Jefferies Financial Group Inc. (JEF) Business

Item 1. Business

Introduction

Jefferies Financial Group Inc. (“Jefferies,” “we,” “us” or “our”) is a

U.S.-headquartered global 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 investment banking

business, bringing value to clients and executing in our capital

markets sales and trading businesses and growing our credit and

alternative asset management platforms. We are always client

focused first and committed to integration and collaboration

across our businesses.

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

•Culture and Community 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 directly

owned managers and through our affiliated asset managers.

We often seed or provide additional strategic capital in the

strategies offered by our 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, deep

product and sector expertise and a flat and nimble operating

structure leading to exceptional execution.

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, debt advisory

and restructuring and private capital advisory services), equity

underwriting and debt underwriting. Our teams are based in

major cities across the United States and other locations in the

Americas, in London and additional cities across Europe and the

Middle East, and in key markets in Asia and in Australia. We have

continually invested in our investment banking business over

several decades, consistently expanding our professional talent

base 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, leveraged buyouts, joint ventures, activist defense,

spin-offs, and divestitures. 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 implementing complex restructuring

transactions. As part of our private capital advisory business, we

offer a range of liquidity and fundraising solutions to sponsors

and limited partners, and advise on both primary and secondary

capital raising. We also advise large institutional investors on the

sale of existing 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 issues, block trades, accelerated book builds, equity-linked

products and corporate derivative solutions.

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

debt.

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 composed

of 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 through us to third-party

investors substantially all of its arranged volume. The Asset

Management business, 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 and collateralized loan obligations. 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 generally retaining the

mortgage servicing rights. Berkadia also provides advisory

services in connection with sales of multifamily assets. 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.

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. This relationship has

continued to expand, providing us with enhanced client

capabilities and supporting continued growth in our global

investment banking and capital markets business. Under our

alliance, we jointly pursue certain investment banking, capital

markets and financing opportunities and have expanded our

alliance beyond the United States to Europe and the Middle East,

Canada, Asia and Australia.

In September 2025, we announced that we have entered into a

Memorandum of Understanding with SMBC Group to establish a

joint venture in Japan to conduct together the principal aspects

of our wholesale Japanese equity research, sales and trading and

equity capital markets business, which we anticipate will begin in

January 2027. Additionally, our strategic alliance is expanding

joint coverage of larger sponsors and implement joint origination,

underwriting and execution for syndicated loans in Europe and

the Middle East.

At November 30, 2025, SMBC owns 15.7% of our common stock

on an as-converted basis and 14.3% on a fully-diluted, as-

converted, basis and the CEO of SMFG serves on our Board of

Directors. In September 2025, we agreed to allow SMBC Group to

increase its economic ownership to 20% (on as as-converted and

fully diluted basis), while maintaining less than 5% voting interest.

Equities

Equities Research, Capital Markets

We provide our clients leading advisory, distribution and solution-

based execution capabilities through equities research and sales

and trading across the global equities markets. These services

are delivered with key capabilities in cash equities, electronic

trading, equity derivatives, convertibles, prime services 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

local expertise and innovative electronic trading solutions,

including customizable algorithms. We offer 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. Through our outsourced trading offering we provide a

global trading solution to all types of asset managers to enhance

their trading infrastructure and execution needs. Our platform is

fully self-clearing and provides global access to markets across

the world. We earn an interest spread equal to the difference

between the amount financed for clients and the amount we pay

for funds. We also 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

We provide clients unique fixed income insights and leading

global execution capabilities, working collaboratively across

markets to provide best-in-class trade execution. 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 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

and structured finance transactions. 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 structures, trades 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 loans as well as other

non-traditional collateral.

We provide execution, distribution, structuring and expertise in

the government and agency bond markets. 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

We manage and provide services to a diverse group of alternative

asset management platforms across a spectrum of investment

strategies and asset classes.

We offer institutional clients an innovative range of investment

strategies through directly owned and affiliated managers and

offer investors opportunities to invest alongside us. Our products

are offered to pension funds, insurance companies, sovereign

wealth funds, endowments and other institutional investors

globally. The investment products 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.

