Docstoc

JMP GROUP S-1/A Filing

Document Sample
JMP GROUP  S-1/A Filing Powered By Docstoc
					Table of Contents

                                      As filed with the Securities and Exchange Commission on March 27, 2007
                                                                                                                                            Registration No. 333-140689



                                       UNITED STATES
                           SECURITIES AND EXCHANGE COMMISSION
                                                               WASHINGTON, D.C. 20549


                                                            AMENDMENT NO. 1
                                                                                     TO
                                                      FORM S-1
                                               REGISTRATION STATEMENT
                                                                    UNDER
                                                           THE SECURITIES ACT OF 1933


                                                                   JMP Group Inc.
                                                             (Exact name of registrant as specified in its charter)




                     Delaware                                                         6211                                                   20-1450327
             (State or other Jurisdiction of                              (Primary Standard Industrial                                     (I.R.S. Employer
            Incorporation or Organization)                                 Classification Code Number)                                  Identification Number)

                                                                    600 Montg omery Street
                                                                 San Francisco, Californi a 94111
                                                                         (415) 835-8900
                                                       (Address, including zip code, and telephone number, including
                                                           area code, of registrant’s principal executive offices)



                                                                        Janet L. Tarkoff
                                                                       Chief Leg al Officer
                                                                        JMP Group Inc.
                                                                    600 Montg omery Street
                                                                 San Francisco, Californi a 94111
                                                                   Telephone: (415) 835-8900
                                                                      Fax: (415) 835-8920
                                     (Name, address, including zip code, and telephone number, including area code, of agent for service)



                                                                                 Copies to:

                         Bruce A. Mann, Es q.                                                                              Peter T. Heal y, Es q.
                       Andrew D. Thorpe, Es q.                                                                           O’Mel veny & Myers LLP
                      Morrison & Foerster LLP                                                                           Embarcadero Center West
                          425 Market Street                                                                            275 Battery Street, 26th Floor
                    San Francisco, Californi a 94105                                                                  San Francisco, Californi a 94111
                      Telephone: (415) 268-7000                                                                         Telephone: (415) 984-8700
                         Fax: (415) 268-7522                                                                                Fax: (415) 984-8701


      Approxi mate date of commencement of proposed sale to the public:                             As soon as practicable after the effective date of this
registration statement.
     If any of the securities being registered on this form are being offered on a delayed or continuous basis pursuant to Rule 415 un der the
Securities Act of 1933, check the following bo x. 
     If this form is filed to reg ister additional securities for an offering pursuant to Rule 462(b) under the Securit ies Act, check the following
box and list the Securit ies Act registration statement number of the earlier effective reg istration statement for the same offering. 
     If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following bo x and list the
Securities Act registration statement number of the earlier effect ive registration statement for the same o ffering. 
     If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securit ies Act, check the following bo x and list the
Securities Act registration statement number of the earlier effect ive registration statement for the same o ffering. 


      The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effecti ve date
until the registrant shall file a further amendment which s pecifically states that this registration statement shall thereafter become
effecti ve in accordance wi th Section 8(a) of the Securities Act of 1933 or until this registration statement shall become effecti ve on such
date as the Securities and Exchange Commission, acting pursuant to sai d Section 8(a), may determine.
Table of Contents

The information contained in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed w it h the
Securities and Exchange Commission is effective. This prospectus is not an offer to sell securities, and we are not solicitin g offers to buy these securities, in any
state w here the offer or sale is not permitted.

                                              SUBJ ECT TO COMPLETION, DATED MARCH 27, 2007




                                                                      Shares
                                                                 Common Stock
      This is an init ial public offering of co mmon stock of JM P Group Inc. We are selling             shares of our common stock, an d the
selling stockholders named in this prospectus are selling an additional            shares. Prior to this offering, there has been no public market
for our shares. We will apply to have our common stock listed on the New Yo rk Stock Exchange under the symbol “JM P.” We anticipate that
the initial offering price will be between $       and $       per share.



