EXHIBIT 99.1

                                  RISK FACTORS

      RISK FACTORS RELATING TO ESTABLISHING OUR COMPANY AS INDEPENDENT FROM
                                  U.S. BANCORP

WE MAY EXPERIENCE INCREASED COSTS RESULTING FROM DECREASED PURCHASING POWER AND
SIZE COMPARED TO THAT PREVIOUSLY PROVIDED BY OUR ASSOCIATION WITH U.S. BANCORP.

         Following our spin-off from U.S. Bancorp, we are a smaller and more
focused company, and there is no guarantee that we will have access to
technological, administrative, financial, insurance and other resources that
are comparable to, or on as favorable terms and prices as, those previously
available to us as a part of U.S. Bancorp.

WE COMPETE WITH U.S. BANCORP WITH RESPECT TO CLIENTS WE BOTH SERVICED PRIOR TO
OUR SPIN-OFF FROM U.S. BANCORP AND MAY NOT BE ABLE TO RETAIN THESE CLIENTS.

         Since U.S. Bancorp acquired our predecessor company in 1998, we
generally operated independently of U.S. Bancorp's other operations in respect
of client services. For example, a client of U.S. Bancorp would not be entitled
to receive our services unless he or she also opened an account with us, and
vice versa. Accordingly, we do not expect our clients to experience any
significant disruption in services as a result of the spin-off. However, we were
able to marginally increase our client base by reason of our affiliation with
U.S. Bancorp. Moreover, both U.S. Bancorp and we provide services to private
individuals and to corporate clients in the middle market sales fixed income
area, and we both compete for clients and business in this area and possibly
others. We cannot assure you that the clients we gained as a result of being
affiliated with U.S. Bancorp or our private individuals and corporate clients in
the middle market sales fixed income area will not move some or all of their
existing business from us to U.S. Bancorp or another third party. Loss of a
significant portion of these clients will negatively impact our results of
operations.

THE CONTINUED OWNERSHIP OF U.S. BANCORP COMMON STOCK AND OPTIONS BY OUR
EXECUTIVE OFFICERS AND SOME OF OUR DIRECTORS WILL CREATE, OR WILL APPEAR TO
CREATE, CONFLICTS OF INTEREST.

         Because of their former positions with U.S. Bancorp, substantially all
of our executive officers, including our chairman and chief executive officer
and our vice chairman, and some of our directors own U.S. Bancorp common stock
and options to purchase U.S. Bancorp common stock. While these holdings in the
aggregate are insubstantial in relation to U.S. Bancorp's total common shares
outstanding, the individual holdings of U.S. Bancorp stock and options that
remained with U.S. Bancorp after the spin-off may be significant for some of
these persons compared to that person's total assets. Even though our board of
directors consists of a majority of directors who are independent from both U.S.
Bancorp and our company, ownership of U.S. Bancorp common stock and U.S. Bancorp
options by our directors and officers will create, or appear to create,
conflicts of interest when these directors and officers are faced with decisions
that could have different implications for U.S. Bancorp than they do for us. For
example, our officers and directors who hold U.S. Bancorp stock may appear to
have a conflict of interest in the event that we advise a company in connection
with a restructuring of its debt obligations where U.S. Bancorp is a significant
creditor or in the event that we enter into financing arrangements with U.S.
Bancorp.

WE HAVE AGREED TO CERTAIN RESTRICTIONS TO PRESERVE THE TAX TREATMENT OF THE
SPIN-OFF, WHICH WILL REDUCE OUR STRATEGIC AND OPERATING FLEXIBILITY.

         U.S. Bancorp obtained an opinion from Wachtell, Lipton, Rosen & Katz,
its special counsel, to the effect that the spin-off qualifies as a transaction
that is generally tax-free under Sections 355 and/or 368(a)(1)(D) of the
Internal Revenue Code of 1986, as amended. Current tax law generally creates a
presumption that the spin-off would be taxable to U.S. Bancorp but not to its
shareholders if we engage in, or enter into an agreement to engage in, a
transaction that would result in a 50 percent or greater change by vote or by
value in our stock ownership during the four-year period beginning on the date




that begins two years before the spin-off date, unless it is established that
the transaction is not pursuant to a plan or series of transactions related to
the spin-off.

