Jefferies Financial Group Inc

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 driving momentum in our full-service

investment banking business, bringing value to clients and

executing in our capital markets sales and trading businesses

and growing our Leucadia Asset Management alternative asset

management platform. We are always client focused first and

committed to integration and collaboration across our

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 a range of 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, and research and strategy.

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 alternative investment

management services to investors globally. Through our asset

management efforts, we often seed or provide additional

strategic capital in the strategies offered by affiliated asset

managers in addition to investing for our own account. Our

Asset Management business also holds investments in public

securities and private companies, along with investments in

several consolidated subsidiaries whose operations consist of,

among other businesses, real estate development, online

foreign exchange trading and telecommunications. These

investments and holdings include the remainder of our legacy

merchant banking portfolio as well as other investments.

Our Businesses

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 public companies,

private companies, and their sponsors and owners, institutional

investors and government entities. Our services are enhanced by

our relentless client focus, our differentiated insights and a flat

and nimble operating structure.

Investment Banking

We provide our clients around the world with a full range of

financial advisory, equity underwriting and debt underwriting

services. 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 Institutions; Financial Sponsors; Healthcare;

Industrials; Municipal Finance; Real Estate, Gaming and Lodging;

and Technology, Media and Telecom. Our product groups include

advisory (which includes mergers and acquisitions, sponsor

coverage, private capital and restructuring and recapitalization

expertise), equity underwriting and debt underwriting. Our teams

are 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, Seoul, Calgary and Toronto. We have continued

to invest in our investment banking business, significantly

expanding our professional talent base again since 2021 and

increasing our presence globally.

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 public and private corporations on mergers, sales,

acquisitions, divestitures, leveraged buyouts, cross-border

transactions, joint ventures, spin-offs and other corporate

restructurings. 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 to

help our clients enhance their financial position by obtaining the

best available capital and by executing complex restructuring

transactions. 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 initial public offerings, follow-on offerings,

rights-offerings, at the market offerings, block trades, private

placements 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 help clients raise capital, carry out

refinancings, issue bonds, and access alternative and structured

finance solutions that optimize terms and minimize risk. These

offerings include both public and private debt, such as

investment grade debt, high yield bonds, leveraged loans,

municipal debt, emerging market debt, global structured notes,

preferred stock and mortgage-backed and other asset-backed

securities.

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 Asset Management. In

connection with its Leveraged Finance business, loans are

originated primarily through our investment banking efforts and

Jefferies Finance typically syndicates to third-party investors

substantially all of its arranged volume. The Asset Management

business of Jefferies Finance, referred to as Jefferies Credit

Partners, is a multi-strategy credit platform that manages

proprietary and third-party capital invested across commingled

funds, funds-of-one, separately managed accounts, business

development companies, collateralized loan obligations and

levered balance sheet funds. Broadly syndicated loan

investments are sourced through transactions arranged by

Jefferies Finance and third-party arrangers and managed through

its subsidiary, Apex Credit Partners LLC. Direct lending

investments are primarily sourced through Jefferies. Jefferies

Finance and its subsidiaries that are involved in investment

management are registered investment advisers with the SEC.

Berkadia Commercial Mortgage Holding LLC is our commercial

real estate finance and investment sales joint venture with

Berkshire Hathaway, Inc. Berkadia originates commercial and

multifamily real estate loans that are sold to U.S. government

agencies or other investors with Berkadia retaining the mortgage

servicing rights. 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 is also a servicer of commercial real estate loans in the

U.S. performing primary, master and special servicing functions

for U.S. government agency programs and financial services

companies. In addition, Berkadia provides brokerage services,

asset review, market research, financial analysis and due

diligence support for multifamily real estate projects.

Strategic Alliance with SMBC Group

In July 2021, we entered into a strategic alliance with Sumitomo

Mitsui Financial Group, Inc. (“SMFG”), 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 agreed with SMBC 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. Under our

alliance, we, 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. Additionally, as of the third

quarter of 2024, the CEO of SMFG serves on our Board of

Directors. At November 30, 2024, SMBC owns 15.8% of our

common stock on an as-converted basis and 14.5% on a fully-

diluted, as-converted, basis.

Equities

Equities Research, Capital Markets

We provide our clients leading advisory, differentiated distribution

and solution-based execution capabilities through equities

research and sales and trading across global equities markets.

These services are delivered with key capabilities in cash

equities, electronic trading, equity derivatives, convertibles,

corporate access and prime services. 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 local expertise and innovative electronic

trading solutions, including customizable algorithms. We bring a

full-service coverage model and customized solutions in equity

derivatives and financing solutions and our convertibles platform

is a market leading franchise.

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

includes 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. 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.

Wealth Management

We provide tailored wealth management services designed to

meet the needs of high net worth individuals, their families and

their businesses, private equity and venture funds and small

institutions.