                                                    Investing in our common stock invol ves risks.
                                            Please read the “ Risk Factors ” section beginning on page 13.


                                                                                                                Per Share                           Total

Public Offering Price                                                                                    $                               $
Underwrit ing Discounts and Commissions                                                                  $                               $
Proceeds, Before Expenses, to Us                                                                         $                               $
Proceeds, Before Expenses, to the Selling Stockholders                                                   $                               $

     Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or complete. Any representati on to the contrary is a cri minal offense .

    We and the selling stockholders have granted the underwriters a 30-day option to purchase up to an additional                  shares of our
common stock to cover overallot ments, if any, at the public offering price per share, less underwriting discounts and co mmissions.

      The underwriters expect to deliver the shares of our common stock to purchasers on or about                                 , 2007.




JMP Securities                                       Merrill Lynch & Co.                                     Keefe, Bruyette & Woods

                                                   The date of this pros pectus is                        , 2007.
Table of Contents

       You shoul d rely only on the informati on contained in this pros pectus or contained in any free wri ting prospectus filed with t he
Securities and Exchange Commission. We have not authorized anyone to provi de you wi th di fferent information from that contained
in this prospectus or in any free writing pros pectus filed with the Securities and Exchange Commission. We and the selling
stockhol ders are offering to sell, and seeking offers to buy, shares of common stock only in jurisdictions where offers or sales are
permi tted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the ti me of
deli very of this prospectus or any s ale of common stock.




                                                           TAB LE OF CONTENTS

                                                                                                                                           Page
Prospectus Summary                                                                                                                            1
Risk Factors                                                                                                                                 13
Special Note Regarding Forward-Loo king Statements                                                                                           29
Div idend Policy                                                                                                                             31
Dilution                                                                                                                                     33
Use of Proceeds                                                                                                                              34
Capitalization                                                                                                                               35
Unaudited Pro Forma Consolidated Financial Information                                                                                       36
Selected Consolidated Financial Data                                                                                                         42
Management’s Discussion and Analysis of Financial Condit ion and Results of Operations                                                       46
Business                                                                                                                                     67
Management                                                                                                                                   85
Executive Co mpensation                                                                                                                      90
Principal and Selling Stockholders                                                                                                          103
Certain Relationships and Related Transactions                                                                                              105
Description of Capital Stock                                                                                                                108
Shares Elig ible for Future Sale                                                                                                            113
Underwrit ing                                                                                                                               114
Validity of Co mmon Stock                                                                                                                   117
Experts                                                                                                                                     117
Where You Can Find More In formation                                                                                                        117
Index to Financial Statements                                                                                                               F-1




     “JMP Securities” and “JMP Asset Management” are our registered trademarks. Additionally, we have filed an applicat ion to register
“JMP” as a trademark. Tradenames, trademarks and service marks of other companies appearing in this prospectus are the property of their
respective holders.


                                                     INDUSTRY AND MARKET DATA

      In this prospectus, we rely on and refer to informat ion and statistics regardin g the investment banking industry, the asset management
industry and the financial services industry. We obtained this data from independent providers or publicly available resource s. Forecasts and
other forward-looking statements made by these sources are subject to the same qualifications and uncertainties as the other forward -looking
statements in this prospectus. Unless otherwise stated, information regarding our emp loyees is as of December 31, 2006.

                                                                        i
Table of Contents

                                                            PROSPECTUS S UMMARY

      You should read the following summary together with the more detailed information in this prospectus, including the “Risk Factors,” our
consolidated financial statements and the accompanying notes contained at the end of this prospectus. Unless otherwise mentioned or unless
the context otherwise indicates, all references in this prospectus to “we,” “us,” “our,” “our firm,” “JMP Group,” or similar references mean
JMP Group Inc. and its subsidiaries.

      Prior to the completion of this offering, we will complete a corporate reorganization so that JMP Group Inc. succeeds to the business
historically operated by JMP Group LLC . Accordingly, unless otherwise specified, we describe the business in this prospectus as if it were our
business, giving effect to the corporate reorganization as if it had been completed prior to this offering.

