When Bankers Started Playing With Other People's Money

On the afternoon of May 22, 1969, Dan Lufkin, the 36-year-old cofounder of the small research-focused investment-banking and brokerage firm Donaldson, Lufkin & Jenrette, or DLJ, walked into his first board of governors meeting at the august New York Stock Exchange, then, as now, located at the corner of Broad and Wall Streets, carrying with him a copy of a document that he had filed two hours earlier with the Securities and Exchange Commission (SEC). It was the first step in the process that would transform DLJ from a 10-year-old private partnership, with its stock owned by the firm’s partners and their friends, into a public company with shares that could be bought or sold by anyone willing to do so. It also would allow DLJ to get greater access to more affordable and badly needed capital than its partners would otherwise be able to provide.

DLJ “is the first member corporation of the New York Stock Exchange (NYSE) to offer its equity securities to the public,” the firm proclaimed on the cover of its prospectus. DLJ’s decision to sell a portion of its equity to the public—it was hoping to raise $24 million—was a direct challenge to a nearly 200-year-old NYSE rule that prohibited member firms from selling stock to the public because the NYSE had to approve all stockholders of a member firm. Obviously, with a public company’s stock being bought and sold nearly every hour of every day, the NYSE would no longer be able to approve, or not, the DLJ