JEFFERIES AFTER JEFFERIES : Although its founder has been barred from the firm, the securities company is regaining its equilibrium.

Immediately after Boyd L. Jefferies agreed to plead guilty to criminal charges and leave Jefferies & Co., the securities firm’s remaining management summoned 20 leaders of its high-powered national sales force to Dallas. Another 40 of the firm’s traders learned about the strategy session and flew in at their own expense.

As the nucleus of the tarnished Los Angeles-based company sat around a big table at an airport hotel that Saturday last March, one might have expected sullen faces, gloomy talk and more than a few whispers about job prospects elsewhere. But that was not the case.

“There was a ‘let’s do it’ kind of attitude, an electricity in the air, a sense that it was time to focus on business again,” recalled Frank Baxter, who was the firm’s chief operating officer until he assumed the post of chief executive vacated by Jefferies on March 19. “There was relief that six months of embarrassment and anxiety had ended.”

The Monday following the pep rally in Dallas, an equally important series of meetings began: Baxter and Raymond L. Killian Jr., the national sales manager, started visiting dozens of bread-and-butter institutional clients to reassure them that the company would survive.

In a volatile business such as securities trading, where image is almost as important as performance and where the main assets ride down in the elevator at the end of each day, there is no certainty that Jefferies & Co., or any independent brokerage for that matter, will prosper forever. The question of survival becomes acute when the government forces the chief asset out after a widely publicized, five-month criminal investigation.

Temporary Exodus

But there has proven to be, as a trade publication dubbed it, “life after Boyd” at Jefferies & Co., though not without some problems.

Business did drop after Jefferies’ resignation. He was accused of illegally “parking” stock for professional trader Ivan F. Boesky--holding it to allow Boesky to evade regulatory limits--and assisting an unidentified client in manipulating the price of a stock.

The company’s second-quarter commissions declined about 5% compared to last year’s, to $23.2 million, at a time when trading volume on the New York Stock Exchange rose 28%. Baxter acknowledged in a recent interview that some clients left temporarily. “That first week, a dozen or so accounts said they weren’t going to do business with us anymore,” he said. “But they’ve come back.”

Baxter said the drop in commissions actually reflected an overall decline in institutional activity in the quarter, and that Jefferies & Co. has not lost any major clients among its 1,600 institutional customers.

The firm’s total revenue for the quarter was off 14% from a year earlier, and net income dropped to $1.6 million from $3.7 million during the same three months in 1986. The comany attributed the decline to several one-time charges.

Among the charges was $1 million in pretax income, which was spent on a special bonus commission program to bolster the morale of its 160-member sales force.

Whether it was a “let’s-do-it” attitude or the extra pay, there was no mass defection. Only one senior trader has left since March, and his exit was not related to the departure of Boyd Jefferies, according to Baxter and others outside the company. Insiders at executive recruitment firms said they have not received the anticipated avalanche of resumes from Jefferies’ employees.

And there is another sign of stability--in the price of stock in the Jefferies Group, the holding company for the brokerage. The stock dipped to $9.50 immediately following Jefferies’ resignation, fueling rumors that the company was ripe for a takeover. But in recent weeks the price has rebounded to its pre-investigation level of $15 to $16.

Employees Stay Put

While takeovers are never impossible, a hostile bid for Jefferies would be difficult, analysts said, because it is a service company in which employees are the chief asset. Many could be expected to leave in the event of an unfriendly acquisition.

Baxter estimated that the firm continues to handle 60% of the block trades on the so-called third market, where listed securities are traded off the exchange. He would not discuss specifics but indicated that third-quarter sales are going well.

“All things considered, they are moving forward even though Boyd isn’t there anymore,” said Perrin Long, a veteran analyst with Lipper Analytical Securities in New York. “The stock has moved up nicely, and one would have to conclude from that that investors think the company is going to make it. I agree.”

A Jefferies customer in New York, who asked that his name not be used, voiced similar sentiments: “They were not a one-man show. Boyd made it special. He started it, built it, sold it, bought it back, and led by example. But you don’t have to do that every day for the rest of your life. Once you have done that, you get some momentum going that sustains itself.

“In the long run, it remains to be seen how strong they will be. But right now they cover accounts better than anybody. They always did and they still do.”

Showing that it could still react to breaking news despite the departure of its founder, in late March Jefferies & Co. assembled nearly 60% of the stock in a takeover target, Cyclops Corp., and sold it to a customer whose takeover was successful. And in June, Jefferies traded a large number of Dayton Hudson shares after a trading halt on the exchange. Jefferies picked up a profit estimated at about $1 million on news of a takeover that later proved to be bogus.

The reputation for covering accounts, for trading around the world even after the exchanges have closed, developed during 25 years in which Boyd Jefferies came to be widely regarded as Jefferies & Co. He was the top producer, the legendary salesman with a maverick streak whose tenacity and creativity in executing complex trades for large institutional customers made his company the dominant force in the third market.