JMP Group Inc.
     We are a fu ll-service investment banking and asset management firm headquartered in San Francisco. We have a diversified business
model with a focus on small and middle-market co mpanies and provide:

        •      investment banking services, including corporate finance, mergers and acquisitions and other strategic advisory services, to
               corporate clients;
        •      sales and trading and related brokerage services to institutional investors;
        •      proprietary equity research related to our six target industries; and

        •      asset management products and services to institutional investors, high net -worth individuals and for our own account.

      We were founded in 1999 by senior professionals from Montgomery Securities, a leading investment bank serving growth companies
during the 1980s and 1990s, which now operates as Banc of A merica Securit ies. We were formed to take advantage of a void in t he
marketplace created by the acquisition of established independent research boutiques by large co mmercial banks during the mid - and
late-1990s. Like our research-driven predecessors, as a growth-oriented, entrepreneurial firm, we are dedicated to serving the needs of small
and middle-market co mpanies and the institutions that invest in them. We have attracted experienced, revenue-producing professionals who are
knowledgeable about their industries and have longstanding relationships with successful companies in their sectors. As of De cember 31, 2006,
we had 64 managing directors and 27 non-member directors who together represented nearly 50% o f our total emp loyees.

       We focus our efforts on clients in six growth industries: business services, consumer, financial services, healthcare, real estate, and
technology. Our specialization in these industries has enabled us to develop recognized expert ise and to cultivate extensive industry
relationships. As a result, we have established our firm as a key advisor for our corporate clients, a truste d resource for institutional investors,
and an effective investment manager for our asset management clients.

      We approach our work with the idea that expert ise, intellectual capital and relat ionships cannot be commodit ized. In our v iew , producing
attractive returns for our investors and maintain ing a strong balance sheet are essential in building a successful enterprise over the long term.
As a result, we have sought to balance rapid growth with acceptable levels of profitability. We believe that we have co nstructed a successful
operating model for serving growth industries, which will help us continue to grow our firm.

                                                                           1
Table of Contents

      Since inception through December 31, 2006, we have:

        •      lead managed and co-managed 133 public securities offerings, including in itial public, fo llo w-on and preferred equity offerings,
               and 59 private securities offerings, including private investments in public equities, or PIPEs, Rule 144A private offerings, and
               trust preferred securities offerings, representing more than $21.5 b illion of total gross proceeds;
        •      advised companies on 62 mergers and acquisitions, or M&A, transactions and other strategic advisory assignments representing
               approximately $5.3 billion of total transaction value;
        •      increased our daily trading volu me of publicly traded equity securities to an average of 5.5 million shares for the year ended
               December 31, 2006, co mpared to 3.2 million shares for the year ended December 31, 2005 and 2.6 million shares for the year
               ended December 31, 2004;

        •      established a highly experienced equity research team, including 20 senior research analysts who publish independent
               fundamental research on 279 co mpanies; and
        •      formed a family of five proprietary hedge funds, two funds of hedge funds, and an externally advised real estate investment trust,
               or REIT.

      We have achieved strong financial results since our inception, generating growth in revenues and earnings as well as diversif y ing our
revenues by industry and product. This diversification has allo wed u s to be consistently profitable in a variety of econo mic and capital markets
environments, including the three-year industry downturn following the bursting of the Internet and technology bubble. In our investment
banking and brokerage businesses, we earn transaction fees for providing capital raising and financial advisory services to corporate clients and
commissions for executing equity trades for institutional investors. In our asset management business, we earn management fee s from the funds
we manage and the REIT we advise based on the net assets under management, and we earn incentive fees if our investment returns exceed
certain benchmarks. During the five years ended December 31, 2006, we increased annual revenues from $19.7 million to $86.8 million and
grew our annual pro forma net income fro m $0.7 million to $9.0 million. Pro forma net inco me g ives effect to adjustments rela ted to our
corporate reorganization as described in “Certain Relationships and Related Transactions —Reorganization Transactions and Corporate
Structure.”

