Asset Management reportable business segment. Fair value
was based on our best estimate of what could be recognized in a sale transaction for the investment.
(3) These impairment losses, which are related to real estate held for development, were recognized in Other revenues in our
Consolidated Statements of Earnings and are held in the Asset Management reportable business segment. Fair value was
based on estimated future cash flows using discounts rates ranging from 10.0% to 14.0%.
101
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(4) 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 11,
Investments.
(5) 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%.
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, 2023 and 2022, we had equity securities without readily determinable fair values, which we
account for at cost, minus impairment, of $0.0 million and $37.0 million, respectively, which are presented within Other assets
in the Consolidated Statements of Financial Condition. Gains (losses) of $(122.2) million, $3.6 million and $0.8 million were
recognized on these investments during the years ended November 30, 2023, 2022 and 2021, respectively. Impairments and
downward adjustments on these investments during the year ended November 30, 2023 were $80.3 million. There were no
impairments and downward adjustments on these investments during the years ended November 30, 2022 and 2021. These
investments would generally be presented within Level 3 of the fair value hierarchy.
Note 7. 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 6, Fair Value Disclosures, and Note 24, 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 International Swaps and Derivatives Association, Inc. 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, 2023 and 2022
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 which other rights of setoff associated with these arrangements
exist and could have an effect on our financial position (in thousands, except contract amounts).
102
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
November 30, 2023 (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
Derivatives not designated as accounting hedges:
Interest rate contracts:
Exchange-traded
Cleared OTC
Bilateral OTC
Foreign exchange contracts:
Exchange-traded
Bilateral OTC
Equity contracts:
Exchange-traded
Bilateral OTC
Commodity contracts:
Exchange-traded
Bilateral OTC
Credit contracts:
Cleared OTC
Bilateral OTC
Total derivatives not designated as accounting hedges
Total gross derivative assets/liabilities:
Exchange-traded
Cleared OTC
Bilateral OTC
Amounts offset in our Consolidated Statements of
Financial Condition (3):
Exchange-traded
Cleared OTC
Bilateral OTC
$
—
259
259
— $
6,070
1
19,638
25,708
316
1,156,937
893,983
—
147,470
678,542
715,754
59
5,662
38,046
21,436
3,658,205
678,917
1,194,983
1,784,564
(384,392)
(1,189,517)
(1,533,711)
88,354
4,415
1,179
—
66,254
1,180,832
31,116
735
15,497
133
22
63
1,185,503
1,266,506
—
129,770
393,220
850,088
33
1,398
38,487
19,573
3,884,641
393,316
1,230,060
2,286,973
(384,392)
(1,189,513)
(1,190,667)
3
3
67,643
4,544
786
4
38,585
1,174,298
16,234
940
6,455
81
29
Net amounts per Consolidated Statements of
Financial Condition (4)
$
550,844
$
1,145,777
(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) 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.
103
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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
Derivatives not designated as accounting hedges:
Interest rate contracts:
Exchange-traded
Cleared OTC
Bilateral OTC
Foreign exchange contracts:
Exchange-traded
Bilateral OTC
Equity contracts:
Exchange-traded
Bilateral OTC
Commodity contracts:
Exchange-traded
Bilateral OTC
Credit contracts:
Cleared OTC
Bilateral OTC
Total derivatives not designated as accounting hedges
Total gross derivative assets/liabilities:
Exchange-traded
Cleared OTC
Bilateral OTC
Amounts offset in our Consolidated Statements of
Financial Condition (3):
Exchange-traded
Cleared OTC
Bilateral OTC
$
—
—
—
— $
217,922
—
57,875
275,797
3,297
655,140
1,044,632
—
287,594
49,736
3,843
772
2
2,398
1,074,134
348,611
1,323,637
5,201
597
5
51
9
37
4,327
8,364
16,274
3,442,410
1,077,468
663,504
1,701,438
(858,921)
(655,969)
(1,578,354)
123
452,570
1,573,975
—
251,339
864,804
800,230
19
4,874
7,742
13,389
3,969,065
864,946
678,234
2,701,682
(858,921)
(657,192)
(1,216,052)
3
5
36,085
4,203
704
1
2,428
1,338,129
5,543
607
3
35
8
Net amounts per Consolidated Statements of
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.
(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.
104
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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,
2023
2022
2021
$
$
(78,766) $
(212,280) $
(41,845)
21,638
219,143
(57,128) $
6,863 $
58,507
16,662
The following table provides information related to gains (losses) on our net investment hedges recognized in Currency
translation and other adjustments, a component of Other comprehensive income (loss), in our Consolidated Statements of
Comprehensive Income (in thousands):
Gains (Losses)
Foreign exchange contracts
Total
Year Ended November 30,
2023
2022
2021
$
$
(49,060) $
(49,060) $
116,876 $
116,876 $
19,008
19,008
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)
Interest rate contracts
Foreign exchange contracts
Equity contracts
Commodity contracts
Credit contracts
Total
Year Ended November 30,
2022
2023
2021
$
$
215,856 $
46,744
(99,968)
4,089
(10,983)
155,738 $
(154,378) $
(164,729)
(29,740)
(43,106)
15,612
(376,341) $
(48,510)
(10,152)
(427,593)
(28,012)
653
(513,614)
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 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.
105
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
OTC Derivatives. The following tables set forth by remaining contract maturity the fair value of OTC derivative assets and
liabilities at November 30, 2023 (in thousands):
OTC Derivative Assets (1) (2) (3)
0 – 12 Months
1 – 5 Years
Greater Than
5 Years
Cross-Maturity
Netting (4)
Total
Commodity swaps, options and forwards
$
5,611 $
— $
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
Total
Cross-product counterparty netting
Total OTC derivative assets included in
Financial instruments owned
164,590
—
101,198
63,933
606
25,482
229
124,491
8,652
—
— $
—
— $
5,611
(38,890)
151,182
15,098
(351)
14,976
506
—
—
(3,034)
223,161
—
—
72,585
606
143,716
609,292
43,029
(164,641)
631,396
$
479,654 $
768,146 $
58,633 $
(206,916) 1,099,517
(42,344)
$ 1,057,173
(1) At November 30, 2023, we held net exchange-traded derivative assets and other credit agreements with a fair value of
$294.5 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, 2023, cash collateral received
was $800.9 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
$
1,387 $
— $
— $
— $
1,387
OTC Derivative Liabilities (1) (2) (3)
0 – 12 Months
1 – 5 Years
Greater Than
5 Years
Cross-Maturity
Netting (4)
Total
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
Total
Cross-product counterparty netting
Total OTC derivative liabilities included in
Financial instruments sold, not yet
purchased
53,109
743
63,726
65,805
14,112
161,035
320,881
936
104,422
8,452
—
484,622
6,484
674
—
—
—
(38,890)
341,584
(351)
2,002
(3,034)
—
—
165,114
74,257
14,112
557,539
(164,641) 1,038,555
$
359,917 $
919,313 $
564,697 $
(206,916) 1,637,011
(42,344)
$ 1,594,667
(1) At November 30, 2023, we held net exchange-traded derivative liabilities with a fair value of $8.9 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, 2023, cash collateral pledged
was $457.8 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.
106
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The following table presents the counterparty credit quality with respect to the fair value of our OTC derivative assets at
November 30, 2023 (in thousands):
Counterparty credit quality (1):
A- or higher
BBB- to BBB+
BB+ or lower
Unrated
Total
$
$
561,329
73,889
234,087
187,868
1,057,173
(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 following tables present external credit ratings of the underlyings or referenced assets for our written credit related
derivative contracts (in millions):
November 30, 2023
External Credit Rating
Investment
Grade
Non-investment
Grade
Unrated
Total Notional
$
1,451.5 $
893.9 $
— $
2,345.4
November 30, 2022
External Credit Rating
Investment
Grade
Non-investment
Grade
Unrated
Total Notional
$
207.9 $
—
515.8 $
—
— $
0.2
723.7
0.2
Credit protection sold:
Index credit default swaps
Credit protection sold:
Index credit default swaps
Single name credit default swaps
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 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,
2023
2022
139.5 $
(97.6)
71.0
112.9
226.5
(168.8)
177.4
235.0
(1) These potential outflows include initial margin received from counterparties at the execution of the derivative contract. The
initial margin will be returned if counterparties elect to terminate the contract after a downgrade.
107
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Note 8. 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 the fair value of the
collateral received and the related obligation to return the collateral in our Consolidated Statements of Financial Condition.
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, 2023
Securities
Lending
Arrangements
Repurchase
Agreements
Obligation to
Return
Securities
Received as
Collateral, at
Fair Value
Total
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
Total
$
1,221,456 $
627,029 $
4,347 $
1,852,832
576,449
—
39,151
—
3,462
—
4,297,933
1,950,908
9,474,205
141,091
2,511,560
838,468
—
—
3,429
—
1,024
—
4,874,382
1,950,908
9,516,785
141,091
2,516,046
838,468
$
1,840,518 $
19,841,194 $
8,800 $
21,690,512
108
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
November 30, 2022
Securities
Lending
Arrangements
Repurchase
Agreements
Obligation to
Return
Securities
Received as
Collateral, at
Fair Value
Total
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
Total
$
967,800 $
471,581 $
— $
1,439,381
332,204
—
66,021
—
—
—
2,210,934
1,192,265
6,203,263
535,619
2,450,880
538,491
—
—
100,362
—
—
—
2,543,138
1,192,265
6,369,646
535,619
2,450,880
538,491
$
1,366,025 $
13,603,033 $
100,362 $
15,069,420
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):
November 30, 2023
Overnight
and
Continuous
Up to 30 Days
31-90 Days
Greater than
90 Days
$
1,068,665 $
10,548,263
— $
244,158 $
527,695 $
2,442,446
1,939,891
4,910,594
Total
1,840,518
19,841,194
Securities lending arrangements
Repurchase agreements
Obligation to return securities received
as collateral, at fair value
Total
$ 11,625,728 $
2,442,446 $
2,184,049 $
8,800
—
—
—
8,800
5,438,289 $ 21,690,512
November 30, 2022
Overnight
and
Continuous
Up to 30 Days
31-90 Days
Greater than
90 Days
$
808,472 $
— $
273,865 $
283,688 $
6,930,667
1,521,629
2,262,705
2,888,032
Total
1,366,025
13,603,033
Securities lending arrangements
Repurchase agreements
Obligation to return securities received
as collateral, at fair value
100,362
—
—
—
100,362
Total
$
7,839,501 $
1,521,629 $
2,536,570 $
3,171,720 $ 15,069,420
We receive securities as collateral under resale agreements, securities borrowing transactions, customer margin loans, and in
connection with securities-for-securities transactions in which we are the lender of securities. We also receive securities as
initial margin on certain derivative transactions. 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, 2023 and 2022, the
approximate fair value of securities received as collateral by us that may be sold or repledged was $33.99 billion and $26.82
billion, respectively. At November 30, 2023 and 2022, a substantial portion of the securities received by us had been sold or
repledged.
109
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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 Significant Accounting Policies for additional
information regarding the offsetting of securities financing 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 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 which other rights of setoff associated with these arrangements exist and could have an effect on
our financial position (in thousands).
November 30, 2023
Netting in
Consolidated
Statements of
Financial
Condition
Net Amounts in
Consolidated
Statements of
Financial
Condition
Additional
Amounts
Available for
Setoff (1)
Gross
Amounts
Available
Collateral (2)
Net
Amount (3)
$ 7,192,091 $
— $
7,192,091 $
(327,723) $
(1,642,946) $ 5,221,422
14,871,137
(8,920,588)
5,950,549
(1,304,009)
(4,582,621)
63,919
8,800
—
8,800
—
(8,800)
—
$ 1,840,518 $
— $
1,840,518 $
(327,723) $
(1,396,069) $
116,726
19,841,194
(8,920,588)
10,920,606
(1,304,009)
(9,035,403)
581,194
Assets:
Securities borrowing arrangements
Reverse repurchase agreements
Securities received as collateral, at
fair value
Liabilities:
Securities lending arrangements
Repurchase agreements
Obligation to return securities
received as collateral, at fair value
8,800
—
8,800
—
(8,800)
—
November 30, 2022
Netting in
Consolidated
Statements of
Financial
Condition
Net Amounts in
Consolidated
Statements of
Financial
Condition
Additional
Amounts
Available for
Setoff (1)
Gross
Amounts
Available
Collateral (2)
Net
Amount (4)
$ 5,831,148 $
— $
5,831,148 $
(285,361) $
(1,381,404) $ 4,164,383
10,697,382
(6,150,691)
4,546,691
(550,669)
(3,954,525)
41,497
100,362
—
100,362
—
(100,362)
—
$ 1,366,025 $
— $
1,366,025 $
(285,361) $
(1,054,228) $
26,436
13,603,033
(6,150,691)
7,452,342
(550,669)
(6,374,480)
527,193
Assets:
Securities borrowing arrangements
Reverse repurchase agreements
Securities received as collateral, at
fair value
Liabilities:
Securities lending arrangements
Repurchase agreements
Obligation to return securities
received as collateral, at fair value
100,362
—
100,362
—
(100,362)
—
(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 Statements 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.