         Temporary U.S. Treasury regulations currently in effect generally
provide that whether an acquisition transaction and a spin-off are part of a
plan is determined based on all of the facts and circumstances, including but
not limited to those specific factors listed in the regulations. In addition,
the regulations provide several "safe harbors" for acquisition transactions that
are not considered to be part of a plan.

         Under the tax sharing agreement entered into between U.S. Bancorp and
us, generally we may not (1) take or fail to take any action that would cause
any representations, information or covenants in the separation documents or
documents relating to the opinion to be untrue, (2) take or fail to take any
action that would cause the spin-off to lose its tax-free status, (3) sell,
issue, redeem or otherwise acquire our equity securities or equity securities of
members of our group except in certain specified transactions for a period of
two years following the spin-off, and (4) sell or otherwise dispose of a
substantial portion of our assets, liquidate, merge or consolidate with any
other person for a period of two years following the spin-off. During that
two-year period, we may take certain actions prohibited by these covenants if we
provide U.S. Bancorp with an Internal Revenue Service ruling or an unqualified
opinion of counsel to the effect that these actions will not affect the tax-free
nature of the spin-off. During the two-year period, these restrictions could
substantially limit our strategic and operational flexibility, including our
ability to finance our operations by issuing equity securities, make
acquisitions using equity securities, repurchase our equity securities, raise
money by selling assets or enter into business combination transactions.

WE HAVE AGREED TO INDEMNIFY U.S. BANCORP FOR TAXES AND RELATED LOSSES RESULTING
FROM ANY ACTIONS WE TAKE THAT CAUSE THE SPIN-OFF TO FAIL TO QUALIFY AS A
TAX-FREE TRANSACTION.

         We have agreed to indemnify U.S. Bancorp for any taxes and related
losses (including any applicable interest and penalties, all related accounting,
legal and other professional fees, all related court costs and all costs,
expenses and damages associated with related shareholder litigation or
controversies and any amount paid in respect of the liability of shareholders)
resulting from (1) any act or failure to act described in the covenants above,
(2) any acquisition of equity securities or assets of Piper Jaffray or any
member of its group, and (3) any breach by Piper Jaffray or any member of its
group of certain of our representations in the separation documents between U.S.
Bancorp and us or documents relating to the opinion notwithstanding the receipt
of an Internal Revenue Service ruling or an unqualified opinion of counsel. The
amount of any indemnification payments could be substantial. The amount of U.S.
Bancorp's taxes for which we are agreeing to indemnify U.S. Bancorp will be
based on the excess of the aggregate fair market value of our stock over U.S.
Bancorp's tax basis in our stock.

THE SEPARATION AND DISTRIBUTION AGREEMENT ENTERED INTO BETWEEN U.S. BANCORP AND
US CONTAINS CROSS-INDEMNIFICATION OBLIGATIONS OF U.S. BANCORP AND US THAT EITHER
PARTY MAY BE UNABLE TO SATISFY.

         The separation and distribution agreement provides, among other things,
that we will generally indemnify U.S. Bancorp, among other things, against
claims relating to or arising out of our business before and after the spin-off
and any losses suffered by U.S. Bancorp from our breach of the separation and
distribution agreement. In addition, U.S. Bancorp has agreed to indemnify us in
an amount up to $17.5 million for losses resulting from third-party claims
relating to research analyst independence and certain exercises of U.S. Bancorp
options in connection with the spin-off and from regulatory investigations
regarding the allocation of IPO shares to directors and officers of existing or
potential investment banking clients, mutual fund practices known as late
trading or market timing and mutual fund marketing and compensation
arrangements. Accordingly, except for that limited indemnity by U.S. Bancorp, we
will be responsible for actions of our business prior to the spin-off, including
in respect of discontinued or disposed of operations of our business. Similarly,
U.S. Bancorp has agreed to indemnify us, among other things, against claims
relating to or arising out of the businesses retained by U.S. Bancorp, and any
losses suffered by us arising from its breach of the separation and distribution
agreement.

