The relationship between Jefferies and First Brands is drawing fresh scrutiny, with the United States Securities and Exchange Commission (SEC) beginning an early-stage inquiry into the investment bank’s dealings with the now-bankrupt car parts group.
According to people familiar with the matter, the regulator has asked Jefferies for details on whether investors in its Point Bonita fund were given a clear picture of their exposures to First Brands.
The auto parts business entered bankruptcy in September with around $12 billion in debt, undermining confidence in parts of the private credit market.
The U.S. securities watchdog is also examining the bank’s internal controls and whether any conflicts may have arisen across different areas of its business.
At this stage, the watchdog has not suggested any wrongdoing, and it often opens civil reviews simply to gather information.
As usual, the agency said it would not comment on whether an investigation exists, and Jefferies likewise declined to comment.
Jefferies had long been involved with First Brands, advising the company, arranging invoice financing and helping to place large loans with outside investors.
The Point Bonita fund held around $715 million in receivables tied to retailers that stocked First Brands’ products like windscreen wipers.
While the fund’s documents showed its largest exposures were to major retailers such as Walmart and O’Reilly, Jefferies later acknowledged that payments to the fund had been routed through First Brands rather than coming directly from those retailers.
Court filings have since confirmed that lenders providing more than $2 billion in receivables financing were also repaid by the company itself instead of its customers.
Further questions emerged after reports revealed that Jefferies earned additional fees through a side agreement with First Brands.
Some lenders said they had not been told about this arrangement; however, the bank maintains that it was legally compliant and disclosed.
The inquiry underscores how the bankruptcy of First Brands — a significant borrower in the fast-growing but opaque private credit industry — is now reverberating across the financial sector.
Jefferies’ chief executive, Rich Handler, claimed last month that the bank was defrauded by the company, but added that the bankruptcy had not caused serious damage to Jefferies’ core operations.
Nevertheless, the bank’s shares have fallen more than 12% this quarter and over 25% this year.
The impact is being felt elsewhere, too.
UBS recently moved to wind down certain funds run by its O’Connor unit after taking losses linked to First Brands.
Meanwhile, the U.S. Department of Justice has separately launched its own inquiry into the company’s collapse.
First Brands did not respond to requests for comment.