110
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(3) Includes $5.17 billion of securities borrowing arrangements, for which we have received securities collateral of $5.04
billion, and $505.0 million of repurchase agreements, for which we have pledged securities collateral of $520.4 million,
which are subject to master netting agreements, but we have not determined the agreements to be legally enforceable.
(4) Includes $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.
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 primarily 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.
The following table summarizes assets segregated or held in separate accounts included in our Consolidated Statements of
Financial Condition (in thousands):
Cash and securities segregated and on deposit for regulatory purposes or deposited
with clearing and depository organizations
Securities purchased under agreements to resell (1)
Total
November 30,
2023
2022
$
$
1,414,593 $
45,490
1,460,083 $
957,302
—
957,302
(1) Includes U.S. Treasury securities segregated for the exclusive benefit of customers under SEC’s Rule 15c3-3.
Note 9. 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 10, 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 Principal transactions revenues in our
Consolidated Statements of Earnings prior to the identification and 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 6, Fair Value
Disclosures and Note 2, Summary of Significant Accounting Policies.
The following table presents activity related to our securitizations that were accounted for as sales in which we had continuing
involvement (in millions):
Transferred assets
Proceeds on new securitizations
Cash flows received on retained interests
Year Ended November 30,
2022
2021
2023
$
8,664.5 $
8,639.6
22.8
6,351.2 $
6,402.6
31.7
10,487.3
10,488.6
21.8
111
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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, 2023 and 2022.
The following table summarizes 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,
2023
2022
Total
Assets
Retained
Interests
Total
Assets
Retained
Interests
$
5,595.1 $
3,014.3
6,323.8
1,877.8
417.3 $
197.3
23.3
68.1
219.8 $
2,997.7
5,140.5
2,526.7
2.9
173.9
31.9
122.8
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 10, Variable Interest Entities.
Note 10. 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.
112
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - 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 to investors, the voting interests of the VIE, management,
service and/or other agreements of the VIE, 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, 2023 and 2022 (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)
Assets held for sale (6)
Other assets (3)
Total assets
Financial instruments sold, not yet purchased
Other secured financings (4)
Liabilities held for sale (6)
Other liabilities (5)
Long-term debt
Total liabilities
November 30,
2023
2022
Secured
Funding
Vehicles
Other
Secured
Funding
Vehicles
Other
$
$
$
$
— $
—
1,677.7
—
815.6
—
2,493.3 $
— $
1,667.3
769.2
10.5
—
2,447.0 $
1.1 $
7.8
—
18.0
578.8
147.9
753.6 $
6.4 $
—
303.4
249.7
49.6
609.1 $
— $
—
1,565.0
—
—
798.8
2,363.8 $
— $
2,289.9
—
4.6
—
2,294.5 $
1.4
7.1
—
15.2
—
88.3
112.0
5.7
—
—
37.6
24.7
68.0
(1) Securities purchased under agreements to resell primarily represent amounts due under collateralized transactions on
related consolidated entities, all of which are eliminated in consolidation.
(2) Approximately $1.4 million of the receivables from brokers at November 30, 2023 are with related consolidated entities,
which are eliminated in consolidation.
(3) Approximately $56.1 million and $82.4 million of the other assets at November 30, 2023 and 2022, respectively, represent
intercompany receivables with related consolidated entities, which are eliminated in consolidation.
(4) Approximately $681.0 million and $253.8 million of the other secured financings at November 30, 2023 and 2022,
respectively, are with related consolidated entities and are eliminated in consolidation.
(5) Approximately $247.9 million and $30.9 million of the other liabilities amounts at November 30, 2023 and 2022,
respectively, are with related consolidated entities, which are eliminated in consolidation.
113
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(6) Assets held for sale and Liabilities held for sale in our Consolidated Statements of Financial Condition as of November 30,
2023 relate to Foursight’s automobile financing vehicles, which are considered to be VIEs, and to the net operating assets
of the wholesale operations of OpNet, which has been determined to be a VIE. Approximately $31.9 million of Assets held
for sale and $5.3 million Liabilities held for sale are with related consolidated entities and are eliminated in consolidation.
See Note 5, Assets Held for Sale.
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 primarily consist of
automobile loans, which as of November 30, 2022 were accounted for as loans held for investment at amortized cost included
within Other assets on the Consolidated Statements of Financial Condition. The liabilities of these VIEs consist of notes issued
by the VIEs, which as of November 30, 2022 were accounted for at amortized cost and included within Other secured
financings on the Consolidated Statements 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. These
assets and liabilities are included in Assets held for sale and Liabilities held for sale in our Consolidated Statements of Financial
Condition as of November 30, 2023. See Note 5, Assets Held for Sale.
Other. We are the primary beneficiary of certain investment vehicles that we manage for external investors and certain
investment vehicles set up for the benefit of our employees as well as investment vehicles managed by third parties where we
have a controlling financial interest. The assets of these VIEs consist primarily of corporate equity securities and broker
receivables. Our variable interests in these vehicles consist of equity securities, management and performance fees and revenue
share. 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 are the primary beneficiary of a real estate syndication entity that develops multi-family residential property and manages
the property. The assets of the VIE consist primarily of real estate and its liabilities primarily consist of accrued expenses and
long-term debt secured by the real estate property. Our variable interest in the VIE primarily consists of our limited liability
company interest, a sponsor promote and development and asset management fees for managing the project.
During the fourth quarter of 2023 we became the primary beneficiary of OpNet’s wholesale wireless broadband business, which
is classified as held for sale and was acquired during the fourth quarter of 2023. We also consolidate Tessellis, a company listed
on the Italian stock exchange in which OpNet has a controlling financial interest. Tessellis is not considered to be a VIE. Refer
to Note 4, Business Acquisitions for additional information.
Nonconsolidated VIEs
The following tables present information about our variable interests in nonconsolidated VIEs (in millions):
CLOs
Asset-backed vehicles
Related party private equity vehicles
Other investment vehicles
Total
November 30, 2023
Carrying Amount
Assets
Liabilities
Maximum
Exposure to Loss
VIE Assets
$
913.3 $
14.1 $
4,414.0 $
661.7
3.1
1,071.2
—
—
—
661.7
14.2
1,233.7
$
2,649.3 $
14.1 $
6,323.6 $
9,455.5
3,734.8
10.3
15,059.2
28,259.8
114
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
CLOs
Asset-backed vehicles
Related party private equity vehicles
Other investment vehicles
Stratos
Total
November 30, 2022
Carrying Amount
Assets
Liabilities
Maximum
Exposure to Loss
VIE Assets
$
133.5 $
1.4 $
1,642.5 $
561.0
24.8
1,172.6
94.8
—
—
—
—
690.4
35.5
1,254.0
94.8
7,705.3
4,408.3
69.1
18,940.5
389.6
$
1,986.7 $
1.4 $
3,717.2 $
31,512.8
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:
◦
◦
◦
Participation interests in corporate loans held by CLOs and commitments to fund such participation interests,
Reverse repurchase agreements with collateral margin maintenance obligations and commitments to fund
such reverse repurchase agreements; and
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.
We also may transfer originated corporate loans to certain VIEs and hold subordinated interests issued by the vehicle. The
underlying assets, which are collateralizing the vehicles, are primarily composed of unsecured consumer loans, mortgage loans
and corporate 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 have committed to invest in private equity funds, (the “JCP Funds”, including JCP
Fund V (see Note 11, Investments)) managed by Jefferies Capital Partners, LLC (the “JCP Manager”). Additionally, we have
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, 2023
and 2022, our total equity commitment in the JCP Entities was $133.0 million, of which $122.6 million and $122.4 million had
been funded, respectively. The carrying value of our equity investments in the JCP Entities was $3.1 million and $24.8 million
at November 30, 2023 and 2022, 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.
115
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Other Investment Vehicles. At November 30, 2023 and 2022, we had equity commitments to invest $1.26 billion and $1.14
billion, respectively, in various other investment vehicles, of which $1.10 billion and $1.06 billion was funded, respectively.
The carrying value of our equity investments was $1.07 billion and $1.17 billion at November 30, 2023 and 2022, 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.
Stratos. We had equity interests in Stratos of $59.7 million at November 30, 2022 consisting of a 49.9% voting interest in
Stratos and rights to a majority of all distributions in respect of the equity of Stratos, which was 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 had a senior secured term loan to Stratos due May 6, 2023, which was accounted for at a fair
value of $35.1 million, at November 30, 2022, and is reported within Financial instruments owned, at fair value in our
Consolidated Statements of Financial Condition. As of November 30, 2022, Stratos was considered a VIE and our term loan
and equity interest were variable interests. The assets of Stratos’ primarily consists of brokerage receivables, other financial
instruments and operating assets as part of Stratos’ foreign exchange trading business. On September 14, 2023, we acquired the
remaining equity interest in Stratos and extinguished the term loan, see Note 4, Business Acquisitions for further details. As of
November 30, 2023, Stratos is a wholly-owned subsidiary and is not considered to be a VIE based on our controlling equity
ownership interest.
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, 2023 and 2022, we held $1.89 billion and $1.47 billion of agency mortgage-backed securities, respectively,
and $261.2 million and $180.6 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.
116
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Note 11. 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).
Total Investments in and loans to related parties
November 30,
2023
2022
$
1,239.3 $
1,426.8
Year Ended November 30,
2023
2022
2021
Total equity method pickup earnings (losses) recognized in Other
revenues in our Consolidated Statements of Earnings
$
(192.2) $
(36.3) $
149.9
The following presents summarized financial information about our significant equity method investees. For certain investees,
we receive financial information on a lag and the summarized information provided for these investees is based on the latest
financial information available as of November 30, 2023, 2022 and 2021, respectively.
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, 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 is 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, 2023, 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, 2023, our remaining commitment to Jefferies Finance was $15.4 million. The investment
commitment is scheduled to expire on March 1, 2024 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, 2023. Advances are shared equally between us and
MassMutual. The facility is scheduled to mature on March 1, 2024 with automatic one year extensions absent a 60 days
termination notice by either party. At November 30, 2023, 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
Year Ended November 30,
2023
2022
2021
$
— $
1.2
0.4 $
1.2
1.5
1.2
117
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The following is a summary of selected financial information for Jefferies Finance (in millions):
Total assets
Total liabilities
Our total equity balance
Net earnings (losses)
November 30,
2023
2022
$
5,598.2 $
4,352.0
6,763.0
5,490.1
November 30,
2022
2021
$
630.1 $
636.4
Year Ended November 30,
2023
2022
2021
$
(12.5) $
(129.4) $
205.7
The following summarizes activity related to our other transactions with Jefferies Finance (in millions):
Year Ended November 30,
2023
2022
2021
Origination and syndication fee revenues (1)
$
133.7 $
194.7 $
Origination fee expenses (1)
CLO placement fee revenues (2)
Investment fund placement fee revenues (3)
Underwriting fees (4)
Service fees (5)
28.6
2.1
3.7
—
100.1
39.7
4.6
—
—
94.7
410.5
66.8
5.7
—
2.5
85.1
(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, 2023 and 2022, 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 act as a placement agent for investment funds managed by Jefferies Finance, for which we recognized fees, which are
included in Commissions and other fees in our Consolidated Statements of Earnings.
(4) We acted as underwriter in connection with term loans issued by Jefferies Finance.
(5) 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 $3.5
million and $1.2 million at November 30, 2023 and 2022, respectively. At November 30, 2023 and 2022, payables to Jefferies
Finance related to cash deposited with us and included in Payables to customers in our Consolidated Statements of Financial
Condition, were $2.6 million and $0.5 million, respectively.