Principal Business Lines
      We operate our business through two subsidiaries, JMP Securities LLC, a reg istered broker-dealer and JMP Asset Management LLC, a
registered investment adviser. Through JMP Securit ies, we conduct our investment banking, sales and trading, and equity research businesses.
Through JMP Asset Management, we manage hedge funds and other investment vehicles.
        •      Investment Banking. Our investment banking professionals provide capital raising, merger and acquisition and other strategic
               advisory services to corporate clients. Dedicated industry coverage groups serve each of our six targeted sectors, enabling o ur
               investment bankers to develop expertise in specific markets and to form close relationships with corporate executives, private
               equity investors, venture capitalists and other key industry participants.

        •      Sales and Trading. Our sales and trading professionals distribute our equity research products and communicate our proprietary
               investment recommendations to our client base of institutional investors. In addition, our sales and trading staff executes e quity
               trades on behalf of our clients and sells the securities of co mpanies for which we act as an underwriter.
        •      Equity Research. We believe that objective, fundamental analysis forms the basis for value-added equity research and we view
               our equity research as the foundation of our firm. Our research depart ment consists of 20 senior research analysts, including 11
               managing directors with an average

                                                                          2
Table of Contents

              of 13 years of industry experience, and a total of 37 research professionals who publish investment recommendations on 279
              primarily s mall and midsized public co mpanies. Our research analysts develop proprietary investment themes and produce timely,
              action-oriented recommendations to assist our clients with their investment decisions.

        •      Asset Management. Our asset management group actively manages several funds for institutional and high -net-worth investors
               seeking alternative investment opportunities, in addition to committing our own cap ital to principal investments. The objective of
               our mu ltip le fund strategies is to diversify both revenue and risk wh ile maintaining the attractive business economics of the hedge
               fund model. To the extent that we invest for our own account, we co mmit a portion of our capital to a portfolio of equity
               securities managed by JMP Asset Management and also contribute capital as the general partner of the funds JMP Asset
               Management manages. In some cases, we co-invest alongside our institutional clients in private transactions originated by our
               investment banking business. We may also invest in private equity funds or other alternative investment vehicles managed by
               third parties, although we have done so infrequently in the past.

Market Opportuni ty
       Since the mid-1990s, there have been more than 40 acquisitions of U.S. investmen t banking firms that we would have considered our
direct peers or co mpetitors. Most of these firms were acquired by larger financial institutions, including U.S. and international depository
institutions, insurance companies and investment banking firms. This continued industry consolidation has led to:
        •      the tendency of major financial institutions —and the firms acquired by them—to focus on more mature industry segments,
               companies with larger market capitalizat ions, and larger transactions;
        •      the reduction of equity research coverage, specifically of s mall and middle -market growth co mpanies; and

        •      restructuring and downsizing within the remain ing consolidated investment banks, resulting in a further reduction of investme nt
               banking and brokerage resources allocated to small and middle -market co mpanies and their investors.

      We believe that small and middle-market co mpanies now receive less consistent attention from consolidated investment bankin g firms,
which now pursue clients and transactions with larger market values. Due to our focus on small and middle -market co mpanies within our six
target industries, we believe that our extensive relat ionships and expertise in serving these companies provide us with a distinct competitive
advantage.

Competiti ve Strengths
    We believe that the following factors define our business model, establish our competitive po sition and distinguish us from other
companies that participate in our businesses and markets:
        •      Experienced and Focused Owner-Managers. We are led by a highly skilled and experienced team of industry professionals.
               Before founding or jo ining our firm, many of our senior professionals held positions at leading investment banking and
               investment management firms. Our 64 managing directors av erage 16 years of industry experience and have each made a
               substantial financial co mmit ment to our firm. Collectively, our managing directors owned approximately 75% of our equity prio r
               to this offering and will o wn appro ximately      % of our equity immediately after this offering.
        •      Diversified Business Model. The selection of our six target industries, the development of multip le products and the establishment
               of our three revenue-producing business lines—investment banking, sales and trading, and asset management—have created a
               diversified business model, especially when

                                                                          3
Table of Contents

              compared to that of our more specialized co mpetitors. Historically, our six target industries have performed, in certain resp ects,
              counter-cyclically to one another and have yielded a large nu mber of clients and business opportunities.

