NEW YORK — Jefferies & Co., a Los Angeles-based brokerage firm specializing in serving institutional investors, said Friday that the Securities and Exchange Commission has challenged the way the firm booked on its 1986 financial statements a $5-million loss resulting from a legal settlement paid partially by its own chief executive.
The SEC's position could result in a substantial cut in Jefferies' stated earnings for the fourth quarter of 1986 and for the entire fiscal year.
A Jefferies spokesman said the firm disputes the agency's interpretation and is supported by its outside auditing firm, Peat, Marwick, Mitchell. SEC spokesmen had no comment.
According to Frank Baxter, Jefferies' president and chief operating officer, the matter at issue is a $5-million settlement the firm made to one or both parties in a disagreement over a securities trade. Jefferies represented both parties but Baxter declined to identify them. Ultimately, the firm paid $1.2 million of the settlement and its chief executive officer, Boyd L. Jefferies, who arranged the transaction, paid the rest himself.