118
Table of Contents
Berkadia
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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 43.6% 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, 2023, 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
Our total equity balance
Gross revenues
Net earnings
Our share of net earnings
November 30,
2023
2022
$
5,318.2 $
3,816.1
612.8
4,436.0
2,801.7
690.1
November 30,
2023
2022
$
400.9 $
425.9
Year Ended November 30,
2023
2022
2021
$
1,120.2 $
1,361.2 $
1,262.4
120.4
52.5
276.5
124.4
290.3
130.6
We received distributions from Berkadia on our equity interest as follows (in millions):
Distributions (1)
(1) In January 2024, we received a distribution of $3.7 million.
Year Ended November 30,
2023
2022
2021
$
58.1 $
69.8 $
58.0
At November 30, 2023 and 2022, we had commitments to purchase $77.5 million and $237.4 million, respectively, of agency
CMBS from Berkadia.
OpNet
We own approximately 47.4% of the common shares and 50.0% of the voting rights of OpNet. In addition to common stock,
we own various classes of convertible preferred stock in OpNet, which will automatically convert to common shares in 2026.
Prior to the acquisition and consolidation of OpNet in the fourth quarter of 2023, we accounted for our equity investment in
OpNet under the equity method. Prior to consolidation, the convertible preferred instruments were measured at cost less
impairment in prior reporting periods and had a carrying value of $0.0 million at November 30, 2022. We also hold common
stock warrants and preferred stock warrants that prior to consolidation, were reported in Financial instruments owned, at fair
value in our Consolidated Statements of Financial Condition and had a fair value of $54.2 million at November 30, 2022.
Additionally, we owned redeemable preferred stock and subordinated bonds issued by OpNet. Prior to consolidation, the
redeemable preferred stock was reported in Other assets in our Consolidated Statements of Financial Condition and had a
carrying value of $24.5 million at November 30, 2022. Prior to consolidation, the subordinated bonds were reported in
Financial instruments owned, at fair value in our Consolidated Statements of Financial Condition with a fair value of
$48.6 million at November 30, 2022. We have outstanding shareholder loans to OpNet, which prior to consolidation, were
119
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
reported within Investments in and loans to related parties in our Consolidated Statements of Financial Condition. The total
carrying value of shareholder loans was $19.3 million at November 30, 2022.
We recognized equity method pickup losses of $(254.1) million, $(59.0) million and $(56.4) million for the years ended
November 30, 2023, 2022 and 2021, respectively, in Other revenues in our Consolidated Statements of Earnings.
On August 31, 2023, we elected to measure all classes of convertible preferred stock in OpNet at fair value and reclassified all
convertible preferred instruments from Other assets to Financial instruments owned, at fair value and recognized $90.8 million
within Principal transactions in our Consolidated Statements of Earnings during the year ended 2023. On November 30, 2023,
we provided notice of our intent to convert certain classes of our preferred shares into common shares and, as a result, we
obtained control of OpNet. Upon the conversion, we will hold in excess of 50.0% of OpNet’s common shares and the aggregate
voting rights over OpNet. As of November 30, 2023, we have consolidated OpNet (refer to Note 4, Business Acquisitions for
further information) and the assets and liabilities of OpNet are included in our consolidated financial statements at November
30, 2023. We consolidate OpNet’s wholesale business, which is considered to be a VIE and is classified as held for sale at
November 30, 2023. We also consolidate Tessellis, a subsidiary of OpNet, which is not considered to be a VIE. Refer to Note 4,
Business Acquisitions and Note 10, Variable Interest Entities for further information.
During the year ended 2023, we contributed $167.2 million to OpNet through direct subscription, settlement of subscription
advances, and conversion of a shareholder loan. We have agreed to provide additional financial support, if necessary, to meet
certain funding needs of OpNet through June 2024.
The following is a summary of selected financial information for OpNet (in millions):
Total assets
Total liabilities
Our total equity balance
Net losses
November 30,
2022
1,050.8
935.2
November 30,
2022
—
$
$
Year Ended November 30,
2023
2022
2021
$
(278.3) $
(88.6) $
(90.5)
As of November 30, 2023, the assets and liabilities of OpNet are consolidated within our consolidated financial statements and
the revenues and expenses of OpNet will be included within our Consolidated Statements of Earnings beginning December 1,
2024.
Stratos
We had a 49.9% voting interest in Stratos and had the ability to significantly influence Stratos through our seats on the board of
directors. On September 14, 2023, we acquired the additional 50.1% voting interest in Stratos (refer to Note 4, Business
Acquisitions for further information). As a result, the financial statements of Stratos are consolidated into our consolidated
financial statements. During 2023, prior to the acquisition, we contributed additional capital of $20.0 million. We also had a
senior secured term loan to Stratos, which was reported within Financial instruments owned, at fair value in our Consolidated
Statements of Financial Condition, which had a fair value of $35.1 million as of November 30 2022. Stratos was considered a
VIE and our term loan and equity interest were variable interests. During the year ended November 30, 2022, we recognized an
other-than-temporary impairment charge of $25.3 million within Other revenues on the Consolidated Statements of Earnings on
our investment. The following is a summary of selected financial information for Stratos (in millions):
Total assets
Total liabilities
November 30,
2022
$
389.6
341.4
120
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Our total equity balance
Net earnings (losses)
(1) Represents the period prior to the step-acquisition.
November 30,
2022
$
59.7
Nine Months Ended
August 31, 2023 (1)
Year Ended November 30,
2022
2021
$
(36.4) $
39.0 $
(21.5)
In connection with foreign exchange contracts entered into with Stratos, we have $0.5 million at November 30, 2022, included
in Payables—brokers, dealers and clearing organizations in our Consolidated Statements of Financial Condition.
Golden Queen Mining Company LLC
We had a 50.0% ownership interest in Golden Queen (sold during the fourth quarter of 2023), which owns and operates a gold
and silver mine project located in California. We also owned warrants to purchase shares with a fair value of $0.6 million at
November 30, 2022, which if exercised, would have increased our ownership to approximately 51.9% of Golden Queen’s
common equity. The warrants were reported in Financial instruments owned, at fair value in our Consolidated Statements of
Financial Condition. We also had a shareholder loan to Golden Queen with a carrying value of $14.0 million at November 30,
2022. During the year ended 2023, we recognized impairment charges of $57.2 million on our investment within Other
revenues in our Consolidated Statements of Earnings. We sold our interest in Golden Queen in November 2023 and recognized
a gain of $1.7 million.
The following is a summary of selected financial information for Golden Queen (in millions):
Total assets
Total liabilities
Our total equity balance
Net losses
Real Estate Investments
November 30,
2022
209.8
102.1
November 30,
2022
46.5
$
$
Year Ended November 30,
2023
2022
2021
$
(0.3) $
(15.2) $
(14.7)
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 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).
We own a 48.1% equity interest in 54 Madison, a fund that most recently owned an interest in one real estate project and is in
the process of being liquidated. The following is a summary of selected financial information for our significant real estate
investments (in millions):
121
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Total assets
Total liabilities
Our total equity balance
Net earnings (losses)
November 30,
2023
2022
$
329.5 $
500.0
350.4
487.5
November 30,
2023
2022
$
90.0 $
107.3
Year Ended November 30,
2023
2022
2021
$
2.2 $
17.7 $
(27.0)
We received distributions from 54 Madison on our equity interest as follows (in millions):
Distributions
JCP Fund V
Year Ended November 30,
2023
2022
2021
$
19.4 $
18.4 $
39.4
We have limited partnership interests of 11% and 50% in Jefferies Capital Partners V L.P. and 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 $2.2 million and $23.9 million at November 30, 2023 and 2022, 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). 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
$
(9.0) $
0.1 $
7.7
At both November 30, 2023 and 2022, we were committed to invest equity of up to $85.0 million in JCP Fund V. At both
November 30, 2023 and 2022, 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 35.3%
of the combined equity interests (in millions):
Year Ended November 30,
2023
2022
2021
Total assets
Total liabilities
Total partners’ capital
September 30,
2023 (1)
2022 (1)
$
6.4 $
0.1
6.3
67.8
0.1
67.7
122
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Twelve Months Ended
September 30,
2022 (1)
2021 (1)
2023 (1)
Net increase (decrease) in net assets resulting from operations
$
(61.4) $
(4.5) $
22.8
(1) Financial information for JCP Fund V included in our financial position at November 30, 2023 and 2022 and included in
our results of operations for the years ended November 30, 2023, 2022 and 2021 is based on the periods presented.
Asset Management Investments
We have an equity method investment with a carrying amount of $15.8 million and $18.6 million at November 30, 2023 and
2022, respectively, consisting of our shares in Monashee, an investment management company, registered investment advisor
and general partner of various investment management funds, which provides 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 $20.2 million and
$17.7 million at November 30, 2023 and 2022. The following table presents the activity included in our Consolidated
Statements of Earnings related to these separately managed accounts (in millions):
Investment losses (1)
Management fees (2)
Year Ended November 30,
2023
2022
2021
$
(0.1) $
0.8
(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.
Subsequent to November 30, 2023, we have amended our arrangements with Monashee. Our ownership interests have been
converted to preferred shares, which will provide us with rights to be paid dividends. In addition, we have invested in a
$10.3 million mandatorily redeemable preferred security issued by Monashee.
At November 30, 2021, our equity method investments also consisted 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 Statements of Earnings as a result of the sale.
ApiJect
We own shares which represent a 38.0% economic interest in ApiJect at November 30, 2023 and November 30, 2022, which 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. Additionally,
we have a right to 1.125% of ApiJect’s future revenues. At both November 30, 2023 and 2022, the total fair value of our equity
investment in common shares of ApiJect was $100.1 million, which is included within Level 3 of the fair value hierarchy.
Additionally, we own 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 $30.4 million, which matures on January 31, 2024. The loan
is accounted for at cost plus accrued interest and is reported within Other assets in our Consolidated Statements of Financial
Condition. The loan has a fair value of $30.4 million and $28.9 million at November 30, 2023 and 2022, respectively, which
was classified as Level 3 of the fair value hierarchy. For the periods presented below, interest income recognized on the loan is
included in Interest revenues in our Consolidated Statements of Earnings (in millions):
123
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Interest income on term loan agreement
SPAC
Year Ended November 30,
2023
2022
2021
$
1.5 $
2.3 $
1.6
We own 73.4% of the publicly traded units of a special purpose acquisition company (“SPAC”), which represents 25.7% of the
voting shares of the SPAC. At November 30, 2023, the SPAC is considered a VIE. We have significant influence over the
SPAC but we are not considered to be the primary beneficiary as we do not have control. Our investment is accounted for at fair
value pursuant to the fair value option and is included within corporate equity securities in Financial instruments owned, at fair
value, in our Consolidated Statements of Financial Condition. The fair value of the investment was $23.8 million and
$22.6 million at November 30, 2023 and 2022, respectively, which is included within Level 1 of the fair value hierarchy.
Note 12. 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 instrument taking into
consideration the forecast of expected future economic conditions.
As of November 30, 2023, we reclassified all automobile loans to assets held for sale in our Consolidated Statements of
Financial Condition. Refer to Note 5, Assets Held for Sale for additional details.
As of November 30, 2022, we had automobile loans, including accrued interest and related fees, of $891.1 million, 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 is 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 one
year 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 not expected to be collected.
124
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
A rollforward of the allowance for credit losses related to our automobile loans for the years ended November 30, 2023, 2022
and 2021 is as follows (in thousands):
Beginning balance
Adjustment for change in accounting principle for current expected
credit losses
Provision for doubtful accounts
Charge-offs, net of recoveries
Reclassified as held for sale (1)
Ending balance
(1) Refer to Note 5, Assets Held for Sale.
Year Ended November 30,
2022
2021
2023
$
79,614 $
67,236 $
29,710
—
40,723
(41,849)
(78,488)
—
35,173
30,148
18,768
(22,795)
(11,390)
—
—
$
— $
79,614 $
67,236
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 (dollars in thousands):
Year of Origination
2022
2021
2020
2019
2018
Prior
Years
Total
Percent
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
170,220 132,528
44,095
35,393
17,635
7,647 407,518
46.3
Credit scores below 620
Total
175,690
5,602 328,495
$ 399,610 $ 277,149 $ 82,742 $ 70,992 $ 34,106 $ 14,627 $ 879,226
21,371
97,953
19,039
8,840
37.4
100.0%
The aging of automobile loans held for investment at November 30, 2022 is as follows (dollars in thousands):
Current accounts
Delinquent accounts
30 - 59 days
60 - 89 days
90 days and over
Total
Year of Origination
2022
2021
2020
2019
2018
Prior
Years
Total
Percent
$ 380,863 $ 255,412 $ 76,841 $ 66,338 $ 31,269 $ 13,291 $ 824,014
93.7%
12,720
15,550
3,718
4,156
4,307
1,090
2,309
2,031
504
3,380
2,020
1,097
39,074
734
539
569
248
181
10,448
59
5,690
4.4
1.2
0.7
$ 399,610 $ 277,149 $ 82,742 $ 70,991 $ 34,106 $ 14,628 $ 879,226
100.0%
125
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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.