        •      Small Company and Middle-Market Specialization. We believe that we have established our firm as a leading advisor to small
               and middle-market co mpanies within our six target industries. We view the experience and far-reaching relationships of our
               senior professionals, coupled with our proven ability to meet the special transactional and strategic needs of our clients, as
               significant co mpetitive strengths for our firm. Our specialized client focus has enabled us to generate significant repeat business
               and typically has enabled us to earn more p ro minent roles in subsequent transactions.
        •      Independence. We are an independent firm owned by our employees and by outside investors. We are not a part of a larger,
               diversified financial institution with mu ltiple business objectives. As a result, we are not subject to the same conflicts of interest
               that may challenge major financial services firms with goals that are at times contrary to those of their clients.
        •      Highly Regarded Equity Research Product. We believe that delivering differentiated, fundamental research to institutional
               investors that can impact their portfolio returns is one of the primary ways that we can distinguish ourselves in the marketp lace.
               We are experts on the industries we cover and provide informed opinions and actionable investment ideas to our institutional
               brokerage clients about small and midsized public co mpanies.

        •      Highly Scalable Asset Management Business. We believe that several of the funds we manage have produced historical returns
               that are attractive to investors. Our goal is to substantially increase client assets under management and to provide investo rs with
               favorable absolute returns. We currently have the capacity to manage additional assets without a substantial incremental
               investment in infrastructure.
        •      Strong Corporate Culture. Our corporate culture is characterized by an entrepreneurial spirit and a desire to build a firm that is
               widely recognized for its excellence. Our managing directors are directly and extensively involved in our daily operations. O ur
               firm’s culture has helped us attract seasoned professionals from other respected financial services firms and to maintain a low rate
               of attrition.

Growth Strategy
      Our growth strategy is to stay focused on our core activities of investment banking, sales and trading, equity res earch and asset
management while continuing to attract experienced revenue-producing professionals to our firm. We may also make investments in businesses
or products that are complementary to our core businesses and may selectively pursue strategic acquis itions. We intend to continue to grow by:
        •      recruit ing experienced professionals with established industry and client relationships, typically fro m well-known investment
               banking firms;

        •      increasing the frequency and extent of our participation in public and private securities offerings, in particu lar increasing our
               number of lead managed mandates as well as receiv ing larger economic roles as a co -manager in offerings in our targeted
               industries;
        •      increasing our participation as a financial advisor in mergers and acquisitions and other strategic corporate transactions;
        •      expanding the group of institutional investors to which we market our equity research and sales and trading products and services,
               and by increasing the frequency with wh ich we do business with these investors;

        •      increasing the number and volu me of securit ies in wh ich we trade;

                                                                           4
Table of Contents

        •      increasing the number of co mpanies under coverage by our equity research analysts;

        •      increasing assets under management and developing new asset management products; and
        •      building upon our investment banking experience to generate principal investment opportunities.

       Notwithstanding our competitive strengths and growth strategy, we face a nu mber of risks. We focus our resources on a limited number
of industries and depend on them to generate a significant portion of our revenues. If we are unable to originate or execute a sufficient number
of transactions in these key industries, our revenues and net income will suffer. In addition, the t iming of our investment b anking transactions
can be unpredictable, as are the related revenues. Consequently, our financial results may fluctuate substantially fro m quart er to quarter. With
regard to our asset management business, our assets under management may decline during periods in whic h our hedge funds and other
investment products generate unsatisfactory investment returns. Any principal investments or acquisitions we pursue may result in additional
risks and uncertainties in our business, including the risk of cap ital loss. We face st rong competition fro m larger firms, so me of which have
greater resources and name recognition and wh ich offer a broader range of products and services. Additionally, we co mpete to attract qualified
professionals with numerous firms in our businesses and other related businesses, such as hedge fund management, venture capital and private
equity. A failure to hire highly skilled emp loyees and to retain our existing employees could materially impede our growth an d success.