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         The ability of either U.S. Bancorp or us to collect under these
indemnity provisions depends on the financial position of the indemnifying
party. For example, persons may seek to hold us responsible for liabilities of
the businesses retained by U.S. Bancorp. Although U.S. Bancorp has agreed to
indemnify us for these liabilities under the separation and distribution
agreement, if these liabilities are significant and we are held liable for them,
we cannot assure you that we will be able to recover the full amount of those
losses from U.S. Bancorp should it be financially unable to perform under its
indemnification obligations.

                      RISK FACTORS RELATING TO OUR BUSINESS

DEVELOPMENTS IN MARKET AND ECONOMIC CONDITIONS HAVE IN THE PAST ADVERSELY
AFFECTED, AND MAY IN THE FUTURE ADVERSELY AFFECT, OUR BUSINESS AND
PROFITABILITY.

         As we are a securities firm, conditions in the financial markets and
the economy generally have a direct and material impact on our results of
operations and financial condition. Uncertain or unfavorable market or economic
conditions adversely affect our business. For example, we have been operating in
a low or declining interest rate market for the past several years. Increasing
or high interest rates, especially if such changes are rapid, may create a less
favorable environment for certain of our businesses, particularly our fixed
income business. Further, our investment banking revenue, in the form of
underwriting discounts and financial advisory fees, is directly related to the
volume and value of the transactions in which we are involved. In an environment
of uncertain or unfavorable market or economic conditions, the volume and size
of capital-raising transactions and acquisitions and dispositions typically
decrease, thereby reducing the demand for our investment banking services and
increasing price competition among financial services companies seeking such
engagements. A downturn in the financial markets also may result in a decline in
the volume and value of trading transactions and, therefore, to a decline in the
revenue we receive from commissions on the execution of trading transactions
and, in respect of our market-making activities, a reduction in the value of our
trading positions and commissions and spreads.

         Our Private Client Services revenue generated from commissions and fees
and net interest on margin loan balances may decline if a market downturn
results in decreased transactions or a decrease in assets under management. In
addition, many of our Private Client Services clients are, and have historically
been, concentrated in the midwestern states of the United States and, to a
lesser extent, the mountain and western states. Accordingly, our Private Client
Services revenue is derived primarily from our individual investor clients in
these regions. Because of this concentration, a significant downturn in the
economy in any of these regions independent of general economic and market
conditions could materially and adversely affect our overall Private Client
Services business.

         Our Capital Markets business focuses primarily on the consumer,
financial institutions, health care and technology industries. Such industries
may experience a downturn independently of general economic and market
conditions, or may face market conditions that are disproportionately worse than
those impacting the economy and markets generally, which may adversely affect
our business. In addition, block trades are increasingly being effected without
an opportunity for us to pre-market the transaction. This increases the risk
that we may be unable to resell the purchased securities at favorable prices,
and concentration of risk may result in losses to us even when economic and
market conditions are generally favorable for others in our industry.

         Furthermore, recent financial bankruptcies and restatements at multiple
public companies have called into question the integrity of the capital markets
in general. In our experience, these scandals and related governmental
initiatives, such as the Sarbanes-Oxley Act of 2002 and the corporate governance
rules and rule proposals issued by the Securities and Exchange Commission, the
New York Stock Exchange, Inc. and the National Association of Securities
Dealers, have diverted the attention of management of many clients away from
capital markets transactions, such as mergers and acquisitions and securities
offerings.

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         Our profitability may be adversely affected by our fixed costs and the
possibility that we will be unable to scale back other costs in a time frame to
match any decreases in revenue relating to changes in market and economic
conditions.

WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY WITH OTHER COMPANIES IN THE FINANCIAL
SERVICES INDUSTRY.

         The financial services industry is extremely competitive and our
overall business will be adversely affected if we are unable to compete
successfully. We compete generally on the basis of such factors as quality of
advice and service, reputation, price, product selection and financial
resources. In recent years, we have experienced significant price competition in
areas of our business including pressure on debt underwriting discounts, as well
as trading spreads and commissions. We believe that price competition in these
and other areas will continue as some of our competitors seek to obtain market
share by reducing fees, commissions or spreads. Many of these competitors are
larger than our company, have greater financial resources and may be more
willing to engage in lending activities to businesses in connection with the
provision of financial advisory services.