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 receive, receivables and payables for 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.
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.
Investment Banking Fee Receivables. Our allowance for credit losses on our investment banking fee receivables uses 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.
The allowance for credit losses for investment banking receivables for the years ended November 30, 2023, 2022 and 2021 is as
follows (in thousands):
Beginning balance
Adjustment for change in accounting principle for current
expected credit losses
Bad debt expense
Charge-offs
Recoveries collected
Ending balance (1)
Year Ended November 30,
2022
2021
2023
$
5,914 $
4,824 $
19,788
—
6,568
(3,246)
(2,930)
6,306 $
—
4,141
(910)
(2,141)
5,914 $
(3,594)
2,287
(6,409)
(7,248)
4,824
$
(1) Substantially all of the allowance for doubtful accounts relate to mergers and acquisitions and restructuring fee receivables,
which include recoverable expense receivables.
Note 13. Goodwill and Intangible Assets
Goodwill
Goodwill attributed to our reportable business segments are as follows (in thousands):
Investment Banking and Capital Markets
Asset Management
Total goodwill
126
November 30,
2023
2022
$
$
1,532,172 $
1,552,944
315,684
1,847,856 $
183,170
1,736,114
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The following table is a summary of the changes to goodwill by reportable segment (in thousands):
Year Ended November 30,
2023
2022
Investment
Banking and
Capital
Markets
Asset
Management
Total
Investment
Banking and
Capital
Markets
Asset
Management
Total
Balance, at beginning of period
Currency translation and other adjustments
Goodwill acquired during the period (1)
Goodwill reclassified as held for sale (2)
Balance, at end of period
$ 1,552,944 $
3,228
—
(24,000)
$ 1,532,172 $
183,170 $ 1,736,114 $ 1,561,928 $
(8,984)
3,228
—
132,514
—
(24,000)
315,684 $ 1,847,856 $ 1,552,944 $
—
132,514
—
183,170 $ 1,745,098
(8,984)
—
—
183,170 $ 1,736,114
—
—
—
(1) See Note 4, Business Acquisitions for further discussion.
(2) See Note 5, Assets Held for Sale for further discussion.
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.
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, 2023.
Our annual goodwill impairment testing at August 1, 2023 did not indicate any goodwill impairment in any of our reporting
units. All of our goodwill is allocated to our Investment Banking, Equities and Fixed Income reporting units, which are part of
our Investment Banking and Capital Markets reportable business segment and our Asset Management business segment, for
which the results of our assessment indicated that each of these reporting units had a fair value in excess of their carrying
amounts based on current projections.
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 weighted average amortization period
of identifiable intangible assets at November 30, 2023 and 2022 (dollars in thousands):
Customer relationships
Trademarks and trade names
Exchange and clearing organization
membership interests and registrations
Other
Total
November 30, 2023
Assets
Acquired (1)
Impairment
Losses
Accumulated
Amortization
Net
Carrying
Amount
Weighted
Average
Remaining
Lives
(Years)
9,801 $
18,513
— $
—
(93,966) $
(39,340)
42,284
107,072
Gross Cost
$
126,449 $
127,899
7,405
14,958
276,711 $
1,390
37,026
66,730 $
$
(78)
—
(78) $
—
(13,137)
(146,443) $
8,717
38,847
196,920
127
6.3
23.5
N/A
5.0
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(1) See Note 4, Business Acquisitions for further discussion.
Customer relationships
Trademarks and trade names
Exchange and clearing organization membership interests
and registrations
Other
Total
November 30, 2022
Impairment
Losses
Accumulated
Amortization
Net
Carrying
Amount
Weighted
Average
Remaining
Lives
(Years)
Gross Cost
$
126,028 $
127,185
— $
—
(89,109) $
(35,486)
36,919
91,699
7,447
14,957
275,617 $
$
(39)
—
(39) $
—
(11,521)
(136,116) $
7,408
3,436
139,462
8.2
25.3
N/A
4.7
At August 1, 2023, we performed our annual impairment testing of intangible assets with an indefinite useful life consisting of
exchange and clearing organization membership interests and registrations. 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 $9.3 million, $10.9 million and $14.2 million for
the years ended November 30, 2023, 2022 and 2021, respectively. These expenses are included in Depreciation and
amortization in our Consolidated Statements of Earnings. As a result of reclassifying certain businesses as being held for sale in
our November 30, 2023 Consolidated Statements of Financial Condition, the amounts presented below do not include future
amortization expense for intangible assets of the businesses to be divested. See Note 5, Assets Held for Sale for further
discussion.
The estimated future amortization expense for the five succeeding fiscal years is as follows (in thousands):
Year ending November 30, 2024
Year ending November 30, 2025
Year ending November 30, 2026
Year ending November 30, 2027
Year ending November 30, 2028
$
20,815
20,291
20,253
16,951
16,709
128
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Note 14. 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,
2023
2022
2021
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
Total revenue from contracts with customers
Other sources of revenue:
Principal transactions
Revenues from strategic affiliates
Interest
Other
Total revenues
$ 2,169,366 $ 2,807,822 $ 4,365,699
896,015
14,836
538,628
182,973
102,297
41,353
6,141,801
905,665
33,867
—
26,284
44,825
53,201
3,233,208
925,494
23,525
412,605
302,135
223,323
47,954
4,742,858
1,413,283
48,707
2,868,674
(122,473)
1,617,336
57,248
956,318
172,761
$ 7,441,399 $ 7,149,263 $ 8,945,464
833,757
56,739
1,183,638
332,271
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.
129
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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 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 is 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
investment banking advisory related expenses, 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.
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 and facilitating foreign currency spot transactions. 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.
130
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - 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.
Disaggregation of Revenue
The following presents our revenues from contracts with customers disaggregated by major business activity and primary
geographic region (in thousands):
2023
Year Ended November 30,
2022
Investment
Banking and
Capital
Markets
Asset
Management
Total
Investment
Banking and
Capital
Markets
Asset
Management
Total
2021
Investment
Banking and
Capital
Markets
Asset
Management
Total
Major business activity:
Investment banking -
Advisory
Investment banking -
Underwriting
Equities (1)
Fixed income (1)
Asset management
Merchant banking
$ 1,198,915
$
—
$ 1,198,915
$ 1,778,003
$
—
$ 1,778,003
$ 1,873,560
$
—
$ 1,873,560
970,451
894,602
10,577
—
—
—
—
—
33,867
124,796
970,451
894,602
10,577
33,867
124,796
1,029,819
910,254
15,240
—
—
—
—
—
23,525
986,017
1,029,819
2,492,139
910,254
15,240
23,525
986,017
881,660
14,355
—
—
—
—
—
14,836
865,251
2,492,139
881,660
14,355
14,836
865,251
Total
$ 3,074,545
$
158,663
$ 3,233,208
$ 3,733,316
$
1,009,542
$ 4,742,858
$ 5,261,714
$
880,087
$ 6,141,801
Primary geographic
region:
Americas
Europe and the Middle
East
Asia-Pacific
Total
$ 2,349,161
$
153,286
$ 2,502,447
$ 2,910,318
$
1,005,200
$ 3,915,518
$ 4,249,641
$
876,242
$ 5,125,883
485,432
239,952
2,646
2,731
488,078
242,683
575,012
247,986
2,595
1,747
577,607
249,733
766,746
245,327
2,816
1,029
769,562
246,356
$ 3,074,545
$
158,663
$ 3,233,208
$ 3,733,316
$
1,009,542
$ 4,742,858
$ 5,261,714
$
880,087
$ 6,141,801
(1) Revenues from contracts with customers associated with the equities and fixed income businesses primarily represent
commissions and other fee revenue.
131
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Refer to Note 26, 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, 2023. 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, 2023.
During the years ended November 30, 2023, 2022 and 2021, we recognized $38.1 million, $78.9 million and $50.0 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 $31.5 million,
$28.1 million and $12.1 million of revenues primarily associated with distribution services during the years ended
November 30, 2023, 2022 and 2021, 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, 2023 and 2022 was $48.3
million and $27.0 million, respectively, which is recorded in Accrued expenses and other liabilities in our Consolidated
Statements of Financial Condition. During the years ended November 30, 2023, 2022 and 2021, we recognized revenues of
$22.7 million, $48.7 million and $10.8 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 $248.2 million and $206.6 million at November 30,
2023 and 2022, 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, 2023 and 2022, capitalized costs to fulfill a contract were $5.3 million and $3.4 million, respectively, which
are recorded in Receivables – Fees, interest and other in the Consolidated Statement of Financial Condition. For the years ended
November 30, 2023, 2022 and 2021, we recognized expenses of $1.8 million, $1.6 million and $1.7 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, 2023, 2022 and 2021.
Note 15. Compensation Plans
Equity Compensation Plan. Our Equity Compensation Plan (the “ECP”) was approved by shareholders on March 25, 2021.
The ECP replaced our 2003 Incentive Compensation Plan, as Amended and Restated (the “Incentive Plan”) and the 1999
Directors’ Stock Compensation Plan, as Amended and Restated July 25, 2013; 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, 2023, 2.7 million shares remain
available for new grants under the ECP.
Restricted stock awards are grants of our common shares that generally require service as a condition of vesting. RSUs give a
participant the right to receive shares if service or performance conditions are met and may specify 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 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, which generally
are subject to the same vesting or performance requirements applicable to the originally granted RSUs.
132
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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 are granted to certain senior executives and 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 under the 2020 Plan with a target of $16.0 million
in long-term equity in the form of RSUs with performance goals measured over the three-year period ending November 30,
2022 and a target of $6.5 million in cash. To receive targeted long-term equity, our senior executives had to achieve Jefferies’
total shareholder return (“TSR”) of 9% on a multi-year compounded basis; and to receive targeted cash, our senior executives
had to achieve 9% 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 was achieved at a level greater than 9%, our senior
executives were eligible to receive up to 75% additional equity incentive compensation if Jefferies’ TSR exceeded the 50th
percentile relative to our peer companies’ total shareholder returns. If ROTDE was greater than 9%, our senior executives were
eligible to receive up to 75% additional cash incentive compensation on an interpolated basis, up to 12% in ROTDE.
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. In March 2021, the Compensation
Committee exercised its discretion to convert the SARs to stock-settled awards and a total of 2,506,266 stock options, with an
exercise price of $23.75, were issued to our senior executives. The stock options resulting from the conversion of the SARs
include rights to “excess dividend equivalents,” which provide for each share subject to the option two times the amount of any
regular quarterly cash dividend paid in the 9.5 years after grant to the extent the per share dividend exceeds the quarterly
dividend rate in effect at the time of grant with the dividend equivalent amount converted to non-forfeitable share units at the
dividend payment date. In connection with our spin-off of Vitesse Energy, Inc. in January 2023, the options and related
dividend equivalent rights were adjusted, resulting in each senior executive holding 2,532,370 Jefferies options exercisable at
$22.69 per share and 228,933 Vitesse options exercisable at $8.97 per share, with corresponding adjustments to the excess
dividend equivalent rights with the result that Vitesse regular quarterly cash dividends relating to shares underlying the Vitesse
options are taken into consideration in the calculation. The stock options became or become exercisable 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, SARs and excess
dividend equivalent rights. At November 30, 2023 and 2022, all options were outstanding. At November 30, 2023, for each
senior executive, 1,688,247 Jefferies options and 152,622 Vitesse options were exercisable. At November 30, 2023 and 2022,
5.1 million and 5.0 million, respectively, of our common shares were designated for the senior executive nonqualified stock
options.
