Risk Factors - JEF

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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).

November 2024 Form 10-K		6

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. 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.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.

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

7		Jefferies Financial Group Inc.

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.

Item 1A. Risk Factors

Factors Affecting Our Business

The following factors describe some of the assumptions, risks,

uncertainties and other factors that could adversely affect our

business or that could necessitate unforeseen changes to the

ways we operate our businesses or could otherwise result in

changes that differ materially from our expectations. In addition

to the specific factors mentioned in this report, we may also be

affected by other factors that affect businesses generally, such

as global or regional changes in economic, business or political

conditions, acts of war, terrorism, pandemics, climate change,

and natural disasters.

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.

Refer to Management’s Discussion and Analysis of Financial

Condition and Results of Operations-Risk Management within

Part II, Item 7. of this Annual Report on Form 10-K for additional

discussion.

A credit-rating agency downgrade could significantly impact our

business.

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.

November 2024 Form 10-K		8

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 and swap

dealer subsidiary, are subject to regulations that limit or restrict

dividend payments or reduce the availability of the flow of funds

from those subsidiaries to us. In addition, our broker-dealer

subsidiaries and swap dealer subsidiary are subject to

restrictions on their ability to lend or transact with affiliates and

are required to maintain minimum regulatory capital

requirements. These regulations may hinder our ability to access

funds that we may need to make payments to fulfill obligations.

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

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 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.

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

9		Jefferies Financial Group Inc.

securities, may materially and adversely affect our revenues from

asset management.

Similarly, our other investments 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 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, the level and

volatility of interest rates, the 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 occur due to a 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 an 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, underwriting or placement

fees, are directly related to the number and size of the

transactions in which we participate and could therefore be

adversely affected by unfavorable financial, economic or

political conditions. In particular, the increasing trend toward

sovereign protectionism and de-globalization has resulted or

could result in decreases in free trade, erosion of traditional

international coalitions, the imposition of sanctions and tariffs,

governmental closures and no-confidence votes, domestic and

international strife, and general market upheaval in response to

such results, all of which could negatively impact our business;

•Adverse changes in the securities markets could lead to a

reduction in revenues from asset management fees and losses

on our own capital invested in managed funds. Even in the

absence of a market downturn, below-market investment

performance by our funds and portfolio managers could

reduce asset management revenues and assets under

management and result in reputational damage that might

make it more difficult to attract new investors;

•Adverse changes in the financial markets could lead to

regulatory restrictions that may limit or halt certain of our

business activities;

•Limitations on the availability of credit can affect our ability to

borrow on a secured or unsecured basis, which may adversely

affect our liquidity and results of operations. Global market and

economic conditions have been particularly disrupted and

volatile in the last several years and may be in the future. Our

cost and availability of funding could be affected by illiquid

credit markets and wider credit spreads;

•New or increased taxes on compensation payments such as

bonuses may adversely affect our profits;

•Should one of our clients or competitors fail, our business

prospects and revenue could be negatively impacted due to

negative market sentiment causing clients to cease doing

business with us and our lenders to cease loaning us money,

which could adversely affect our business, funding and

liquidity;

•Unfavorable economic conditions could have an adverse effect

on the demand for new loans and the servicing of loans

originated by third-parties, which would have an adverse

impact on the operations and profitability of some of our

financial services businesses.

Operational Risks

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, the

amount of Level 3 assets, counterparty exposure, leverage, cash

capital and performance analysis. Refer to 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

November 2024 Form 10-K		10

professionals, portfolio managers and other revenue producing

or specialized personnel, in addition to qualified, successful

personnel in functional, non-revenue producing roles.

Competitive pressures we experience with respect to employees

could have an adverse effect on our business, results of

operations, financial condition and liquidity.

Turnover in the financial services industry is high. The cost of

retaining skilled professionals in the financial services industry

has escalated considerably. Financial industry employers are

increasingly offering guaranteed contracts, upfront payments and

increased compensation. These can be important factors in a

current employee’s decision to leave us as well as in a

prospective employee’s decision to join us. As competition for

skilled professionals in the industry remains intense, we may

have to devote significant resources to attracting and retaining

qualified personnel.