         Further, consolidation in the financial services industry fostered in
part by changes in the regulatory framework in the United States also has
increased competition, bolstering the capital base and geographic reach of some
of our competitors. Examples of such consolidation in recent years include HSBC
Holdings plc's acquisition of Household International, Inc. in 2002, Royal Bank
of Canada's acquisition of Tucker Anthony Sutro in 2001, First Union
Corporation's merger with Wachovia Corporation in 2001 and Chase Manhattan
Corporation's acquisition of Hambrecht & Quist Group in 1999. Finally, the
emergence of alternative trading systems via the Internet and other mediums
through which securities and futures transactions are effected has increased
competition. It appears that this trend toward using alternative trading systems
is continuing to grow, which may adversely affect our commission and trading
revenue, reduce our participation in the trading markets and our ability to
access market information and result in the creation of new and stronger
competitors.

         We also face intense competition for qualified employees from
businesses in the financial services industry. The performance of our business
is highly dependent upon our ability to attract and retain highly skilled and
motivated employees. For example, the primary sources of revenue in our Private
Client Services business are commissions and fees earned on customer accounts
managed by our financial advisors, who are regularly recruited by other firms
and are able to change firms and take their client relationships with them. We
found that the market downturn and speculation prior to the spin-off regarding
our future increased competition for our Private Client Services financial
advisors, and resulted in some attrition. Particularly, given the relatively
small size of both our company and our employee base compared to some of our
competitors and the geographic locations in which we operate, the performance of
our business may be adversely affected to the extent we are unable to attract
and retain our employees effectively.

OUR UNDERWRITING AND MARKET-MAKING ACTIVITIES MAY PLACE OUR CAPITAL AT RISK.

         We may incur losses and be subject to reputational harm to the extent
that, for any reason, we are unable to sell securities we purchased as an
underwriter at the anticipated price levels. In addition, as an underwriter, we
are subject to heightened standards regarding liability for material
misstatements or omissions in prospectuses and other offering documents relating
to offerings we underwrite. As a market maker, we may own large positions in
specific securities. These undiversified holdings concentrate the risk of market
fluctuations and may result in greater losses than would be the case if our
holdings were more diversified.

AN INABILITY TO READILY DIVEST OR TRANSFER TRADING POSITIONS MAY RESULT IN
FINANCIAL LOSSES TO OUR BUSINESS.

         Timely divestiture or transfer of our trading positions can be impaired
by decreased trading volume, increased price volatility, concentrated trading
positions, limitations on the ability to transfer positions in highly
specialized or structured transactions to which we may be a party and changes in
industry and government regulations. Our reliance on timely divestiture or
transfer increases our

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vulnerability to price fluctuations or losses, since we may be forced to remain
in a position longer than we anticipated if, for example, trading volume in that
security declines due to significant company specific, market or geopolitical
events.

USE OF DERIVATIVE INSTRUMENTS AS PART OF OUR RISK MANAGEMENT TECHNIQUES MAY
PLACE OUR CAPITAL AT RISK, WHILE OUR RISK MANAGEMENT TECHNIQUES THEMSELVES MAY
NOT FULLY MITIGATE OUR MARKET RISK EXPOSURE.

         Our Capital Markets business may use futures, options and swaps to
hedge inventory. We do not use derivative instruments for speculative purposes.
Our fixed income area manages a portfolio of interest rate swaps that hedge the
residual cash flows resulting from a tender option bond program. Our fixed
income area also provides swaps and other interest rate hedging products to
institutional investors. Derivative products provided to customers are hedged.
However, there are risks inherent in our use of these products, including
counterparty exposure and termination risk. Counterparty exposure refers to the
risk that the amount of collateral in our possession on any given day may not be
sufficient to fully cover the current value of the swaps if a counterparty were
to suddenly default. This risk exists despite the fact that all of our swaps are
collateralized. Termination risk refers to risks associated with swaps used in
connection with the tender option bond program, where changes in the value of
the swaps may not mirror changes in the value of the cash flows they are
hedging. It is possible that losses may occur from our current exposure to
derivative and interest rate hedging products and expected increasing use of
these products in the future.