In December 2021, the Compensation Committee of our Board of Directors granted each of our senior executives RSUs with a
grant date fair value of $8.2 million and performance stock units (“PSUs”) with a target fair 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 a performance
goal based on fiscal 2021 through fiscal 2023 Return on Tangible Equity (“ROTE”). The target level of ROTE was 10%, with a
threshold of 7.5%, and a maximum level of 15%. Any performance below 7.5% will result in forfeiture of all PSUs; 7.5%
ROTE will result in earning 75% of target PSUs; and 15% ROTE or greater will result in earning 150% of target PSUs. ROTE
performance between 7.5% and 10% and 10% and 15% will be linearly interpolated to determine the level of earning PSUs.
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.
133
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
In December 2022, the Compensation Committee of our Board of Directors granted our senior executives RSUs with an
aggregate grant date fair value of $13.1 million and performance stock units (“PSUs”) with a target fair value of $13.1 million.
The RSUs have a three-year cliff vesting schedule. With respect to the PSUs, there is a three-year service period, along with a
performance goal based on fiscal 2022 through fiscal 2024 ROTE. The target level of ROTE was 10%, with a threshold of
7.5%, and a maximum level of 15%. Any performance below 7.5% will result in forfeiture of all PSUs; 7.5% ROTE will result
in earning 75% of target PSUs; and 15% ROTE or greater will result in earning 150% of target PSUs. ROTE performance
between 7.5% and 10% and 10% and 15% will be linearly interpolated to determine the level of earning PSUs.
In January 2023, in connection with our spin-off of all of our Vitesse Energy, Inc. shares to our shareholders, we adjusted
certain outstanding equity awards to include like awards for the acquisition of Vitesse common stock (“Vitesse Awards”), all of
which are share-based awards. Vesting terms of Vitesse Awards and exercise dates and expiration dates of Vitesse options are
the same as those terms of the related Jefferies awards. For those Vitesse Awards that remain subject to performance or service-
based vesting requirements, we continue to recognize expense based on the original grant-date fair value and any incremental
fair value resulting from modifications of awards. In fiscal 2023, we recognized $4.0 million of compensation expense for
modifications of the excess dividend equivalent rights relating to stock options in connection with the adjustments relating to
the Vitesse spin-off.
The following table details the total activity in restricted stock, inclusive across all plans, during the years ended November 30,
2023, 2022 and 2021 (in thousands, except per share amounts):
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
Grants
Forfeited
Fulfillment of vesting requirement
Balance at November 30, 2023
Restricted Stock
Weighted-
Average
Grant Date
Fair Value
1,483 $
337
(40)
(196)
1,584
1,457
—
(902)
2,139
444
—
(481)
2,102 $
22.19
30.81
24.92
23.55
23.78
29.91
—
24.03
27.85
33.16
—
24.09
29.83
134
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The following table details the activity in total RSUs, inclusive across all plans, during the years ended November 30, 2023,
2022 and 2021 (in thousands, except per share amounts):
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 service requirement (1)
Balance at November 30, 2022
Grants
Distributions of underlying shares
Forfeited
Fulfillment of vesting requirement (1)
Balance at November 30, 2023
Weighted-Average
Grant Date
Fair Value
Future
Service
Required
No Future
Service
Required
Future
Service
Required
No Future
Service
Required
21
80
—
—
(53)
48
2,299
—
—
(39)
2,308
553
—
—
(9)
2,852
18,543 $
445
(1,803)
—
8
17,193
472
(6,453)
—
1,443
12,655
732
(5,485)
—
2,685
10,587 $
14.99 $
27.10
—
—
25.03
24.07
33.75
—
—
24.67
33.70
34.47
—
—
21.82
33.89 $
20.97
30.03
26.32
—
15.52
20.64
28.79
14.65
—
25.38
24.55
29.35
23.35
—
26.50
26.00
(1) Fulfillment of vesting requirement during the years ended November 30, 2023, 2022 and 2021, includes 2,438,000 RSUs,
1,433,000 RSUs and 0 RSUs, respectively, related to the senior executive compensation plans.
During the years ended November 30, 2023, 2022 and 2021, grants include approximately 717,000, 550,000 and 445,000,
respectively, of dividend equivalents declared on RSUs; the weighted-average grant date fair values of the dividend equivalents
were approximately $31.88, $28.78 and $30.03, respectively.
135
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
In addition, the following table details the activity in RSUs with performance conditions (“PSUs”) related to the senior
executive compensation plan during the years ended November 30, 2023, 2022 and 2021 (in thousands, except per share
amounts):
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
Grants
Forfeited
Fulfillment of vesting requirement
Balance at November 30, 2023
Target
Number of
Shares
Weighted-
Average
Grant Date
Fair Value
4,189 $
74
(1,396)
—
2,867
537
—
(1,433)
1,971
1,379
—
(2,438)
912 $
24.75
29.81
25.31
—
25.43
35.44
—
25.43
28.16
30.15
—
26.49
35.64
During the years ended November 30, 2023, 2022 and 2021, grants are shown with the targeted number of shares and also
include approximately 224,000, 67,000 and 74,000, respectively, of dividend equivalents declared on RSUs; the weighted-
average grant date fair values of the dividend equivalents were approximately $34.15, $28.67 and $29.81, respectively. In
December 2023, the Compensation Committee of our Board of Directors approved a total of 191,757 RSUs relating to above
target performance earned under the PSUs granted in fiscal 2022, which remain subject to service-based vesting through
December 2024.
Employee Stock Purchase Plan. An Employee Stock Purchase Plan (the “ESPP”) has been implemented under both the prior
Incentive Plan and the 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 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 LLC (“HomeFed”) merger in 2019, each HomeFed stock option
was converted into an option to purchase two of our common shares. During the year ended November 30, 2023, all HomeFed
stock options were exercised at a price of $22.20 per common share. At November 30, 2022 and 2021, 12,000 and 96,000,
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.
136
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Compensation Expense. The components of total compensation cost associated with certain of our compensation plans are as
follows (in millions):
Components of compensation cost:
Restricted cash awards (1)
Stock options and Stock appreciation rights
Restricted stock and RSUs (2)
Profit sharing plan
Total compensation cost
Year Ended November 30,
2023
2022
2021
$
$
324.6 $
196.6 $
—
45.4
11.6
—
43.9
10.5
381.6 $
251.0 $
375.5
48.7
29.5
7.8
461.5
(1) Amounts for the year ended November 30, 2021, include $188.3 million of costs related to the accelerated amortization of
certain cash-based awards, which were amended to remove any service requirements for vesting in the awards.
(2) Total compensation cost 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, $0.5 million and $0.4 million for the years ended November 30, 2023, 2022 and 2021, respectively.
Remaining unamortized amounts related to certain compensation plans at November 30, 2023 are as follows (dollars in
millions):
Non-vested share-based awards
Restricted cash awards
Total
Remaining
Unamortized
Amounts
Weighted
Average
Vesting Period
(in Years)
$
$
110.3
654.7
765.0
3.3
3.0
In December 2023, $575.1 million of restricted cash awards related to the 2023 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
$
99.4 $
113.6 $
112.4 $
249.7 $
575.1
Year Ended November 30,
2024
2023
2025
Thereafter
Total
137
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Note 16. Benefit Plans
U.S. Pension Plans
Pursuant to the agreement 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, 2023 and we do not anticipate making a contribution to the plan for the
year ending November 30, 2024.
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
Funded status at end of year
Year Ended November 30,
2023
2022
$
172,066 $
226,728
7,981
5,805
(5,289)
(47,362)
—
(10,888)
(4,702)
(8,403)
163,870 $
172,066
147,272 $
199,215
6,094
1,000
(10,888)
—
(2,301)
(37,574)
1,000
(8,403)
(4,702)
(2,264)
141,177 $
147,272
(22,693) $
(24,794)
$
$
$
$
As of November 30, 2023 and 2022, $37.0 million and $40.5 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 $22.7 million and $24.8 million, respectively, was reflected as accrued
pension cost.
138
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The following table summarizes the components of net periodic pension cost and other amounts recognized in other
comprehensive income (loss) excluding taxes (in thousands):
Interest cost
Expected return on plan assets
Settlement losses
Actuarial losses
Net periodic pension cost
Amounts recognized in other comprehensive income (loss):
Net (gains) losses arising during the period
Settlement losses
Amortization of net loss
Total recognized in other comprehensive income (loss)
Net amount recognized in net periodic benefit cost and other
comprehensive income (loss)
Year Ended November 30,
2022
2023
2021
7,981 $
(6,411)
370
413
2,353 $
(2,670) $
—
782
(1,888) $
5,805 $
(7,311)
833
3,348
2,675 $
4,946
(8,433)
—
4,192
705
(211) $
(833)
(3,348)
(4,392) $
(8,264)
—
(4,192)
(12,456)
465 $
(1,717) $
(11,751)
$
$
$
$
$
The amounts in Accumulated other comprehensive income (loss) at November 30, 2023 and 2022 have not yet been recognized
as components of net periodic pension cost in the Consolidated Statements of Earnings.
The assumptions used are as follows:
WilTel Plan
Discount rate used to determine benefit obligation
Weighted-average assumptions used to determine net pension cost:
Discount rate
Expected long-term return on plan assets
U.S. Pension Plan
Discount rate used to determine benefit obligation
Weighted-average assumptions used to determine net pension cost:
Discount rate
Expected long-term return on plan assets
The following pension benefit payments are expected to be paid (in thousands):
Fiscal Year:
2024
2025
2026
2027
2028
Years 2029 - 2033
139
November 30,
2023
2022
5.30 %
4.90 %
4.90 %
6.00 %
2.60 %
6.00 %
5.20 %
4.80 %
4.80 %
5.00 %
2.40 %
5.00 %
$
24,303
12,035
13,166
13,641
13,024
61,816
Table of Contents
U.S. Plan Assets
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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.
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 2023.
Other
We have defined contribution pension plans, including 401(k) plans, that cover certain employees. Amounts charged to expense
related to such plans were $12.6 million, $12.7 million and $9.8 million for the years ended November 30, 2023, 2022 and
2021, respectively.
140
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Note 17. 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, 2023 and 2022 is as follows (in
thousands, except lease term and discount rate):
Premises and equipment - ROU assets (1)
$
455,468
$
455,264
November 30,
2023
2022
Weighted average:
Remaining lease term (in years)
Discount rate
8.3
3.5 %
10.0
2.9 %
(1) At November 30, 2023, we classified certain operating lease assets and liabilities as held for sale and discontinued
recording amortization on the related right-of-use assets. See Note 5, Assets Held for Sale for further discussion.
The following table presents the maturities of our operating lease liabilities, excluding certain operating leases liabilities
reclassified as held for sale, and a reconciliation to the Lease liabilities included in our Consolidated Statements of Financial
Condition at November 30, 2023 and 2022 (in thousands):
Fiscal Year
2023
2024
2025
2026
2027
2028
2029 and thereafter
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
Total amount in our Consolidated Statements of Financial Condition
$
$
November 30,
2023
2022
— $
97,744
95,509
88,535
81,714
74,965
188,529
626,996
(83,029)
543,967
683
544,650 $
76,847
78,656
78,103
74,472
71,255
67,048
161,674
608,055
(75,353)
532,702
1,006
533,708
In addition to the table above, at November 30, 2023, we entered into a lease agreement that was signed but had not yet
commenced. This operating lease will commence in 2024 with a lease term of fourteen years. Lease payments for this lease
agreement will be $11.1 million for the period from lease commencement to the end of the lease term.
The following table presents our lease costs (in thousands):
Operating lease costs (1)
Variable lease costs (2)
Less: Sublease income
Total lease cost, net
Year Ended November 30,
2022
2023
2021
$
$
81,194 $
14,506
(5,545)
90,155 $
80,959 $
12,887
(4,507)
89,339 $
79,701
11,168
(7,191)
83,678
(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.
141
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Consolidated Statements of Cash Flows supplemental information was as follows (in thousands):
Cash outflows - lease liabilities
$
81,831 $
81,082 $
Non-cash - ROU assets recorded for new and modified leases
56,968
87,977
79,437
30,246
The amortization of the ROU assets is included within Other adjustments in the Consolidated Statements of Cash Flows.
Year Ended November 30,
2022
2021
2023
Note 18. Short-Term Borrowings
Short-term borrowings at November 30, 2023 and 2022 mature in one year or less and include the following (in thousands):
Bank loans
Fixed rate callable note
Floating rate puttable notes
Total short-term borrowings (1)
November 30,
2023
2022
$
$
989,715 $
517,524
—
—
4,068
6,800
989,715 $
528,392
(1) 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, 2023, the weighted average interest rate on short-term borrowings outstanding is 6.06% per annum.