If we were to lose the services of certain of our professionals, we

may not be able to retain valuable relationships and some of our

clients could choose to use the services of a competitor instead

of our services. If we are unable to retain our professionals or

recruit additional professionals, our reputation, business, results

of operations and financial condition will be adversely affected.

Further, new business initiatives and efforts to expand existing

businesses frequently require that we incur compensation and

benefits expense before generating additional revenues.

Moreover, companies in our industry whose employees accept

positions with competitors often claim that those competitors

have engaged in unfair hiring practices. We may be subject to

such claims in the future as we seek to hire qualified personnel

who have worked for our competitors. Some of these claims may

result in material litigation. We could incur substantial costs in

defending against these claims, regardless of their merits. Such

claims could also discourage potential employees who work for

our competitors from joining us.

We face increasing competition in the financial services industry.

We operate in an intensely competitive with other 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 on both a global and regional basis. There is also

growing pressure to provide services at lower fees to appeal to

clients, which may impact our ability to effectively compete.

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

11		Jefferies Financial Group Inc.

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 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.

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.

Employee misconduct or fraud 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 fraud or other

misconduct that adversely affects our business. For example, we

are subject to a number of obligations and standards arising

from our asset management business and our responsibility over

the assets managed by this business. In addition, our financial

advisors may act in a fiduciary capacity, providing financial

planning, investment advice, and discretionary asset

management. Misconduct or fraud by employees, advisors, or

other third-party service providers could cause significant losses.

In addition, 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. Employee misconduct or fraud could include,

among other things, binding us to unauthorized transactions that

present unacceptable risks, engaging in other unauthorized

November 2024 Form 10-K		12

activities or concealing unsuccessful investments. The violation

of these obligations and standards by any of our employees

would adversely affect our clients and us. It is not always

possible to deter employee misconduct, and the precautions we

take to detect and prevent this activity may not be effective

against certain misconduct, including conduct which is difficult

to detect. The occurrence of significant employee misconduct

could have a material adverse financial effect or cause us

significant reputational harm and/or legal and regulatory liability,

which in turn could seriously harm our business and our

prospects.

We may not be able to insure certain risks economically.

We cannot be certain that we will be able to insure all risks that

we desire to insure economically or that all of our insurers or

reinsurers will be financially viable if we make a claim. If an

uninsured loss or a loss in excess of insured limits should occur,

or if we are required to pay a deductible for an insured loss,

results of operations could be adversely affected.

Future acquisitions and dispositions of our businesses and

investments are possible, changing the components of our assets

and liabilities, and if unsuccessful or unfavorable, could reduce

the value of our securities.

Any future acquisitions or dispositions may result in significant

changes in the composition of our assets and liabilities, as well

as our business mix and prospects. Consequently, our financial

condition, results of operations and the trading price of our

securities may be affected by factors different from those

affecting our financial condition, results of operations and trading

price at the present time.

Our investment in Jefferies Finance may not prove to be

successful and may adversely affect our results of operations or

financial condition.

Many factors, most of which are outside of our control, can affect

Jefferies Finance’s business, including adverse investment

banking and capital market conditions leading to a decline of

syndicate loans, inability of borrowers to repay commitments,

adverse changes to a borrower’s credit worthiness, and other

factors that directly and indirectly effect the results of operations,

and consequently may adversely affect our results of operations

or financial condition.

Our investment in Berkadia may not prove to be successful and

may adversely affect our results of operations or financial

condition.

Many factors, most of which are outside of our control, can affect

Berkadia’s business, including loan losses in excess of reserves,

a change in the relationships with U.S. Government-Sponsored

Enterprises or federal agencies, a significant loss of customers,

and other factors that directly and indirectly effect the results of

operations, including the sales and profitability of Berkadia, and

consequently may adversely affect our results of operations or

financial condition.

If Berkadia suffered significant losses and was unable to repay its

commercial paper borrowings, we would be exposed to loss

pursuant to a reimbursement obligation to Berkshire Hathaway.

