At a cocktail party in New York a few years ago, an institutional trader was asked why he conducted his business through Boyd L. Jefferies, head of Jefferies Group in Los Angeles, and not through a more established firm located in the Big Apple.
"I don't give a damn where he works," the trader snapped. "He calls me a half-hour earlier in the morning than anyone else, and he has a lot of useful information."
It's this kind of story, recounted Thursday by a Los Angeles securities attorney, that has helped give Jefferies Group its reputation as a scrappy, but discreet, go-getter in the nation's investment community.
That reputation, though, is being put to the test in the wake of news this week that Boyd Jefferies and his firms have received subpoenas from the Securities and Exchange Commission and the U.S. attorney in connection with the widening insider trading investigation surrounding professional speculator Ivan F. Boesky.
Jefferies has denied ever trading on inside information from Boesky or anyone else--or passing any inside information to others. Sources have told The Times that investigators want to know if Boyd Jefferies or his companies took large positions in merger stocks on which Boesky received inside tips.
Boyd Jefferies, 55, heads Jefferies Group, whose principal subsidiary is Jefferies & Co. The firm is among the nation's most unusual securities dealers.
Jefferies & Co. is known principally as the place big investors go to trade blocks of stock off the floor of the major exchanges--sometimes because these exchanges are closed and other times because trading through Jefferies means greater secrecy and less market disruption.
Jefferies & Co. is the dominant force in this so-called third-market trading. "We believe professional investors should be able to buy or sell a security whenever they wish," Jefferies told a reporter a few years ago.
When the threat of Hurricane Gloria closed the major stock exchanges in New York one Friday 14 months ago, it was Jefferies & Co. that benefited. It traded 12 million shares that day, about double its normal amount, in activity spurred on by several takeover announcements.
The Jefferies name has a way of cropping up when big takeover bids are in the works.
Jefferies, for example, was involved in large blocks of trading in the stock of USX Corp. a couple of months ago. USX's trading volume was unusually heavy on reports that several celebrated corporate raiders were amassing shares in the steel concern, formerly known as U.S. Steel. Jefferies alone moved more than 10.5 million shares of USX stock in two days.
Corporate raider Carl C. Icahn ultimately bought more than 11% of USX stock, later making an $8-billion bid for the company. The Icahn offer remains on the table.
Jefferies & Co. has attracted attention in other ways, as well.
Five years ago, it was forced to fold a brokerage subsidiary, Wagenseller & Durst, after months of rumors about the small, old-line firm's financial difficulties. Jefferies & Co. also tried to start another retail operation, but the attempt was disbanded about a year ago.
Trades at Jefferies & Co. are done the old-fashioned way: brokers get on the phone and find out who wants to buy and sell.
To accommodate overseas customers, traders report to the sales desk as early as 3 a.m. But the rewards are worth the trouble. Some diligent salesmen have been known to make $500,000 a year on commissions, calling clients literally dozens of times a day to line up a sale.
Customers Are Invisible
Investor anonymity is sacrosanct. Brokers identify buyers and sellers only by letter and number. For that reason, Jefferies is known as a discreet trader that is not bedeviled by leaks that plague large brokerage houses.
Boyd Jefferies dominates the company. Its chairman and chief executive since the firm was founded 24 years ago, he is the second largest (11.6%) shareholder behind American Can, which owns 20%.
Jefferies made more than $1.1 million last year, including salary and bonus. He owns a $1-million condominium in Indian Wells, an exclusive community near Palm Springs, as well as a magnificent $5-million home in Laguna Beach that overlooks the Pacific.
Those who've seen the private and intense Jefferies in action say he works hard for his money. A trader at heart, he also arrives at his Los Angeles office early in the morning so he can talk to clients overseas.
"Legendary workaholics like (corporate chiefs) Peter Grace and Harold Geneen are pygmies compared with Boyd," a friend once said about him.
Jefferies Group's earnings fell sharply last year but have rebounded in 1986 due to increased brokerage commissions and trading for its own account.
Its 1985 earnings of $7.77 million were 35% less than in 1984, in part because the brokerage reported heavy losses on trading for its account in the third quarter. However, nine-month profits this year have more than doubled, to $9.42 million.
But the insider trading scandal and resulting speculation has had its effect. Jefferies stock has been battered, closing Thursday at $12 after beginning the week at $15.75 a share.
Times staff writer Jane Applegate contributed to this story.