At November 30, 2023 and 2022, our borrowings under credit facilities classified within bank loans in Short-term borrowings
in our Consolidated Statements of Financial Condition were $937.1 million and $517.0 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, 2023, we were in compliance with all
covenants under these credit facilities.
142
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Note 19. 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) (dollars in thousands):
Maturity
Effective
Interest Rate
November 30,
2023
2022
Unsecured long-term debt:
5.500% Senior Notes
1.000% Euro Medium Term Notes
6.000% Callable Note due 2025
6.500% Callable Note due 2025
4.500% Callable Note due 2025
6.500% Callable Note due 2025
6.750% Callable Note due 2025
6.500% Callable Note due 2025
5.000% Callable Note due 2026
6.000% Callable Note due 2026
6.500% Callable Note due 2026
6.625% Callable Note due 2026
4.850% Senior Notes (1)
6.450% Senior Debentures
5.000% Callable Note due 2027
5.000% Callable Note due 2028
5.875% Senior Notes
7.000% Callable Note due 2028
4.150% Senior Notes
2.625% Senior Debentures (1)
2.750% Senior Debentures (1)
7.375% Callable Note due 2033
6.250% Senior Notes
6.500% Senior Notes
6.625% Senior Notes
6.830% Callable Note due 2053
Floating Rate Senior Notes
Floating Rate Senior Notes
Unsecured Credit Facility
Structured Notes (2)
Floating Euro Medium Term Notes
Total unsecured long-term debt
Secured long-term debt:
Tessellis Secured Debt
HomeFed EB-5 Program Debt
HomeFed Construction Loans
Secured Credit Facilities
Secured Bank Loan
Total long-term debt (3)
October 18, 2023
July 19, 2024
June 16, 2025
July 18, 2025
July 22, 2025
August 18, 2025
October 17, 2025
November 21, 2025
March 26, 2026
May 30, 2026
July 31, 2026
September 21, 2026
January 15, 2027
June 8, 2027
June 16, 2027
February 17, 2028
July 21, 2028
October 31, 2028
January 23, 2030
October 15, 2031
October 15, 2032
November 17, 2033
January 15, 2036
January 20, 2043
October 23, 2043
November 20, 2053
September 22, 2053
October 29, 2071
November 17, 2025
Various
June 19, 2026
— % $
1.00 %
6.22 %
6.71 %
4.84 %
6.71 %
6.97 %
6.71 %
5.52 %
6.27 %
6.72 %
6.85 %
7.55 %
5.46 %
5.22 %
5.29 %
6.01 %
7.24 %
4.26 %
4.73 %
7.08 %
7.66 %
6.03 %
6.05 %
6.97 %
6.72 %
5.59 %
5.21 %
6.31 %
— %
4.56 %
— $
544,222
5,389
24,917
6,172
25,910
42,838
11,953
8,593
14,093
49,730
17,898
703,542
361,126
24,825
9,910
990,838
28,219
992,554
901,692
382,957
19,601
484,890
405,850
247,010
14,730
15,253
61,728
350,000
1,708,443
42,417
8,497,300
393,048
519,970
—
—
6,153
—
—
—
8,554
—
—
—
703,533
363,915
24,784
9,888
—
—
991,518
911,777
392,162
—
497,681
409,472
246,954
—
—
61,715
349,578
1,583,828
—
7,474,530
75,440
242,608
48,182
735,222
100,000
—
209,060
56,965
933,531
100,000
$ 9,698,752 $ 8,774,086
(1) The carrying values of these senior notes include net gains of $21.6 million and $219.1 million during the years ended
143
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
November 30, 2023 and 2022, respectively, associated with interest rate swaps based on designation as fair value hedges.
See Note 2, Summary of Significant Accounting Policies, and Note 7, 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 Principal transactions revenues. A weighted average
coupon rate is not meaningful, as all of the structured notes are carried at fair value.
(3) Total Long-term debt has a fair value of $9.57 billion and $8.46 billion at November 30, 2023 and 2022, respectively,
which would be classified as Level 2 or Level 3 in the fair value hierarchy.
During 2023, long-term debt increased by $924.7 million to $9.70 billion at November 30, 2023, as presented in our
Consolidated Statements of Financial Condition. This increase is primarily due to the issuance of our 5.875% Senior Notes due
2028 with a principal amount of $1.0 billion. The proceeds from the issuances of our other debt, net of repayments, were
$290.2 million. Additionally, at November 30, 2023, long-term debt includes $75.4 million related to Tessellis due to the step-
acquisition of OpNet. This was partially offset by the maturity of our 5.500% Senior Note with a principal amount of $393.0
million and the reclassification of long-term debt to liabilities held for sale related to Foursight.
At November 30, 2023 and 2022, our borrowings under several credit facilities classified within Long-term debt in our
Consolidated Statements of Financial Condition were $735.2 million and $933.5 million, respectively. Interest on these credit
facilities is based on an adjusted 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, 2023, we
were in compliance with all covenants under these credit facilities.
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, 2023 and 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 SOFR plus 1.25%. The agreement contains
certain covenants that, among other things, restricts lien or encumbrance upon any of the pledged collateral. At November 30,
2023, 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, 2023, 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.
Substantially all of HomeFed’s EB-5 Program debt matures in 2024 through 2028.
At November 30, 2023, HomeFed has a construction loan with an aggregate committed amount of $62.0 million. The proceeds
are being used for construction at certain of its real estate projects. The outstanding principal amount of the loan bears interest
based on the SOFR plus 2.75%, subject to adjustment on the first of each calendar month. At November 30, 2023, the interest
rate on the loan was 8.07%. The loan matures in May 2024 and is collateralized by the property underlying the related project
with a guarantee by HomeFed. At November 30, 2023 and 2022, $48.2 million and $57.0 million, respectively, was outstanding
under the construction loan agreement.
144
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Note 20. Preferred Shares
Mandatorily Redeemable Convertible Preferred Shares
Our $125.0 million of callable mandatorily redeemable cumulative convertible preferred shares (“Preferred Shares”) were
converted during the first quarter of 2023 at a price of $1,000 per preferred share, plus accrued interest, into 4,654,362 common
shares for $125.0 million, or $26.82 per common share.
Non-Voting Convertible Preferred Shares
On April 27, 2023, we established Series B Non-Voting Convertible Preferred Shares with a par value of $1.00 per share
(“Series B Preferred Stock”) and designated 70,000 shares as Series B Preferred Stock. The Series B Preferred Stock has a
liquidation preference of $17,500 per share and rank senior to our voting common stock upon dissolution, liquidation or
winding up of Jefferies Financial Group Inc. Each share of Series B Preferred Stock is automatically convertible into 500 shares
of non-voting common stock, subject to certain anti-dilution adjustments, three years after issuance. The Series B Preferred
Stock participates in cash dividends and distributions alongside our voting common stock on an as-converted basis.
Additionally, on April 27, 2023, we entered into an Exchange Agreement with Sumitomo Mitsui Banking Corporation
(“SMBC”), which entitles SMBC to exchange shares of our voting common stock for shares of the Series B Preferred Stock at a
rate of 500 shares of voting common stock for one share of Series B Preferred Stock. The Exchange Agreement is limited to
55,125 shares of Preferred Stock and SMBC will pay $1.50 per share of voting common stock so exchanged. During the year
ended November 30, 2023, SMBC exchanged 21.0 million shares of voting common stock for 42,000 shares of Series B
Preferred Stock and we received cash of $31.5 million from SMBC in connection with the exchange. As a result of the
exchange, our equity attributed to our voting common stock decreased by $21.0 million, our equity attributed to the Series B
Preferred Stock increased by $42,000 and additional paid-in capital increased by $52.5 million.
At November 30, 2023, SMBC owns 9.1% of our common stock on an as-converted basis and 8.3% on a fully-diluted, as-
converted, basis. During the year ended November 30, 2023, we paid $12.6 million, or $0.60 per share on an as-converted
basis, of cash dividends on the Series B Preferred Stock.
On June 28, 2023, shareholders approved an Amended and Restated Certificate of Incorporation, which authorized the issuance
of non-voting common stock with a par value of $1.00 per share (the “Non-Voting Common Shares”). The Non-Voting
Common Shares are entitled to share equally, on a per share basis, with the voting common stock, in dividends and
distributions. Upon the effectiveness of the Amended and Restated Certificate of Incorporation on June 30, 2023, the number of
authorized shares of common stock remains at 600,000,000 shares, comprised of 565,000,000 shares of voting common stock
and 35,000,000 shares of Non-Voting Common Shares.
145
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Note 21. 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
common share are as follows (in thousands, except per share amounts):
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)
Preferred shares and mandatorily redeemable convertible preferred
share dividends
Net earnings attributable to Jefferies Financial Group Inc.
common shareholders for diluted earnings per share
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
Preferred shares and mandatorily redeemable convertible preferred
shares (2)
Denominator for diluted earnings per common share (3)
Earnings per common share:
Basic
Diluted
Year Ended November 30,
2022
2023
2021
$
275,672 $
777,168 $
1,667,403
(14,729)
(3,015)
(9,961)
260,943
774,153
1,657,442
—
—
29
8,281
207
6,949
$
260,943 $
782,463 $
1,664,598
222,325
234,258
246,991
(1,920)
12,204
(1,330)
14,450
(1,567)
18,171
232,609
247,378
263,595
2,085
1,926
—
236,620
1,518
2,234
4,441
255,571
1,203
2,262
4,441
271,501
$
$
1.12 $
1.10 $
3.13 $
3.06 $
6.29
6.13
(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 certain
preferred stock, restricted stock and RSUs for which requisite service has not yet been rendered and amounted to weighted
average shares of 8.9 million 1.0 million and 1.6 million for the years ended November 30, 2023, 2022 and 2021,
respectively. Dividends declared on participating securities were $2.1 million, $1.1 million and $1.4 million during the
years ended November 30, 2023, 2022 and 2021, 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.
(2) The two-class method was more dilutive for each period presented.
(3) Certain securities have been excluded as they would be antidilutive. However, these securities could potentially dilute
earnings per share in the future. Antidilutive shares at November 30, 2023, were 9.5% of the weighted average common
shares outstanding for the year ended November 30, 2023.
146
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Note 22. 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 Earnings. A
summary of accumulated other comprehensive income (loss), net of taxes is as follows (in thousands):
2023
November 30,
2022
2021
Net unrealized gains (losses) on available-for-sale securities
$
(4,595) $
(5,892) $
269
Net currency translation adjustments and other
Net unrealized losses related to instrument-specific credit risk
Net minimum pension liability
(162,541)
(220,071)
(181,946)
(104,526)
(46,463)
(48,930)
(166,499)
(153,672)
(52,241)
Total accumulated other comprehensive loss, net of tax
$
(395,545) $
(379,419) $
(372,143)
Amounts reclassified out of accumulated other comprehensive income (loss) to net earnings are as follows (in thousands):
Year Ended November 30,
2022
2023
2021
Net unrealized gains (losses) on instrument-specific credit risk at fair value (1)
Foreign currency translation adjustments (2)
Amortization of defined benefit pension plan actuarial losses (3)
Total reclassifications for the period, net of tax
$
$
(167) $
17,506
(631)
16,708 $
(129) $
—
(2,483)
(2,612) $
1,861
—
(3,138)
(1,277)
(1) The amounts include income tax benefit (expense) of $0.1 million, $0.0 million, and $(0.6) million during the years ended
November 30, 2023, 2022 and 2021, respectively, which were reclassified to Principal transactions revenues in our
Consolidated Statements of Earnings.
(2) Relates to the acquisition and consolidation of OpNet in the fourth quarter of 2023. See Note 4, Business Acquisitions and
Note 5, Assets Held for Sale for further information. The amount includes income tax benefit (expense) of $(5.4) million
for the year ended November 30, 2023, which was reclassified to Other income in our Consolidated Statements of
Earnings.
(3) The amounts include income tax benefits of approximately $0.2 million, $0.8 million, and $1.1 million during the years
ended November 30, 2023, 2022 and 2021, respectively, which were reclassified to Compensation and benefits expenses in
our Consolidated Statements of Earnings. See Note 16, Benefit Plans for further information.