Berkadia obtains funds generated by commercial paper sales of

an affiliate of Berkadia. All of the proceeds from the commercial

paper sales are used by Berkadia to fund new mortgage loans,

servicer advances, investments and other working capital

requirements. Repayment of the commercial paper is supported

by a $1.5 billion surety policy issued by a Berkshire Hathaway

insurance subsidiary and a Berkshire Hathaway corporate

guaranty, and we have agreed to reimburse Berkshire Hathaway

for one-half of any losses incurred thereunder. If Berkadia 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) have been required in 2024 with respect to EMIR

OTC derivative transaction reporting, and affect our European

entities.

The Markets in Financial Instruments Regulation and a revision of

the Market in Financial Instruments Directive in 2018 (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.

New prudential regimes for investment firms have been

implemented in both the EU and the UK for MiFID authorized

investment firms. The Investment Firms Regulation (IFR) and the

Investment Firms Directive (IFD), applicable in the EU, and the

MIFIDPRU regime, applicable in the UK, while applying a more

appropriate capital treatment for investments firms such as the

UK entity, Jefferies International Limited, and, its EU subsidiary,

Jefferies GmbH, 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.

13		Jefferies Financial Group Inc.

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 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 under

circumstances, 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.

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). 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 are in effect in the Americas, Europe and the

Middle East and Asia-Pacific 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 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 dealer’s 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

November 2024 Form 10-K		14

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 1C.Item 1A. Cybersecurity

Cybersecurity Risk Management and Strategy

Our Chief Information Security Officer (“CISO”) and the Global

Information Security team (“GIS”) oversee our cybersecurity

program and exercise overall responsibility for the strategic

vision, design, development and implementation of, and

adherence to, the program’s protocols. The comprehensive

program includes policies and procedures designed to protect

our systems, operations and the data entrusted to it from

anticipated threats or hazards. The program applies seven layers

of controls: governance, identification, protection, detection,

response, recovery and third-party vendor management. The

CISO reviews the cybersecurity framework annually as well as on

an event-driven basis, as necessary, and reviews the scope of

cybersecurity measures periodically, including to accommodate

changes in business practices that may implicate security-related

issues.

Protective measures, where appropriate, include, but are not

limited to, physical and digital access controls, software security

and patch management, identity verification, mobile device

management, data loss prevention solutions, employee

cybersecurity awareness communications and best practices

training programs, security baselines and tools to detect and

report anomalous activity, service provider risk assessments,

network monitoring, hardware and software, and data erasure

and media disposal. Measures, policies and standards are

aligned with industry-leading frameworks, such as those

promulgated by the International Organization for

Standardization and the National Institute of Standards and

Technology (“NIST”).

We test our cybersecurity defenses regularly through automated

vulnerability scanning to identify and remediate critical

vulnerabilities. In addition, an independent vendor conducts

annual penetration tests to validate our external security posture.

For certain businesses, we also conduct cyber incident tabletop

exercises involving hypothetical cybersecurity incidents to test

our cyber incident response processes. Tabletop exercises are

conducted by the Information Technology Risk team in

collaboration with outside service providers, as appropriate, and

members of senior management and Legal and Compliance.

Learnings from these tabletop exercises and any events that we

experience are reviewed, discussed, and incorporated into our

cybersecurity risk management processes, as appropriate.

In addition to our internal exercises to test aspects of our

cybersecurity program, we annually engage an independent third

party to assess information system risks and the maturity of our

cyber security program. The independent third party assesses the

cybersecurity program against the Cyber Risk Institute Cyber

Profile, a financial sector-focused framework based on the NIST

Cybersecurity Framework, the results of which are reported to the

Board of Directors and inform our program.

We have a comprehensive cybersecurity incident response and

communication plan (the “IRP”), managed by the Security

Operations Group, which is designed to inform appropriate risk

management and business managers of non-routine suspected

or confirmed information security or cybersecurity events based

on the expected risk an event presents. A team composed of

individuals from several internal technical and managerial

functions may be formed to investigate and remediate such an

event and determine the extent of external advisor support

required, including from external counsel, forensic investigators

and law enforcement agencies. The IRP is reviewed at least

annually.