And he was the one responsible for the activity that thrust the firm into the public eye--its high-profile role in “sweeps” of the market to amass huge blocks of stock in target companies for the takeover specialists who transformed corporate America in the 1980s.

Yet the huge sweeps and other sensitive deals have never generated the bulk of the firm’s revenue. More than 70% of its trades involve blocks of 20,000 or 50,000 shares for institutional clients--boring, efficient and highly profitable fare, but not what held the interest of the boss.

“What Boyd lived for was not making money,” said Michael Klowden, who sits on the Jefferies board and whose law firm, Morgan, Lewis & Bockius, represents the company. “What he lived for was getting trades done. He wasn’t going to be satisfied until he had executed every block trade in New York Stock Exchange stock in a single day. And that obviously had the potential for creating problems.”

The potential was fulfilled in 1986 when a sensitive trade arranged by Jefferies backfired, resulting in a dispute with the parties in the trade that the firm paid $5 million to settle. Jefferies paid $3.5 million of the money out of his own pocket. At one point, the Securities and Exchange Commission objected to the way the firm had accounted for the money paid by Jefferies, but the dispute was resolved in favor of the company.

The incident led the board to approve new rules in October, 1986, that required clearing any sensitive trade with another member of the management committee and either the in-house lawyer or outside counsel. It was a change clearly aimed at reining in the boss.

But it was a change that came too late.

The following month, the SEC announced that Boesky, a longtime customer of Jefferies & Co., had admitted involvement in the insider trading scandal sweeping Wall Street. Boesky paid a record $100 million in fines and returned profits and, more significantly for Jefferies, agreed to cooperate with the continuing federal investigation.

Rumors soon surfaced in the press that Boyd Jefferies was among those implicated by Boesky. The firm’s records were subpoenaed. A cloud fell over its operations, but no one knew where the probe was headed.

Everyone found out March 19, when Jefferies got on the internal communications system that connects the firm’s offices--six in this country and one in London. He announced that he had agreed to plead guilty to two federal felony charges and accept a five-year bar from the securities industry, which included severing relations with his company.

The firm was censured, and the SEC ordered a review of internal controls, which is still under way. And the management at Jefferies & Co. confronted a unique void and two tough tasks--boosting morale of its sales staff and persuading customers to stay.

The hastily arranged meeting in Dallas was followed by a second session there for all of the company’s employees. At the second meeting, maroon jackets with “Jefferies & Co.” stitched in gold across the back appeared everywhere as a symbol of unity. The bonus incentive program helped, too.

The task of reassuring customers was perhaps more difficult, but the nature of Jefferies’ crimes helped. Rather than the sleazy insider trading and personal profit of Boesky or investment banker Dennis B. Levine, Jefferies’ crimes involved what Klowden, the lawyer, described as “excessive customer accommodation.” Neither Jefferies nor his firm made a significant amount of money on the deals.

Another factor kept customers and employees alike from abandoning Jefferies & Co. last spring.

“Jefferies & Co. had built a management structure that was in place before all the scandal happened, and they reacted quickly,” said Randall Hill, director of financial services for SpencerStuart , an executive recruitment firm. Standing beside Jefferies in the New York office when he announced his resignation was Frank Baxter, an 11-year veteran of the company who had taken over as president in January, 1986. He and Jefferies had shared the helm with national sales chief Killian and Alan D. Browning, the chief administrative officer. Indeed, Baxter and Browning had been running the brokerage for the past year while Jefferies indulged his passion for trading.

Baxter proved the perfect antidote to scandal. He is calm and practical, cut from the mold of a great-grandfather who came West in the gold rush only to take the more sensible step of opening a stage coach stop between Sacramento and Reno that became the town of Baxter.

The most dangerous part of his day, he conceded in an interview recently, is walking three blocks from his Bunker Hill apartment to Jefferies’ offices in the Union Bank Building at 445 S. Figueroa St. at 2:50 a.m. to prepare for the opening of the stock markets in New York.

“Some of our more interesting citizens are out at that hour,” he joked.

Reassured Clients, Employees

Baxter and the other top managers had been quietly preparing for Jefferies’ announcement for several days, devising strategies for quickly reassuring top employees and big customers that the company would remain intact.

Killian, who had spent 17 years in institutional sales at the investment firm of Goldman Sachs before moving to Jefferies in 1985, joined Baxter in crisscrossing the country in March to tell the company’s story to its large customers.

“It was obvious that the company was still there, and Killian and Baxter are very capable men,” one institutional customer said.

Last month, the company reinforced the collegial nature of the new operation by announcing that management had been realigned to give senior officials greater responsibility for overall direction--and a greater share in the profits. Along with making Baxter, Killian and Browning senior managing directors, 16 others were named managing directors.

“From the list of names in their Wall Street Journal ad (about the promotions) awhile back, it looked to me like everyone was still there,” said a former Jefferies & Co. trader who left more than a year ago.

All except Boyd Jefferies, of course.