Note 23. Income Taxes
The provision for income tax expense consists of the following components (in thousands):
Current:
U.S. Federal
U.S. state and local
Foreign
Total current
Deferred:
U.S. Federal
U.S. state and local
Foreign
Total deferred
Total income tax expense
Year Ended November 30,
2022
2023
2021
$
$
14,600 $
14,896
51,923
81,419
10,380
3,112
(3,030)
10,462
91,881 $
198,507 $
67,236
78,505
344,248
(61,303)
(17,010)
7,917
(70,396)
273,852 $
322,551
70,370
86,918
479,839
72,753
19,502
4,635
96,890
576,729
147
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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)
Earnings before income tax expense
Year Ended November 30,
2022
2023
177,595 $
176,674
354,269 $
801,047 $
254,515
1,055,562 $
$
$
2021
1,970,625
283,480
2,254,105
(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):
Computed expected federal income taxes
Increase (decrease) in income taxes resulting from:
State and local income taxes, net of Federal income
tax benefit
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
2023
Year Ended November 30,
2022
2021
Amount
$ 74,396
Percent Amount
21.0 % $ 221,668
Percent Amount
21.0 % $ 473,362
Percent
21.0 %
17,071
4.8
47,364
4.5
96,884
4.3
7,306
11,664
(4,504)
(16,136)
—
(25,561)
18,988
8,657
$ 91,881
2.1
3.3
(1.3)
(4.6)
—
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)
—
—
(16,915)
(7.2)
13,902
5.4
2.4
14,698
25.9 % $ 273,852
(27,374)
(1.7)
8,651
1.3
1.4
(156)
25.9 % $ 576,729
(1.2)
0.4
—
25.6 %
The following table presents a reconciliation of gross unrecognized tax benefits (in thousands):
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
Balance at end of period
Year Ended November 30,
2022
2023
2021
$
349,955 $
339,036 $
314,347
1,555
10,134
(28,622)
(699)
30,690
5,902
(25,673)
—
$
332,323 $
349,955 $
50,079
3,490
(24,180)
(4,700)
339,036
The total amount of unrecognized benefits that, if recognized, would favorably affect the effective tax rate was $263.0 million
and $276.5 million (net of Federal benefit) at November 30, 2023 and 2022, 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 $25.5 million, $18.6 million and $10.8 million for the years ended
November 30, 2023, 2022 and 2021, respectively. At November 30, 2023, 2022 and 2021, we had interest accrued of
approximately $142.1 million, $116.5 million and $97.9 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, 2023, 2022 and 2021. We recognize interest and penalties, if any, related to unrecognized tax benefits in income
tax expense in our Consolidated Statements of Earnings.
148
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - 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):
Deferred tax assets:
Compensation and benefits
Operating lease liabilities
Long-term debt
Tax credits
Accrued expenses and other
Investments in associated companies
Net operating loss carryover
Sub-total
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Operating lease right-of-use assets
Amortization of intangibles
Other
Total deferred tax liabilities
Net deferred tax asset, included in Other assets
November 30,
2023
2022
$
$
189,928 $
128,805
75,850
24,000
151,360
93,952
251,244
915,139
(228,074)
687,065
110,071
62,333
56,318
228,722
458,343 $
250,096
133,250
47,535
—
156,388
11,931
10,176
609,376
(6,266)
603,110
118,567
62,670
34,011
215,248
387,862
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 $458.3 million at November 30,
2023 is more likely than not based on expectations of future taxable income in the jurisdictions in which we operate.
During the fourth quarter of 2023, we acquired Stratos and OpNet. Refer to Note 4, Business Acquisitions for further
discussion. In relation to these acquisitions, we recognized deferred tax assets in the aggregate of $222.8 million primarily
related to net operating losses, offset by a valuation allowance of $222.3 million.
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
$25.3 million.
The table below summarizes the earliest tax years that remain subject to examination in the major tax jurisdictions in which we
operate:
Jurisdiction
United States
New York State
New York City
United Kingdom
Germany
Hong Kong
India
Tax Year
2020
2001
2006
2021
2018
2017
2010
149
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Note 24. Commitments, Contingencies and Guarantees
Commitments
The following table summarizes our commitments at November 30, 2023 (in millions):
Expected Maturity Date (Fiscal Years)
2026 and
2027
2028 and
2029
2025
2024
2030 and
Later
Maximum
Payout
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
$
75.0 $
1.4 $
38.6 $
0.3 $
121.3 $
250.0
2,205.6
26.2
7,477.1
4,732.2
2.5
—
—
—
—
77.2
—
—
—
—
80.2
1,083.5
201.3
—
—
—
—
—
—
—
—
—
—
—
—
236.6
329.7
2,205.6
26.2
7,477.1
4,732.2
1,365.0
$ 14,846.3 $ 1,087.4 $
317.1 $
0.3 $
121.3 $ 16,372.4
(1) Equity, loan and other unfunded commitments are presented by contractual maturity date. The amounts, however, are
available on demand.
(2) Loan purchase commitments consist of unfunded commitments to acquire secondary market loans. For the population of
loans to be acquired under the loan purchase commitments, at November 30, 2023, Jefferies had also entered into back-to-
back committed sale contracts aggregating to $2.0 billion.
(3) At November 30, 2023, all of the securities within forward starting securities purchased under agreements to resell and all
of the forward starting securities sold under agreements to repurchase settled within three business days.
Equity Commitments. Includes commitments to invest in our joint venture, Jefferies Finance, asset management funds and in
Jefferies Capital Partners, LLC, a manager of private equity funds, which consists of a team led by our President and a director.
At November 30, 2023, our outstanding commitments relating to Jefferies Capital Partners, LLC and its private equity funds
were $10.4 million.
Additionally, at November 30, 2023, we had other outstanding equity commitments to invest up to $171.5 million with strategic
affiliates and $39.3 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 and are contingent on certain
representations, warranties and contractual conditions applicable to the borrower. At November 30, 2023, we had outstanding
loan commitments of $77.2 million to clients and $2.5 million to a strategic affiliate.
Loan commitments outstanding at November 30, 2023 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. Other unfunded commitments also include written put options to certain
bondholders of an equity method investee.
150
Table of Contents
Guarantees
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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, 2023 (in millions):
Guarantee Type:
Derivative contracts—non-credit related
Total derivative contracts
Expected Maturity Date (Fiscal Years)
2024
2025
2026 and
2027
2028 and
2029
2030 and
Later
Notional/
Maximum
Payout
$ 11,654.4 $ 17,138.5 $ 9,337.6 $
$ 11,654.4 $ 17,138.5 $ 9,337.6 $
— $
— $
— $ 38,130.5
— $ 38,130.5
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, 2023, the fair value of derivative contracts meeting the definition of a guarantee is
approximately $423.1 million.
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, 2023, the aggregate amount of infrastructure
improvement bonds outstanding was $43.9 million.
Standby Letters of Credit. At November 30, 2023, we provided guarantees to certain counterparties in the form of standby
letters of credit in the amount of $56.8 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.
151
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Note 25. Regulatory Requirements
Net Capital
Jefferies LLC is a broker-dealer registered with the SEC and a member firm of the Financial Industry Regulatory Authority
(“FINRA”) and 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 Regulation 1.17 of the Commodity Futures Trading Commission (“CFTC”) under the Commodity Exchange Act
(“CEA”), 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 SEA Rule 15c3-1 or
CFTC Regulation 1.17.
Jefferies Financial Services, Inc. (“JFSI”) is a registered swap dealer subject to the CFTC’s regulatory capital requirements and
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, 2023, JFSI is in compliance with these SEC and CFTC requirements. Additionally, JFSI is subject to the net
capital requirements of the National Futures Association (“NFA”), as a member of the NFA. JFSI is required to maintain
minimum net capital, as defined under SEA Rule 18a-1 of not less than the greater of 2% of the risk margin amount, as defined,
or $20 million. Under CFTC Regulation 23.101, JFSI is required to maintain minimum net capital of not less than the greater of
2% of the uncleared swap margin, as defined in CFTC Regulation 23.100, or $20 million.
At November 30, 2023, Jefferies LLC and JFSI’s net capital and excess net capital were as follows (in thousands):
Jefferies LLC
JFSI - SEC
JFSI - CFTC
Net Capital
$
1,088,817 $
348,457
348,457
Excess Net
Capital
980,587
328,457
324,553
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, 2023 and 2022, $4.67 billion and $5.77 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,
2023 and 2022, $4.43 billion and $4.87 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.
Customer Protection and Segregation Requirement
As a registered broker dealer that clears and carries customer accounts, Jefferies LLC is subject to the customer protection
provisions under SEC Rule 15c3-3 and is required to compute a reserve formula requirement for customer accounts and deposit
cash or qualified securities into a special reserve bank account for the exclusive benefit of customers. At November 30, 2023,
Jefferies LLC had $640.9 million in cash and qualified U.S. Government securities on deposit in special reserve bank accounts
for the exclusive benefit of customers.
As a registered broker dealer that clears and carries proprietary accounts of brokers (commonly referred to as “PAB”), Jefferies
is also required to compute a reserve requirement for PABs pursuant to SEC Rule 15c3-3. At November 30, 2023, Jefferies had
$53.1 million in cash and qualified U.S. Government securities in special reserve bank accounts for the exclusive benefit of
PABs.
The qualified securities meeting the 15c3-3 customer and PAB requirements are included in Cash and securities segregated and
Securities purchased under agreements to resell in our Consolidated Statements of Financial Condition.
152
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Note 26. 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 (losses) before income taxes.
Net revenues and non-interest expenses not directly associated with specific reportable business segments are allocated
based on the most relevant measures applicable, including each reportable 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.
Net revenues presented for our Investment Banking and Capital Markets reportable segment 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. During 2023, we refined our allocated net
interest methodology to better reflect net interest expense across our business units based on use of capital. Historical periods
have been recast to conform with the revised methodology.
153
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Our net revenues, non-interest expenses and earnings (losses) before income taxes by reportable business segment are
summarized below (in millions):
Investment Banking and Capital Markets:
Net revenues
Non-interest expenses
Earnings before income taxes
Asset Management:
Net revenues
Non-interest expenses
Earnings (losses) 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 (losses) before income taxes (1)
Total:
Net revenues
Non-interest expenses
Earnings before income taxes
Year Ended November 30,
2022
2023
2021
$
4,504.4 $
4,741.3 $
3,995.1
509.3
188.3
351.0
(162.7)
4,692.7
4,346.1
346.6
7.7
—
7.7
3,950.8
790.5
1,243.5
967.0
276.5
5,984.8
4,917.8
1,067.0
(6.0)
5.4
(11.4)
4,700.4
4,346.1
5,978.8
4,923.2
$
354.3 $
1,055.6 $
6,929.3
4,730.6
2,198.7
1,084.8
1,025.7
59.1
8,014.1
5,756.3
2,257.8
(0.3)
3.4
(3.7)
8,013.8
5,759.7
2,254.1
(1) Management does not consider certain foreign currency transaction gains or losses, 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.
The following table summarizes our total assets by reportable business segment (in millions):
Investment Banking and Capital Markets
Asset Management
Total assets
November 30,
2023
2022
$
$
51,776.9 $
6,128.3
57,905.2 $
45,541.0
5,516.7
51,057.7
154
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
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,
2022
2023
2021
$
$
3,625.6 $
4,815.4 $
775.9
298.9
925.4
238.0
4,700.4 $
5,978.8 $
6,748.8
1,045.7
219.3
8,013.8
Americas (1)
Europe and the Middle East (2)
Asia-Pacific
Net revenues
(1) Primarily relates to U.S. results.
(2) Primarily relates to U.K. results.
Note 27. 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, 2023 and 2022, we had $31.0 million and $17.7 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 has investments in hedge funds managed by us of approximately $3.0 million at November 30,
2023.
Investment Banking. For the year ended November 30, 2023, we recorded fees of $5.0 million, which are included in
Investment banking revenues in our Consolidated Statements of Earnings, related to services provided to a merchant banking
investment held in our Asset Management business.
Vitesse Energy. On January 13, 2023, our consolidated subsidiary, Vitesse Energy, issued shares measured at a total
consideration of $30.6 million in exchange for acquiring all of the outstanding capital interests of Vitesse Oil, which was
controlled by JCP Fund V. We provided investment banking services to Vitesse Energy and recognized revenue of $3.0 million
for the year ended November 30, 2023, included within Investment banking revenues in our Consolidated Statements of
Earnings. See Note 1, Organization and Basis of Presentation for additional details related to the Vitesse Energy distribution.
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.
