SecProbe.io

CORRESP
1
filename1.htm

filename1

	October
	1, 2012

	VIA EDGAR

	Ms. Suzanne Hayes

	Assistant Director

	Division of Corporation Finance

	United States
	Securities and Exchange Commission

	100 F Street, N.E.

	Washington, D.C. 20549

				RE:

				Stifel Financial Corp.

				Form 10-K for the Fiscal Year Ended December 31, 2011

				Filed February 28, 2012

				Form 10-Q for the Quarterly Period Ended June 30, 2012

				Filed August 9, 2012

				File No. 001-09305

	Dear Ms. Hayes:

	This letter sets forth the responses of Stifel Financial Corp. (the
	"Company") to the comments by the staff (the "Staff") of the Securities and
	Exchange Commission (the "Commission") contained in the Staff's letter dated
	September 18, 2012. For your convenience, the text of the Staff's comments
	is set forth in italics below, followed in each case by our response.

	Form 10-K for the Fiscal Year Ended December 31, 2011

	Management's Discussion and Analysis of Financial Condition and Results of
	Operations, page 28

	Liquidity and Capital Resources, page 60

				1.

				Comment:
				We note that assets, consisting mainly of cash or assets readily
				convertible into cash, are your principal source of liquidity.
				It is not clear from your disclosure however, which specific
				assets are considered liquid and your basis for considering
				these assets liquid. Please provide us with and disclose the
				following in future filings:

				●    a
				schedule detailing the assets you consider to be highly liquid
				for each balance sheet presented;

				●
				the estimated amount of time it would take to convert those
				assets into cash; and

				●
				the amount of each asset class that has been pledged as
				collateral either voluntarily or contractually.

	Response:

	In response to the Staff's comment, in future filings, beginning with our
	Quarterly Report on Form 10-Q for the quarterly period ended September 30,
	2012, we will include disclosure along the lines of the following as it
	relates to the liquidity of our assets:

	Our assets, consisting mainly of cash or assets readily convertible into
	cash, are our principal source of liquidity. The liquid nature of these
	assets provides for flexibility in managing and financing the projected
	operating needs of the business. As of December 31, 2011 we had $4.9 billion
	in assets, $2.5 billion of which consisted of cash or assets readily
	convertible into cash as follows
	(in millions, except
	average days to conversion):

					December 31, 2011

					December 31, 2010

					Avg. Conversion

					Cash and cash equivalents

				$

				167.7

				$

				253.5

					Receivables from brokers, dealers, and clearing
					organizations

				252.6

				247.7

					3 days

					Securities purchased under agreements to resell

				75.5

				123.6

					1 day

					Trading securities owned at fair value

				471.2

				385.1

					5 days

					Available-for-sale securities at fair value

				1,202.1

				1,012.7

					3 days

					Held-to-maturity securities at amortized cost

				190.5

				52.6

					10 days

					Investments

				172.8

				146.5

					5 days

					Total cash and assets readily convertible to cash

				$

				2,532.4

				$

				2,221.7

	In addition, Stifel Bank's financing arrangement
with the Federal Home Loan Bank ("FHLB") adds additional flexibility in managing
its liquidity position. As of December 31, 2011, Stifel Bank's borrowing
capacity with the Federal Home Loan Bank was $613.5 million based on available
collateral. FHLB borrowing capacity is contingent on the amount of collateral
pledged to the FHLB.

	As of December 31, 2011 and 2010, the amount of collateral pledged by asset class is
	as follows (in millions):

				December 31, 2011

				December 31, 2010

				Contractual

				Contingent

				Contractual

				Contingent

				Cash and cash equivalents

			$

			47.6

			$

			-

			$

			31.7

			$

			-

				Trading securities owned at fair value

			80.2

			312.2

			109.6

			162.6

				Available-for-sale securities at fair value

			-

			634.8

			-

			111.6

			$

			127.8

			$

			947.0

			$

			141.3

			$

			274.2

			2

	Management of Our Liquidity, page 60

				2.

				Comment:
				We note that you perform market stress tests for counterparty
				risk. It is not clear if you perform similar stress tests on
				your liquidity based on a scenario that considers both
				market-wide stresses and company-specific stresses. Please tell
				us and disclose in your future filings the liquidity related
				stress tests you perform, if any. If applicable, address the
				following in your disclosure:

				●
				Discuss the inputs and assumptions used in your testing;

				●
				Provide qualitative disclosure of the outputs of your testing
				and discuss the objective of such testing; and

				●
				Discuss any internal policies regarding limits of the outputs.
				In this regard, discuss any known breaches of internal limits
				for the modeled outputs and address your procedures for
				addressing such breaches.