Cybersecurity is assessed by Information Technology Risk and

approved by the Chief Information Officer (“CIO”) as a component

of our annual, enterprise-wide Risk Control Self Assessment

(“RCSA”) managed by the Operational Risk Group. The RCSA

process is independently verified by the Internal Audit

Department. Additionally, our cybersecurity risk management

process includes reviewing risks discerned from time to time

from both internal events and from external events, alerts and

reports received from a broad variety of sources. Reports from

external sources are also reviewed to formulate risk mitigation

and remediation strategies. The CISO periodically discusses and

reviews cybersecurity risks and related mitigants with the CIO,

the Head of Information Technology Risk and General Counsel

and incorporates relevant cybersecurity risk updates and metrics.

We conduct periodic risk assessments and adjust and enhance

our cybersecurity program in response to the evolving

cybersecurity landscape and to align with regulatory and industry

standards.

We also employ a process designed to periodically assess the

cybersecurity risks associated with the engagement of third-party

vendors and service providers. This assessment is conducted on

the basis of, among other factors, the types of products or

services provided and the extent and type of data accessed or

processed by the third party.

Cybersecurity Governance

Our Board’s Risk and Liquidity Oversight Committee oversees

Jefferies’ enterprise risk management. Oversight includes

annually reviewing and approving the risk management

framework and overarching risk appetite statements, which

includes reviewing technology, cybersecurity and privacy risk and

15		Jefferies Financial Group Inc.

reviewing the steps management has taken to monitor and

control such exposures. The CISO keeps the Board informed

about our security posture and cybersecurity maturity program

on a regular basis, providing updates about the current threat

landscape and related risks, cybersecurity events, significant

incidents and new initiatives.

Our cybersecurity program is periodically assessed by the

Internal Audit Department. The results of these audits are

reported to the Audit Committee. Any resulting findings and

associated actions to address issues are tracked and managed

to completion. In addition, the Information Technology Risk team

provides key risk indicators (“KRIs”) monthly to the Operational

Risk Committee whose members include the CIO, Chief Risk

Officer (“CRO”), Head of Internal Audit and the CISO. The monthly

presentation includes updates on key security incidents and the

trending of cybersecurity KRIs.

Our dedicated GIS team is led by the CISO, who reports to the

CIO. The CISO has extensive experience in cybersecurity and

technology with over twenty years’ experience managing

cybersecurity in the financial and consulting services industries

and is responsible for all aspects of cybersecurity across our

global businesses. The CISO works closely with the CIO, Chief

Financial Officer, CRO and the Legal and Compliance

Departments to develop and advance our cybersecurity strategy.

Recently Filed

Click on a ticker to see risk factors

Ticker *	File Date
PYPL	10 hours ago
HMMR	10 hours ago
OTIS	10 hours ago
PEAK	11 hours ago
SLAB	12 hours ago
DOW	19 hours ago
BKR	20 hours ago
PEP	1 day, 9 hours ago
FCFS	1 day, 10 hours ago
RTX	1 day, 10 hours ago
KREF	1 day, 10 hours ago
BA	1 day, 13 hours ago
GE	1 day, 21 hours ago
JVA	4 days, 10 hours ago
ISRG	4 days, 10 hours ago
INTC	4 days, 10 hours ago
CMCSA	4 days, 11 hours ago
TMUS	4 days, 11 hours ago
SKKY	4 days, 11 hours ago
X	4 days, 15 hours ago
CHTR	4 days, 20 hours ago
NOC	5 days, 11 hours ago
NOBH	5 days, 12 hours ago
SIRI	5 days, 18 hours ago
NOW	6 days, 5 hours ago
TSLA	6 days, 7 hours ago
META	6 days, 7 hours ago
CCS	6 days, 7 hours ago
BRID	6 days, 10 hours ago
FLUX	6 days, 10 hours ago
SVBL	6 days, 10 hours ago
PBSV	6 days, 10 hours ago
URI	6 days, 11 hours ago
MXL	6 days, 11 hours ago
LEVI	6 days, 11 hours ago
OCEL	6 days, 11 hours ago
FREVS	6 days, 18 hours ago
CODA	6 days, 20 hours ago
JEF	1 week ago
NRIX	1 week ago
LMT	1 week ago
CRGH	1 week ago
GM	1 week ago
CNXC	1 week ago
CCL	1 week, 1 day ago
MULN	1 week, 4 days ago
KBH	1 week, 4 days ago
SNX	1 week, 4 days ago
LEN	1 week, 5 days ago
MKC	1 week, 5 days ago

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