155
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
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, 2023. Based on that evaluation, our Chief Executive Officer and
Chief Financial Officer concluded that our disclosure controls and procedures as of November 30, 2023 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, 2023 that has
materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
Rule 10b5-1 Trading Plans
During the quarter ended November 30, 2023, no directors or executive officers entered into, modified or terminated, contracts,
instructions or written plans for the sale or purchase of the Company’s securities that were intended to satisfy the affirmative
defense conditions of Rule 10b5-1.
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 2024 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.
Item 11. Executive Compensation
Omitted pursuant to General Instruction I(2)(c) to Form 10-K.
156
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
Information with respect to this item will be contained in the Proxy Statement for the 2024 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 2024 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 2024 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 2024 Annual Meeting of Shareholders, which is incorporated herein by
reference.
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
157
Table of Contents
Exhibit
No.
JEFFERIES FINANCIAL GROUP INC.
Description
2.1
3.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
10.1
10.2
10.3
10.4
10.5
10.6
10.7
Separation and Distribution Agreement, dated as of January 13, 2023, by and among Jefferies Financial Group Inc.,
Vitesse Energy Finance LLC, Vitesse Energy, Inc., and the other signatories listed therein, is incorporated herein by
reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed on January 17, 2023. *
Amended and Restated Certificate of Incorporation of Jefferies Financial Group Inc., is incorporated by reference
to Exhibit 3.1 to the Company’s Current Report on 8-K filed on June 30, 2023.*
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.*
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.
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 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, is incorporated herein by reference to Appendix II to the 2013 Proxy 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.*
158
Table of Contents
Exhibit
No.
JEFFERIES FINANCIAL GROUP INC.
Description
10.8
10.9
10.12
10.14
10.13
10.10
10.11
Form of Restricted Stock Units Agreement (Time-Based) under the Company’s Equity Compensation Plan, is
incorporated herein by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed on April
8, 2022.* +
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.* +
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, is incorporated
herein by reference to Exhibit 10.17 to the Company’s Annual Report on Form 10-K filed on January 27, 2023.* +
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.* +
Vitesse Energy, Inc. Transitional Equity Award Adjustment Plan is incorporated herein by reference to Exhibit
10.2 of the Company’s Current Report on Form 8-K filed on January 17, 2023.* +
Exchange Agreement, dated as of April 27, 2023, by and between Jefferies Financial Group Inc., a New York
corporation, and Sumitomo Mitsui Banking Corporation, a joint stock company incorporated in Japan, is
incorporated by reference to Exhibit 10.1 to the Company’s Current Report on 8-K filed on April 27, 2023.*
10.15 Memorandum of Understanding in Relation to Strategic Alliance, dated as of April 27, 2023, by and among
Jefferies Financial Group Inc., a New York corporation, Jefferies Finance LLC, a Delaware limited liability
company, Sumitomo Mitsui Financial Group, Inc., a financial holding company incorporated in Japan, Sumitomo
Mitsui Banking Corporation, a joint stock company incorporated in Japan, SMBC Nikko Securities Inc., a joint
stock company incorporated in Japan, and SMBC Nikko Securities America, Inc., a Delaware corporation, is
incorporated by reference to Exhibit 10.2 to the Company’s Current Report on 8-K filed on April 27, 2023.*
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. **
Jefferies Financial Group Inc. Incentive-Based Compensation Recovery Policy.
Interactive data files pursuant to Rule 405 of Regulation S-T, formatted in Inline Extensible Business Reporting
language (iXBRL): (i) the Consolidated Statements of Financial Condition as of November 30, 2023 and 2022; (ii)
the Consolidated Statements of Earnings for the years ended November 30, 2023, 2022 and 2021; (iii) the
Consolidated Statements of Comprehensive Income for the years ended November 30, 2023, 2022 and 2021; (iv)
the Consolidated Statements of Changes in Equity for the years ended November 30, 2023, 2022 and 2021; (v) the
Consolidated Statements of Cash Flows for the years ended November 30, 2023, 2022 and 2021; and (vi) the Notes
to Consolidated Financial Statements.
Cover page interactive data file pursuant to Rule 406 of Regulation S-T, formatted in iXBRL (included in exhibit
101)
21
23.1
31.1
31.2
32.1
32.2
97.1
101
104
+
*
**
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.
159
Table of Contents
SIGNATURES
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.
JEFFERIES FINANCIAL GROUP INC.
/s/ MATT LARSON
Matt Larson
Executive Vice President and Chief Financial Officer
Dated: January 26, 2024
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.
/s/
/s/
/s/
/s/
/s/
/s/
/s/
/s/
Name
JOSEPH S. STEINBERG
Joseph S. Steinberg
Title
Chairman of the Board of Directors
Date
January 26, 2024
RICHARD B. HANDLER
Richard B. Handler
Chief Executive Officer and Director
(Principal Executive Officer)
MATT LARSON
Matt Larson
Executive Vice President and Chief
Financial Officer
(Principal Financial Officer)
January 26, 2024
January 26, 2024
BRIAN P. FRIEDMAN
Brian P. Friedman
President and Director
January 26, 2024
MARK L. CAGNO
Mark L. Cagno
Vice President and Controller
(Principal Accounting Officer)
LINDA L. ADAMANY
Linda L. Adamany
ROBERT D. BEYER
Robert D. Beyer
MATRICE ELLIS KIRK
Matrice Ellis Kirk
Director
Director
Director
January 26, 2024
January 26, 2024
January 26, 2024
January 26, 2024
160
Table of Contents
/s/
/s/
/s/
/s/
/s/
MARYANNE GILMARTIN
MaryAnne Gilmartin
THOMAS W. JONES
Thomas W. Jones
JACOB M. KATZ
Jacob M. Katz
Director
Director
Director
January 26, 2024
January 26, 2024
January 26, 2024
MICHAEL T. O’KANE
Director
January 26, 2024
Michael T. O’Kane
MELISSA V. WEILER
Melissa V. Weiler
Director
January 26, 2024
161
Table of Contents
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
62
63
66
67
68
69
70
73
Financial Statement Schedules
Schedule I - Condensed Financial Information of Jefferies Financial Group Inc. (Parent Company Only) at
November 30, 2023 and 2022 and for each of the three fiscal years ended November 30, 2023, 2022 and 2021 ..... S-2 - S-5
S-1
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
(PARENT COMPANY ONLY)
CONDENSED STATEMENTS OF FINANCIAL CONDITION
(In thousands, except share and per share amounts)
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
MEZZANINE EQUITY
Mandatorily redeemable convertible preferred shares
EQUITY
Preferred shares, par value of $1 per share, authorized 70,000 shares; 42,000 shares
issued and outstanding; liquidation preference of $17,500 per share
Common shares, par value $1 per share, authorized 565,000,000 shares; 210,626,642
and 226,129,626 shares issued and outstanding, after deducting 110,491,428 and
90,334,082 shares held in treasury
Additional paid-in capital
Accumulated other comprehensive loss
Retained earnings
Total Jefferies Financial Group Inc. shareholders’ equity
Total liabilities and equity
November 30,
2023
2022
$
2,455,437 $
2,411,270
68,076
80,567
630,705
7,248,785
4,393,104
4,277,788
1,025,140
20,179,602 $
— $
690
1,253,151
718,634
8,497,300
10,469,775
—
42
57,876
97,870
637,302
7,567,225
3,486,572
3,867,931
821,634
18,947,680
10,868
4,873
430,846
668,717
7,474,530
8,589,834
125,000
—
210,627
2,044,859
(395,545)
7,849,844
9,709,827
20,179,602 $
226,130
1,967,781
(379,419)
8,418,354
10,232,846
18,947,680
$
$
$
See accompanying notes to condensed financial statements.
S-2
Table of Contents
JEFFERIES FINANCIAL GROUP INC.
(PARENT COMPANY ONLY)
CONDENSED STATEMENTS OF EARNINGS AND COMPREHENSIVE INCOME
(In thousands)
Year Ended November 30,
2022
2021
2023
Revenues:
Principal transactions
Interest
Other
Total revenues
Interest expense
Net revenues
Non-interest expenses:
Total non-interest expenses
Losses before income taxes
Income tax benefit
Net earnings (losses) before undistributed earnings of subsidiaries
Undistributed earnings of subsidiaries
Net earnings
Preferred stock dividends
Net earnings attributable to Jefferies Financial Group Inc. common
shareholders
Other comprehensive income (loss), net of tax:
Currency translation adjustments and other
Change in fair value related to instrument-specific credit risk
Minimum pension liability adjustments
Unrealized gain (losses) on available-for-sale securities
Total other comprehensive loss, net of tax
$
(95,642) $
580,485
(3,654)
481,189
446,786
34,403
34,462
(59)
(42,322)
42,263
235,425
277,688
14,616
(61,407) $
317,020
(66,539)
189,074
317,916
(128,842)
98,373
213,910
101,203
413,486
318,138
95,348
69,962
(198,804)
(78,338)
(120,466)
905,915
147,761
(52,413)
(11,806)
(40,607)
1,714,959
785,449
1,674,352
8,281
6,949
263,072
777,168
1,667,403
57,530
(53,572)
(77,420)
2,467
1,297
(16,126)
49,146
3,311
(6,161)
(7,276)
(9,781)
(82,521)
9,320
(244)
(83,226)
Comprehensive income attributable to Jefferies Financial Group Inc.
common shareholders
$
246,946 $
769,892 $ 1,584,177
See accompanying notes to condensed financial statements.
S-3
Table of Contents
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 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
Distribution (to) from subsidiaries, net
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
Proceeds from conversion of common to preferred shares
Dividends paid
Net cash used in financing activities
Net increase (decrease) in cash and cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of period
Cash, cash equivalents and restricted cash at end of period
Supplemental disclosures of cash flow information:
Cash paid (received) during the period for:
Interest
Income taxes, net
Non-cash investing activities:
Investments contributed to subsidiary
Dividends received from subsidiaries
S-4
Year Ended November 30,
2022
2021
2023
$
277,688 $
785,449 $
1,674,352
53,728
45,360
1,040
(235,425)
6,808
(438,649)
17,303
(67,626)
(4,183)
(189,608)
49,916
(483,648)
(211)
—
—
887,895
—
887,684
(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
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)
—
50,000
(50,000)
456,220
(611)
455,609
—
(10,868)
1,718,992
(813,182)
(828,114)
—
(169,402)
31,500
(278,595)
(349,669)
54,367
2,469,146
2,523,513 $
4,068
—
400,059
(202,172)
30,428
2,752
(859,593)
—
(280,104)
(904,562)
1,819,942
649,204
2,469,146 $
—
(5,090)
1,681,058
(1,256,495)
(341,327)
2,107
(269,400)
—
(222,798)
(411,945)
(655,197)
1,304,401
649,204
Year Ended November 30,
2023
2022
2021
176,981 $
95,634
484,349 $
124,516
381,117
625,072
— $
—
— $
—
5,451
1,970
$
$
$
Table of Contents
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
Total cash, cash equivalents and restricted cash
November 30,
2023
2022
2,455,437 $
2,411,270
68,076
57,876
2,523,513 $
2,469,146
$
$
See accompanying notes to condensed financial statements.
S-5
Table of Contents
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, 2023. 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”).
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, 2023.
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 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 $875.0 million at November 30, 2023. For further information, refer to Note 18, Short-Term Borrowings and Note
19, 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, 2023.
S-6
Our
Leadership
Directors
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
Officers
Richard B. Handler
Chief Executive Officer
Brian P. Friedman
President
Joseph S. Steinberg
Chairman
Matthew S. Larson
Executive Vice President and Chief Financial Officer
Robert D. Beyer 2, 5
Michael J. Sharp
Chairman of Chaparal Investments LLC
Executive Vice President and General Counsel
Matrice Ellis Kirk 3, 4, 5
CEO of Ellis Kirk Group
Mark L. Cagno
Vice President and Controller
MaryAnne Gilmartin 2, 3, 4, 5
John Stacconi
Founder and CEO of MAG Partners LP
Vice President and Global Treasurer
Thomas W. Jones 1, 3, 4, 5
Founder and Senior Partner of TWJ Capital LLC
Jacob M. Katz 1, 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
1 Audit Committee
2 Compensation Committee
Melissa V. Weiler 1, 2, 5
3 ESG, Diversity, Equity and Inclusion Committee
4 Nominating and Corporate Governance Committee
Retired Managing Director of Crescent Capital Group
5 Risk 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
Equiniti Trust Company, LLC
48 Wall Street, Floor 23
New York, NY 10005
800.937.5449
www.astfinancial.com
helpAST@equiniti.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)