Fixed Income

Jefferies’ facilitates client activity by making markets in a wide

range of fixed income securities, loans and derivative

instruments to a large and diversified group of clients including

financial institutions and corporates. We offer clients real-time

actionable insights and differentiated high and low touch

execution as well as a range of financing solutions tailored to our

clients’ needs.

Our global capabilities across sales, trading and capital markets

cover credit products including loans, high yield and distressed

debt securities, investment grade securities, municipal securities,

structured finance transactions and trade and litigation claims.

Our emerging markets sales and trading team actively

participates in sovereign and corporate fixed income markets in

Latin America, Eastern Europe, the Middle East, Africa and Asia.

Our global structured solutions business provides customized

products in interest rates and foreign exchange to investors as

well as providing interest rate and foreign currency hedging

solutions to corporates. Our securitized markets group trades,

structures and provides warehousing solutions for collateralized

loan obligations (CLOs) and asset-backed securities covering

prime and non-conforming residential mortgage-backed

securities, U.S. agency residential mortgage-backed securities

and consumer as well as other non-traditional collateral.

Our interest rate product capabilities cover government bonds,

other government-backed securities and cleared interest rate

swaps. Jefferies is designated as a Primary Dealer for U.S.

government securities and is 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 and provide ideas and analysis to

clients across our breadth of fixed income products.

Alternative 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

stable long-term 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.

Other Investments

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; Tessellis S.p.A.

(“Tessellis”), a telecommunications company publicly listed on

the Italian stock exchange; HomeFed LLC (“HomeFed”), (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, 2024, we had 7,822 employees globally across all

of our consolidated subsidiaries within our Investment Banking

and Capital Markets and Asset Management reportable

segments. Our workforce is distributed across our regions of the

Americas with 49.3%, Europe and the Middle East with 38.1%, and

Asia-Pacific with 12.6%. We employ 5,759 within our Investment

Banking advisory and underwriting businesses, Fixed Income and

Equities capital markets businesses, and alternative asset

management business. In addition,2,063 individuals are

employees of our Stratos, Tessellis, HomeFed and M Science

During 2024, 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. We also expanded our global footprint by

hiring professionals into new locations, including Seoul and

Calgary.

Talent and Recruiting

In order to compete effectively and continue to provide best-in-

class service to our clients, we must attract and retain highly

talented professionals. Our core workforce is predominately

composed of employees in roles within investment banking,

sales, trading, research and other revenue producing and support

personnel for those businesses. During 2024, we hired 1,221 full-

time employees, with 784 in the Americas,276 in Europe and the

Middle East and 161 in Asia-Pacific. Of the hires,845 were made

laterally while 376 were hired directly from our campus recruiting

efforts. While our hiring of talent was largely in Investment

Banking, there has also been meaningful additional investment in

Equities, Fixed Income, Research, Alternative Asset Management

and our support areas. 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 2024, we welcomed 345 summer interns globally

from approximately 140 different colleges, universities and

business schools. We also hire off-cycle interns throughout the

year in Europe and the Middle East and Asia-Pacific. Our Global

Recruiting Policy, rolled out in 2024, requires a diverse slate of

candidates for all roles. Interviewing guides, training and other

resources are provided to hiring managers to support inclusive

hiring.

We have several recruitment programs aimed at diversifying the

pipeline of our campus and experienced hires. Through our

Jefferies Black & Latino Network (“J-NOBLE”) Fellowship

Program, we provide mentorship, internships and ongoing

development to students from diverse backgrounds and

experiences who aspire to pursue investment banking careers.

Since the program launched in 2019, 50 fellows have participated

in the program. Our MBA Fellowship Program, launched in 2023,

supports summer associates based on their outstanding

achievements and financial need. The MBA fellows in Investment

Banking are paired with a mentor at the Managing Director level

and provided developmental support. Our Equity Research Career

Switch Program is aimed at recruiting diverse individuals who are

interested in changing careers into equity research.

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 enhancing skillsets,

professional development and management best practices. Our

programs comprise both internal leaders and best-in-class

external experts facilitating our trainings. We also offer

mentoring initiatives, including our firmwide Cross-Divisional

Mentoring Program, Career Advisory Program, New Hire Buddy

Program, and Managing Director Mentoring. Additional

development programs include our two Women in Leadership

Programs, which provide learning and networking opportunities

to position our female leaders for success. Our Thrive as a

Leader leadership development program, sponsored by J-NOBLE,

Jefferies Ethnic Minority Society (JEMS), and JASIA (Jefferies

Asian Heritage) is aimed at providing professional development

and career advancement training to diverse participants at the

Vice President and Senior Vice President levels. To supplement

our in-person learning model, we also offer on-demand training to

all of our employees via a digital learning platform.

Wellness

In addition to training and development programs, we continue to

be focused on the mental and physical well-being of our

employees. We host global wellness webinars led by mental

health experts, provide confidential 1:1 wellness and nutritional

counseling, host monthly group fitness classes 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 on managing stress and well-being,

supporting the mental health of friends, family and colleagues,

emotional regulation and physical fitness initiatives. In November

2024, we hosted our inaugural ‘wellness week’ throughout Asia-

Pacific comprised of mental and physical health initiatives.