         We continue to refine our risk management techniques, strategies and
assessment methods on an ongoing basis. However, our risk management techniques
and strategies may not be fully effective in mitigating our risk exposure in all
economic market environments or against all types of risk, including risks that
we fail to identify or anticipate. Some of our strategies for managing risk are
based upon our use of observed historical market behavior. We apply statistical
and other tools to these observations to quantify our risk exposure. Any
failures in our risk management techniques and strategies to accurately quantify
our risk exposure could limit our ability to manage risks. In addition, any risk
management failures could cause our losses to be significantly greater than the
historical measures indicate. Further, our quantified modeling does not take all
risks into account. Our more qualitative approach to managing those risks could
prove insufficient, exposing us to material unanticipated losses.

AN INABILITY TO ACCESS CAPITAL READILY OR ON TERMS FAVORABLE TO US COULD IMPAIR
OUR ABILITY TO FUND OPERATIONS AND COULD JEOPARDIZE OUR FINANCIAL CONDITION.

         Ready access to funds is essential to our business. In the future we
may need to incur debt or issue equity in order to fund our working capital
requirements, as well as to make acquisitions and other investments. In addition
to maintaining a cash position, we rely on bank financing as well as other
funding sources such as the repurchase and securities lending markets for funds.
Our access to funding sources could be hindered by many factors. Those factors
that are specific to our business include the possibility that lenders could
develop a negative perception of our long-term or short-term financial prospects
if we incurred large trading losses or if the level of our business activity
decreased due to a market downturn. Similarly, our access to funds may be
impaired if regulatory authorities took significant action against us, or if we
discovered that one of our employees had engaged in serious unauthorized or
illegal activity.

OUR TECHNOLOGY SYSTEMS ARE CRITICAL COMPONENTS OF OUR OPERATIONS, AND FAILURE OF
THOSE SYSTEMS MAY DISRUPT OUR BUSINESS, CAUSE FINANCIAL LOSS AND CONSTRAIN OUR
GROWTH.

         We typically transact thousands of securities trades on a daily basis
across multiple markets. Our data processing, financial, accounting and other
technology systems are essential to this task. A system malfunction impeding the
processing of our clients' transactions could result in financial loss,
liability to clients, regulatory intervention and constraints on our ability to
grow. We outsource a substantial portion of our critical data processing
activities, including trade processing and back office data processing. For
example, we have entered into contracts with Thomson Financial, Inc. pursuant to
which Thomson Financial handles our trade and back office processing, and Unisys
Corporation, pursuant to which Unisys supports our data center and network
management technology needs. We also contract with other third

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parties for our market data services, which constantly broadcast news, quotes,
analytics and other relevant information to our employees. We contract with
other vendors to produce and mail our customer statements. In the event that any
of these service providers fails to adequately perform such services or that the
relationship between that service provider and us is terminated, we may
experience a significant disruption in our operations, including our ability to
timely and accurately process our clients' transactions or maintain complete and
accurate records of those transactions.

         Adapting or developing our technology systems to meet new regulatory
requirements, client needs and industry demands also is critical for our
business. The growth of the Internet and the introduction of new technologies
present new challenges on a regular basis. We have an ongoing need to upgrade
and improve our various technology systems, including our data processing,
financial, accounting and trading systems. This need could present operational
issues or require significant capital spending. It also may require us to make
additional investments in technology systems and may require us to reevaluate
the value and/or expected useful lives of our current technology systems, which
could negatively impact our results of operations.

         Secure processing, storage and transmission of confidential and other
information in our computer systems and networks also is critically important to
our business. We take protective measures and endeavor to modify them as
circumstances warrant. However, our computer systems, software and networks may
be vulnerable to unauthorized access, computer viruses or other malicious code,
and other events that could have a security impact. If one or more of such
events occur, this potentially could jeopardize our or our clients' or
counterparties' confidential and other information processed and stored in, and
transmitted through, our computer systems and networks, or otherwise cause
interruptions or malfunctions in our, our clients', our counterparties' or third
parties' operations. We may be required to expend significant additional
resources to modify our protective measures or to investigate and remediate
vulnerabilities or other exposures, and we may be subject to litigation and
financial losses that are either not insured against or not fully covered
through any insurance maintained by us.

