The U.S. Securities and Exchange Commission opened a formal investigation into Jefferies Financial Group Inc. (JEF) on November 27, 2025, after learning that the firm’s asset‑management arm had significant exposure to the bankrupt auto‑parts maker First Brands Group. The probe focuses on whether Jefferies provided adequate disclosure to investors about the Point Bonita Capital fund’s holdings in First Brands’ receivables and term loans, and whether the firm’s internal controls and conflict‑of‑interest policies were sufficient.
Jefferies’ exposure to First Brands is concentrated through its Leucadia Asset Management division’s Point Bonita fund, which held roughly $715 million in First Brands receivables, and through Apex Credit Partners, a Jefferies subsidiary that held about $48 million in First Brands term loans. The firm has stated that its direct exposure is approximately $161 million, with a more direct investment in receivables of $43 million. First Brands filed for Chapter 11 bankruptcy in September 2025 after a wave of creditor claims and allegations of double‑pledging of receivables, prompting a Department of Justice inquiry.
The market reacted sharply to the disclosure of Jefferies’ exposure. The stock fell about 8 % on October 8, 2025, from $59.10 to $54.44, and continued a losing streak, dropping 23.7 % over ten sessions by October 13. Investors cited concerns about the potential magnitude of losses, the adequacy of Jefferies’ risk‑management practices, and the broader implications of opacity in private‑credit markets.
In an October 12 letter, CEO Rich Handler and President Brian Friedman downplayed the exposure, stating that Jefferies’ exposure to First Brands was approximately $45 million—significantly smaller than the $715 million initially disclosed. They emphasized that any losses would be “readily absorbed” and would not threaten the company’s financial condition or business momentum, and asserted that Jefferies had not earned undisclosed fees and was unaware of any fraudulent activity at First Brands.
The SEC’s investigation could lead to enforcement actions, fines, or mandatory disclosures that may impact Jefferies’ earnings, capital structure, and market perception. Investors should monitor the SEC’s findings and any subsequent statements from Jefferies for updates on the investigation’s scope and potential outcomes. The probe underscores the risks associated with opaque private‑credit exposures and the importance of robust disclosure and risk‑management frameworks for financial institutions.
Additional context shows that First Brands’ collapse has affected other institutions, including UBS, which reported over $500 million in exposure, and has triggered a DOJ inquiry into its accounting practices. The broader fallout highlights systemic risks in the private‑credit market and the potential for contagion among firms with similar exposure profiles.
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