Diversity, Equity, and Inclusion

The foundation of our culture is our approach to employee

engagement, diversity, equity, and inclusion (“DEI”), 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 eight

global Employee Resource Groups that support 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. Our DEI function has grown since our launch

in 2019 to include six full-time employees located in New York,

London and Hong Kong.

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 DEI strategy focuses on fostering inclusive

leadership, building diverse and inclusive teams, developing our

leaders, fostering community and belonging and client and

community engagement. Inclusive Leadership training is

extended to all employees and all new hires are required to

participate in the training. We are focused on improving the

collection and transparency of diversity metrics and the

information flow to senior leadership and utilize an annual

employee engagement survey, which enables employees to

provide feedback on an anonymous basis. Our 2024 participation

rate was 79%globally. Our annual Self-ID campaign also aims 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. In partnership with the ESG/

DEI Committee, we participated in a rigorous study to track

progress against our peers in representation data, initiatives, and

programs. Jefferies’ data representation is generally in line with

our peers.

We encourage you to review our Sustainability Report (located on

our website) for more detailed information regarding our human

capital programs and initiatives. Nothing on our website,

including the Sustainability 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, refer to “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). We also provide all our employees with benefits

to support inclusive fertility health and family-forming benefits.

We have continued to broaden our inclusive benefits offering by

adding menopause support as well. This year, we expanded our

primary caregiver leave time in the United States and provided

coaching to individuals going out and returning from primary

caregiver leave globally. 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

2024, we donated$3.8 million to over 200 organizations across a

number of 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 and to deliver a competitive breadth of high-quality

service offerings; our vast global footprint; the depth and breadth

of our capabilities in Investment Banking and Capital Markets;

and our ability 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, investment

management and derivative 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 and to regulation by other SROs

within the U.S. and the securities exchanges and execution

facilities of which we are a member. The SEC, FINRA, CFTC, NFA,

SROs 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 (“DSRO”)

under the U.S. Commodity Exchange Act for Jefferies LLC’s non-

clearing FCM activities is the NFA. As it pertains to Jefferies

Financial Services Inc. (“JFSI”), the designated examining

authority for its activities as an SEC registered SBS dealer and

OTCDD is the SEC, while the DSRO for its activities as a swap

dealer registered with the CFTC 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.

Broker-dealers are subject to SEC, FINRA, MSRB, SRO 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, JFSI, and

its affiliated entities, 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).

The investment advisers responsible for the Jefferies’ 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 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, Jefferies’

affiliated registered investment advisers with private investment

fund clients are required to report certain information about their

investment funds to the SEC.

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, as applicable to Jefferies LLC). 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. As a non-clearing FCM, Jefferies LLC is also

required to maintain minimum adjusted net capital of $1.0 million

under CFTC rules.

JFSI is dually registered with the SEC as an SBS dealer and

OTCDD and registered with the CFTC as a swap dealer. JFSI is

required to comply with the SEC and CFTC capital rules for SBS

dealers and swap dealers, respectively. Further, as an OTCDD,

JFSI is subject to compliance with the SEC’s net capital

requirements.

As an SEC registered OTCDD and security-based swap dealer,

JFSI is subject to rules regarding capital, segregation and margin

requirements. The CFTC and NFA have also adopted similar

swap dealer capital rules. Under the rules there are minimum

capital requirements for, among others, an entity that acts as a

dealer in SBS or swaps, of $100 million in tentative net capital or

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 in net capital.

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.

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 refer to Item 1A. Risk Factors -

“Legislation and regulation may significantly affect our business.”

Jefferies Financial Group Inc. is not subject to any regulatory

capital rules.

Refer to Net Capital within Item 7. Management’s Discussion and

Analysis and Note 22, 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. Jefferies International Limited,

which is the principal operating subsidiary of Jefferies in the U.K.,

maintains regulatory capital aligned with the two key regulatory

pillars. Pillar 1 is its own funds requirement which represents the

highest of the permanent minimum capital requirement, fixed

overheads requirement and k-factor requirements set out in the

Investment Firms Prudential Regime (“IFPR”) under the Financial

Conduct Authority’s (“FCA”) MIFIDPRU sourcebook, while Pillar 2

pertains to the International Capital Adequacy and Risk

Assessment (“ICARA”) process whereby Jefferies International

Limited ensures that it maintains capital in excess of minimum

regulatory capital requirements under both normal and stressed

conditions. 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), the U.K.

Financial Conduct Authority, the German Federal Financial

Supervisory Authority (“BaFin”), the Canadian Investment

Regulatory Organization, the Swiss Financial Market Supervisory

Authority (“FINMA”), the Dubai Financial Services Authority, the

Hong Kong Securities and Futures Commission, the Japan

Financial Services Agency, the Monetary Authority of Singapore,

the Australian Securities and Investments Commission and the

Securities and Exchange Board of India (“SEBI”). 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.