Other Investments

Our legacy merchant banking portfolio includes Stratos Group

International, LLC (“Stratos”), 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 and public 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, 2025, we had 7,787 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 50%, Europe and the Middle East with 36%, and

Asia-Pacific with 14%. We employ 5,990 within our Investment

Banking advisory and underwriting businesses, Fixed Income and

Equity Capital Markets businesses, and Alternative Asset

Management business. In addition, 1,797 individuals are

employees of our Stratos, Tessellis, HomeFed and M Science

subsidiaries.

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

supporting roles for those businesses. We believe that 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 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

professionals. 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. 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.

Culture and Community

The foundation of our culture is our approach to building

community and fostering engagement, which is summed up in

our Corporate Social Responsibility Principle: Respect People. We

believe that innovation and thought leadership thrive when

individuals feel connected, valued and empowered. 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

(ERGs) that support a collaborative workplace. Our ERG 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 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 strategy focuses on fostering inclusive leadership,

building inclusive teams, developing our leaders, fostering

community and belonging and client and community

engagement.

Our Board has a Culture and Community Committee, which,

among other things, oversees the sustainability matters arising

from our business and includes oversight over the Company’s

efforts to build upon our culture. The Culture and Community

Committee demonstrates our and the Board’s ongoing

commitment to fostering a culture of engagement and of

supporting communities in which we operate.

We encourage you to review our Culture and Community Report

(located on our website) for more detailed information regarding

our human capital programs and initiatives. Nothing on our

website, including the Culture and Community 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

childcare assistance). We also provide all our employees with

benefits to support inclusive fertility health and family-forming

benefits, including coaching for individuals going out and

returning from primary caregivers leave globally. We have

continued to broaden our inclusive benefits offering by adding

menopause support as well. 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

2025, we donated approximately $19.0 million to 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”) is the

federal agency responsible for the administration of laws relating

to commodity interests. In addition, we are subject to regulation

by the Financial Industry Regulatory Authority, Inc. (“FINRA”) and

the National Futures Association (“NFA”) and our municipal

securities activities are subject to regulation by the Municipal

Securities Rulemaking Board (“MSRB”). In addition to federal

regulation, we are subject to state securities regulations in each

state and U.S. territory in which we conduct securities or

investment advisory activities and to regulation by the securities

exchanges and execution facilities of which we are a member.

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 for Jefferies LLC’s activities as a broker-dealer is FINRA,

and the designated self-regulatory organization (“DSRO”) 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 and the DSRO for its

activities as a swap dealer registered with the CFTC is the NFA.

SEC, FINRA, MSRB, SRO and state securities regulations 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. 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 and 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 our operations and profitability. 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. The SEC’s

Uniform Net Capital Rule 15c3-1 (the “Net Capital Rule”) 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

that could require the use of significant amounts of capital or

limit its ability to engage in certain financing transaction.

Compliance 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, FINRA could impose higher minimum net

capital requirements than required by the SEC and could restrict

Jefferies LLC from expanding business or 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.

As a registered broker dealer that clears and carries customer

accounts and proprietary accounts of brokers or dealers

(commonly referred to as “PAB”), Jefferies LLC is subject to the

customer and PAB reserve provisions under SEC Rule 15c3-3 and

is required to compute a separate reserve formula requirements

for customer and PAB accounts and deposit cash or qualified

securities into separate special reserve bank account for the

exclusive benefit of customers and PAB.

Jefferies LLC is also subject to the Securities Investor Protection

Act and is required by federal law to be a member of the

Securities Investors Protection Corporation (“SIPC”). The SIPC

oversees the liquidation of broker-dealers during liquidation or

financial distress. The SIPC fund provides protection for cash

and securities held in client accounts up to $500,000 per client,

with a limitation of $250,000 on claims for cash balances.

JFSI as an SBS dealer, and OTCDD and swap dealer registered

with the CFTC 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 an entity

that acts as a dealer in SBS or swaps, of $100 million in tentative

net capital and the greater of $20 million or 2% of a risk margin

amount (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.

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 21, 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 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 under the Financial Conduct Authority’s

(“FCA”) MIFIDPRU sourcebook, while Pillar 2 pertains to the

International Capital Adequacy and Risk Assessment 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, the

Canadian Investment Regulatory Organization, the Swiss

Financial Market Supervisory Authority, 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.

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.