	Response:

Our significant operating subsidiary, Stifel
Nicolaus, is subject to the Uniform Net Capital Rule (Rule 15c3-1) promulgated
by the SEC. The Uniform Net Capital Rule is designed to measure the general
financial integrity and liquidity of a broker-dealer and the minimum net capital
deemed necessary to meet the broker-dealer's continuing commitments to its
customers and other broker-dealers.  The calculation is based upon allowable liquid
assets subject to certain haircuts for marketability. At December 31, 2011,
Stifel Nicolaus had net capital of $182.1 million, which was $168.8 million in
excess of its minimum required net capital. Stifel Nicolaus has consistently
operated with capital in excess of its regulatory capital requirements. While
the calculation of Stifel Nicolaus' net capital is performed on a monthly basis,
management performs daily liquidity reviews at the broker-dealer.

	Stifel Bank performs two primary stress tests on its liquidity position.
	These stress tests are based on the following company-specific stresses: (1)
	the amount of deposit run-off that Stifel Bank could withstand over a one
	month period of time based on its on-balance sheet liquidity and available
	credit; and (2) Stifel Bank's ability to fund operations if all available
	credit were to be drawn immediately, with no additional available credit.
	The goal of these stress tests is to determine Stifel Bank's ability to fund
	continuing operations under significant pressures on both assets and
	liabilities.

	Under both stress tests, Stifel Bank considers cash and highly liquid
	investments as available to meet liquidity needs. In its analysis, Stifel
	Bank considers Agency MBS, Corporate Bonds, and CMBS as highly liquid. In
	addition to being readily financed at modest haircut levels,
	Stifel Bank estimates that each of the individual securities within each of
	the asset classes described above could be sold into the market and
	converted into cash within three business days under normal market
	conditions, assuming that the entire portfolio of a given asset class was
	not simultaneously liquidated. At December 31, 2011, available cash and
	highly liquid investments comprised approximately 50% of Stifel Bank's
	assets, which was well in excess of its internal target.

	In addition to these stress tests, Stifel Bank management performs a daily
	liquidity review. The daily analysis provides Stifel Bank management with
	all major fluctuations in liquidity. The analysis also tracks the proportion
	of deposits that Stifel Bank is sweeping from its affiliated broker-dealer,
	Stifel Nicolaus. In order to minimize volatility in its affiliated deposits,
	Stifel Bank will not sweep more than 80% of the total insured sweep deposits
	from Stifel Nicolaus. On a monthly basis, liquidity key performance
	indicators and compliance with liquidity policy limits are reported to the
	Company's Board of Directors (the "Board"). Stifel Bank has not violated any internal liquidity
	policy limits.

	We will include disclosure along the lines of the foregoing language in
	future filings, beginning with our Quarterly Report on Form 10-Q for the
	quarterly period ended September 30, 2012.

			3

	Use of Capital Resources, page 63

				3.

				Comment:
				We note that the Stone & Youngberg acquisition agreement
				included a contingent earn-out provision which may result in an
				additional payment based upon revenue goals. Additionally, we
				note your disclosure in note 3 to the financial statements that
				you recognized a $23.5 million liability for the estimated
				earn-out payments. Please expand your disclosure to disclose
				whether the earn-out payment is subject to a cap. If it is
				subject to a cap, please disclose the maximum potential earn-out
				payment. If it is not subject to a cap, please disclose how the
				amount of the payment will be calculated. Additionally, tell us
				the basis for your belief that you were not required to file the
				agreement as an exhibit.

	Response:

	In response to the Staff's comment, in future filings, beginning with our
	Annual Report on Form 10-K for the year ended December 31, 2012, we will
	include disclosure along the lines of the following as it relates to
	earn-out payments related to our acquisition of Stone & Youngberg:

	On July 25, 2011, we entered into a definitive agreement to acquire Stone &
	Youngberg, a leading financial services firm specializing in municipal
	finance and fixed income securities. The purchase consideration consisted of
	cash, a portion paid at closing and $24.0 million to be paid in installments
	over the next three years, and stock based on the value of net assets at
	closing. In addition, we may be required to pay a contingent earn-out over a
	five year period after the closing, which is capped at $25.0 million, based
	upon revenue goals, as established in the purchase agreement.