OUR BUSINESS IS SUBJECT TO EXTENSIVE REGULATION THAT LIMITS OUR BUSINESS
ACTIVITIES, AND A SIGNIFICANT REGULATORY ACTION AGAINST OUR COMPANY MAY HAVE A
MATERIAL ADVERSE FINANCIAL EFFECT OR CAUSE SIGNIFICANT REPUTATIONAL HARM TO OUR
COMPANY.

         As a participant in the financial services industry, we are subject to
complex and extensive regulation of many aspects of our business by U.S. federal
and state regulatory agencies, securities exchanges and other self-regulatory
organizations and by foreign governmental agencies, regulatory bodies and
securities exchanges. Generally, the requirements imposed by our regulators are
designed to ensure the integrity of the financial markets and to protect
customers and other third parties who deal with us. These requirements are not
designed to protect our shareholders. Consequently, these regulations often
serve to limit our activities, through net capital, customer protection and
market conduct requirements and restrictions on the businesses in which we may
operate or invest. Compliance with many of these regulations entails a number of
risks, particularly in areas where applicable regulations may be unclear. In
addition, regulatory authorities in all jurisdictions in which we conduct
business may intervene in our business and we and our employees could be
prohibited from engaging in some of our business activities, fined or otherwise
disciplined for violations.

         With the integrity of the financial markets being called into question,
the current environment poses heightened risk of regulatory action, which could
adversely affect our ability to conduct our business or could result in fines or
reputational damage to our company. For example, regulatory authorities have
recently focused intense scrutiny on research analysts' interaction with
investment banking departments at securities firms. This scrutiny has led to
increased restrictions on the interaction between research analysts and
investment banking departments at securities firms. In addition, we and several
other securities firms have reached settlement agreements with certain federal
and state securities regulators and self-regulatory organizations to resolve
investigations into equity research and its relationship to investment banking.
Certain of these restrictions could adversely impact our businesses, at least in
the short-term. This issue and others that face the financial services industry
are complex and difficult and our reputation could be damaged if we fail, or
appear to fail, to deal appropriately with them.

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         Moreover, new laws or regulations or changes in the interpretation or
enforcement of existing laws or regulations may also adversely affect our
business. For example, the Sarbanes-Oxley Act and the rules and rule proposals
of the SEC, the NYSE and the NASD necessitate significant changes to corporate
governance and public disclosure. These provisions generally apply to companies
with securities listed on U.S. securities exchanges and some provisions apply to
non-U.S. issuers with securities traded on U.S. securities exchanges. To the
extent that private companies forgo initial public offerings, non-U.S. issuers
decline to list their securities in the United States or undertake merger or
acquisition transactions, in order to avoid being listed in the United States
and subject to these regulations, or companies fail to undertake merger or
acquisition transactions due to such provisions, our business may be adversely
affected.

REGULATORY CAPITAL REQUIREMENTS MAY ADVERSELY AFFECT OUR ABILITY TO EXPAND OR
MAINTAIN PRESENT LEVELS OF OUR BUSINESS OR IMPAIR OUR ABILITY TO MEET OUR
FINANCIAL OBLIGATIONS.

         We are subject to the SEC's uniform net capital rule, Rule 15c3-1, and
the net capital rule of the NYSE, which may limit our ability to make
withdrawals of capital from Piper Jaffray & Co., our broker dealer subsidiary.
The uniform net capital rule sets the minimum level of net capital a broker
dealer must maintain and also requires that a portion of its assets be
relatively liquid. The NYSE may prohibit a member firm from expanding its
business or paying cash dividends if resulting net capital falls below its
requirements. Our London-based broker dealer subsidiary is also subject to
similar limitations under United Kingdom laws. As Piper Jaffray Companies is a
holding company, we depend on dividends, distributions and other payments from
our subsidiaries to fund dividend payments, if any, and to fund all payments on
our obligations, including any debt obligations. These regulatory restrictions
may impede access to funds that Piper Jaffray Companies needs to make payments
on obligations, including debt obligations, or dividend payments. In addition,
underwriting commitments require a charge against net capital and, accordingly,
our ability to make underwriting commitments may be limited by the requirement
that we must at all times be in compliance with the applicable net capital
regulations. Piper Jaffray & Co. also is subject to certain notification
requirements related to withdrawals of excess net capital.

