SEC Scrutinizes Jefferies Over First Brands Disclosures

The U.S. Securities and Exchange Commission (SEC) is carrying out a probe into Jefferies Financial Group Inc. JEF over its connections with First Brands Group. This was reported by Reuters, citing the Financial Times, which cited people familiar with the matter.

First Brands, an aftermarket auto parts manufacturer, supplies major retailers such as Walmart, AutoZone, NAPA, O’Reilly Auto Parts and Advance Auto Parts. The firm filed for bankruptcy, disclosing liabilities of roughly $12 billion, sparking fears among debt investors and broader stress in corporate debt markets.

The regulator is examining whether Jefferies adequately informed investors in its Point Bonita fund about their exposure to the auto business. It is also reviewing the company’s internal controls and any potential inter-divisional conflicts. The SEC’s investigation is in its early stages, and it is uncertain whether it will lead to misconduct allegations.

Background of Jefferies & First Brands

In October 2025, Jefferies disclosed its indirect exposure to First Brands Group, LLC, which filed for Chapter 11 bankruptcy protection on Sept. 29, 2025.

Point Bonita Capital, a division of Leucadia Asset Management (“LAM”), manages a $3 billion trade-finance portfolio, including receivables purchased from First Brands since 2019. The portfolio is backed by $1.9 billion of investor equity, of which LAM owns $113 million (about 6%).

Under these arrangements, Point Bonita buys First Brands’ receivables due from retailers, a process known as factoring. Payments were received on time until Sept. 15, 2025, when First Brands stopped transferring funds collected from retailers. In its bankruptcy filings, First Brands said its advisors are investigating whether some receivables were turned over to multiple financing parties.

Separately, Apex Credit Partners LLC (“Apex”), a Jefferies Finance LLC (50%-owned by JEF) subsidiary, manages $4.2 billion in collateralized loan obligations (“CLOs”). Apex-managed CLOs held almost $48 million of First Brands’ term loans, or around 1% of total CLO assets. Apex also retains between 5% and 9.9% of each CLO’s equity tranche, as required by risk-retention rules.

Jefferies emphasized that it holds no direct securities or debt obligations of First Brands.

JEF’s Price Performance & Zacks Rank

Over the past six months, JEF shares have gained 19% against the industry’s decline of 2.4%.

Currently, Jefferies carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Regulatory Probes Faced by Other Finance Firms

Last month, the Federal Deposit Insurance Corporation (“FDIC”) filed a lawsuit against Capital One COF, alleging that the bank paid about $100 million less than it should have to help bail out depositors of Silicon Valley Bank and Signature Bank, both of which collapsed in 2023. This was reported by Reuters.

The dispute revolved around whether Capital One understated its level of uninsured deposits by excluding a $56 billion position between two subsidiaries from regulatory filings detailing its financial condition.

The FDIC argued that excluding the $56 billion balance caused Capital One to compute its special assessment at $324.84 million instead of the correct $474.08 million, leaving roughly $99.4 million outstanding.

In September, UBS Group AG UBS agreed to pay €835 million ($986.8 million) to resolve a long-running French tax case concerning its cross-border business activities between 2004 and 2012.

The bank will pay a €730 million ($862.7 million) fine and €105 million ($124.1 million) in civil damages to the French state. UBS Group stated that the matter is fully provisioned and its resolution aligns with the company’s strategy of addressing legacy issues in the best interests of its stakeholders.

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This article originally published on Zacks Investment Research (zacks.com).

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