	Lastly, as to the question regarding the filing of the Purchase Agreement
	(the "Agreement") for the acquisition of Stone & Youngberg, we considered
	the requirements in Item 1.01 of Form 8-K, along with the relevant language
	from Item 601 (No. 10) of Regulation S-K. We considered a number of factors,
	including the total amount of consideration paid and likely to become
	payable, the form of the consideration, the revenue and earnings of the
	target relative to our earnings, and the nature of Stone & Youngberg's
	business compared to our historical business.  Based on these and similar
	factors, we concluded the Agreement did not meet the materiality tests
	therein. Moreover, at the time of the relevant acquisition, we performed
	tests in Item 2.01 of Form 8-K and determined that such acquisition did not
	involve a significant amount of assets, and that accordingly the filing of
	the Agreement was not required under Item 601 (No. 2) of Regulation S-K.

			4

	Item 7A. Quantitative and Qualitative Disclosures about Market Risk, page 68

	Risk Management

				4.

				Comment:  Please
				include a detailed discussion of the risk management processes
				and policies. The discussion should identify the offices and
				committees responsible for risk management and explain how
				information is communicated to the Board of Directors, senior
				managers and the Chief Risk Officer.

	Response:

	Management believes effective risk management is vital to the success of the
	Company's business activities. Accordingly, the Company employs an
	enterprise risk management ("ERM") framework to facilitate the incorporation
	of risk evaluation into decision-making processes across the Company. The
	Company has policies and procedures in place to identify, assess, monitor
	and manage the significant risks involved in the activities of its Global
	Wealth Management Group, Stifel Bank and Institutional Group business
	segments as well as at the holding company level. Principal risks involved
	in the Company's business activities include market, credit, operational,
	and regulatory/legal risk.

	Risk management requires independent company-level oversight, accountability
	of the Company's business segments, and effective communication of risk
	matters to senior management and across the Company. The Company's risk
	governance structure is comprised of the Board; the Risk
	Management/Corporate Governance Committee of the Board and the Audit
	Committee of the Board; senior management oversight (including the Chief
	Executive Officer, Chief Financial Officer, General Counsel and Chief
	Compliance Officer); the Internal Audit Department, committees, and groups
	within and across the Company's business segments. A risk governance
	structure composed of independent but complementary entities facilitates
	efficient and comprehensive supervision of the Company's risk exposures and
	processes.

	The Company maintains a risk management culture that is incisive and subject
	to ongoing review and enhancement. To help ensure the efficacy of risk
	management, which is an essential component of the Company's reputation, our
	executive management team requires thorough and frequent communication and
	the appropriate escalation of risk matters. The following is a summary of
	our risk management policies and procedures, including how information is
	disseminated throughout the Company.

	Market Risk

	Fixed
	Income Trading (Stifel Nicolaus). The Fixed Income senior management
	team and trading desk heads are responsible for ensuring that market risk
	exposures are well-managed and prudent. The trading desk heads are
	responsible for ensuring transparency of material market risks, monitoring
	compliance with established limits, and escalating risk concentrations to
	appropriate senior management. To execute these responsibilities, the
	trading desk heads monitor the Company's risk against limits on aggregate
	risk exposures, perform a variety of risk analyses, routinely report risk
	summaries, and maintain the Company's VaR and scenario analysis systems.
	These limits are designed to control price and market liquidity risk. Market
	risk is also monitored through various measures: statistically (using VaR
	and related analytical measures); by measures of position sensitivity; and
	through routine stress testing, which measures the impact on the value of
	existing portfolios of specified changes in market factors, and scenario
	analyses. The material risks identified by these processes are summarized in
	reports that are circulated to and discussed with senior management.

			5

	The Company manages its trading positions by employing a variety of risk
	mitigation strategies. These strategies include diversification of risk
	exposures and hedging. Hedging activities consist of the purchase or sale of
	positions in related securities and financial instruments, primarily U.S.
	Treasury securities. The Company manages and monitors its market risk
	exposures in such a way as to maintain a portfolio that the Company believes
	is well-diversified in the aggregate with respect to market risk factors and
	that reflects the Company's aggregate risk tolerance as established by the
	Company's executive management team.

	Aggregate position limits have been approved for the trading group.
	Additional market risk limits are assigned to trading desks and, as
	appropriate, products. Senior management, trading desk heads
	and traders monitor market risk measures against limits in accordance with
	policies set by the executive management team, senior
	management and trading desk heads. In addition, senior management monitors
	inventory levels and results of the trading departments, as well as
	inventory aging, pricing, concentration, and securities ratings. We have
	established specific approval processes for position trading limits and aged
	inventory exceptions.

	Stifel
	Bank. Stifel Bank's primary market risk is intere