OUR EXPOSURE TO LEGAL LIABILITY IS SIGNIFICANT, AND COULD LEAD TO SUBSTANTIAL
DAMAGES AND RESTRICTIONS ON OUR BUSINESS GOING FORWARD.

         We face significant legal risks in our businesses and the volume and
amount of damages claimed in litigation, arbitrations, regulatory enforcement
actions and other adversarial proceedings against financial services firms are
increasing. These risks include potential liability under securities laws and
regulations in connection with our investment banking and other corporate
finance transactions. Further, companies in our industry are increasingly
exposed to claims for recommending investments that are not consistent with a
client's investment objectives or engaging in unauthorized or excessive trading.
Our experience has been that adversarial proceedings against financial services
firms typically increase in a market downturn. We are also subject to claims
from disputes with our employees and our former employees under various
circumstances. In addition, legal or regulatory matters involving our directors,
officers or employees in their individual capacities may create exposure for us
because we may be obligated or may choose to indemnify the affected individuals
against liabilities and expenses they incur in connection with such matters to
the extent permitted under applicable law. In addition, like other financial
services companies, we may face the possibility of employee fraud or misconduct.
The precautions we take to prevent and detect this activity may not be effective
in all cases and we cannot assure you that we will be able to deter or prevent
fraud or misconduct. Exposures from and expenses incurred related to any of the
foregoing actions or proceedings could have a negative impact on our results of
operations, financial condition and credit rating.

WE MAY SUFFER LOSSES IF OUR REPUTATION IS HARMED.

         Our ability to attract and retain customers and employees may be
adversely affected to the extent our reputation is damaged. If we fail to deal,
or appear to fail to deal, with various issues that may give rise to
reputational risk, we could harm our business prospects. These issues include,
but are not limited to, appropriately dealing with potential conflicts of
interest, legal and regulatory requirements, ethical issues,

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money-laundering, privacy, record-keeping, sales and trading practices and the
proper identification of the legal, reputational, credit, liquidity and market
risks inherent in our products. Failure to appropriately address these issues
could also give rise to additional legal risk to us, which could, in turn,
increase the size and number of claims and damages asserted against us or
subject us to regulatory enforcement actions, fines and penalties.

PROVISIONS IN OUR CERTIFICATE OF INCORPORATION AND BYLAWS AND OF DELAWARE LAW
MAY PREVENT OR DELAY AN ACQUISITION OF OUR COMPANY, WHICH COULD DECREASE THE
MARKET VALUE OF OUR COMMON STOCK.

         Our certificate of incorporation and bylaws and Delaware law contain
provisions that are intended to deter abusive takeover tactics by making them
unacceptably expensive to the raider and to encourage prospective acquirors to
negotiate with our board of directors rather than to attempt a hostile takeover.
These provisions include a classified board of directors and limitations on
actions by our shareholders by written consent. In addition, our board of
directors has the right to issue preferred stock without shareholder approval,
which could be used to dilute the stock ownership of a potential hostile
acquiror. Delaware law also imposes some restrictions on mergers and other
business combinations between us and any holder of 15 percent or more of our
outstanding common stock. We adopted a rights agreement in connection with the
spin-off, which would impose a significant penalty on any person or group that
acquires 15 percent or more of our outstanding common stock without the approval
of our board of directors. We believe these provisions protect our shareholders
from coercive or otherwise unfair takeover tactics by requiring potential
acquirors to negotiate with our board of directors and by providing our board of
directors with more time to assess any acquisition proposal, and are not
intended to make our company immune from takeovers. However, these provisions
apply even if the offer may be considered beneficial by some shareholders and
could delay or prevent an acquisition that our board of directors determines is
not in the best interests of our company and our shareholders.

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