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June 6 (Bloomberg) -- Jefferies Group LLC faced pressure from U.S. prosecutors to dismiss William Jennings, its co-head of fixed income, while they were investigating suspected trading abuses, regulatory records show.

Jennings was “permitted to resign” on Jan. 27 after Jefferies learned that the U.S. Attorney’s Office in Connecticut wouldn’t settle with the company while he was still employed, according to records maintained by the Financial Industry Regulatory Authority. The investment bank, which is owned by Leucadia National Corp., agreed to pay $25 million to settle criminal and civil probes the next day.

Jesse Litvak, a trader in Jennings’s department, was convicted of securities fraud in March for lying to clients about what he charged them to trade mortgage bonds. His customers included funds that were part of a government program to support the mortgage-bond market. Litvak, 39, asked a judge to throw out his conviction in April.

The case raised questions across Wall Street about just how much trickery is allowed in trading as witnesses at Litvak’s trial testified that his tactics were common. Mortgage-bond traders at JPMorgan Chase & Co., Morgan Stanley and Royal Bank of Scotland Group Plc were placed on leave after other banks received inquiries from U.S. regulators.

At the time of their settlement with Litvak, U.S. officials said that he wasn’t the only employee who lied to his customers. Jennings wasn’t charged. Asset-Backed Alert, an industry newsletter, reported the Finra disclosure earlier today.

David Zornow, a lawyer for Jennings at Skadden Arps Slate Meagher & Flom LLP, declined to comment. Richard Khaleel, a Jefferies spokesman, didn’t immediately respond to phone and e-mail messages seeking comment.

To contact the reporter on this story: Zeke Faux in New York at

To contact the editors responsible for this story: Peter Eichenbaum at Steve Dickson

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