Why We Are Going Public
      We believe that this offering will allo w us to better execute our growth strategy. We believe that as a public company we will h ave
greater visibility with prospective clients and industry peers, increased access to capital, and additional currency with which to explore strategic
opportunities as they arise. Finally, we expect that operating as a public company will provide us with increased brand recog nition and will
enhance our ability to attract and retain top professionals by enabling us to offer equity -based incentives linked directly to the long-term
success of our business.

Our Reorg anization
       We have historically conducted our business through a limited liability co mpany, JMP Group LLC, and its consolidated subsidia ries.
Prior to the comp letion of this offering, we will co mp lete a corporate reorganization in order to have JMP Group Inc. succeed to the business of
JMP Group LLC and its consolidated subsidiaries and to have the members of JMP Group LLC beco me stockholders of JMP Group Inc . In the
corporate reorganization, we will exchange all of the outstanding membership interests of JMP Group LL C for shares of common stock of
JMP Group Inc. at an exchange ratio of one-for-one. In addition, outstanding options to purchase Class B common interests of JMP Group LLC
will be converted into options to purchase shares of common stock of JM P Group Inc. A s a result of the exchange, JMP Group Inc. will be a
holding company and JMP Group LLC will become a who lly-o wned subsidiary of JMP Group Inc., as illustrated by the organization chart
below. For further details on these transactions, see “Certain Relationships and Related Transactions —Reorganization Transactions and
Corporate Structure” in this prospectus. This prospectus assumes that the corporate reorganization has taken effect prior to this offering, unless
otherwise indicated.

     Upon the completion of this offering, we anticipate that our annual total compensation and benefits, including amounts payable to our
named executive officers, but excluding equity awards granted prior to and in connection with this offering, will equal appro ximately 60% o f
revenues each year, although we may change this rate at any time.

                                                                         5
Table of Contents




(1)   Based on             shares of common stock outstanding as of the completion of our offering. Does not include (i) an aggregate of 2,674,940 shares issuable upon the exercise of
      outstanding options to purchase shares of our common stock as of December 31, 2006, or (ii) the            shares of our common stock underlying restricted stock units that we intend to
      grant to certain of our employees effective as of the completion of this offering.

       In connection with this offering, we will grant an aggregate of            restricted stock units to our employees, of which our named
executive officers will receive an aggregate of           restricted stock units. In connection with our corporate reorganization, we will make
distributions to the members of JM P Group LLC, which will include (i) distributions of all 2007 earn ings generated prior to the comp letion of
the corporate reorganization, (ii) distributions of $10.0 million related to earnings previously allocated to the members for periods prior to
December 31, 2006 that have not yet been distributed, and (iii) d istributions for estimated inco me tax obligations of the members attributable
primarily to performance bonus accruals that will be allocated as taxab le inco me to the members upon the corporate reorganiza tion. Our named
executive officers will receive approximately 32.1% of the amount we will distribute prior to this offering. Profit distribut ions in 2006 and in
the first quarter of 2007 to managing directors totaled an aggregate of $11.4 million and $          million, respectively. Of these amounts, we
distributed to our named executive officers an aggregate of $5.0 million and $           million, respectively.

General Informati on
       As of December 31, 2006, we had 187 emp loyees, including 91 senior professionals, which are our managing directors and directors.

      Our headquarters is located at 600 Montgomery St reet, Su ite 1100, San Francisco, Californ ia 94111. We have additional offices in New
Yo rk, New York; Boston, Massachusetts; and Chicago, Illinois. Ou r main office telep hone number is (415) 835-8900. We maintain an Internet
website at http://www.jmpsecurities.co m. The information on our website is not part of this prospectus.

                                                                                               6
Table of Contents



The Offering

Co mmon stock offered by JMP Group Inc.                               shares

Co mmon stock offered by the selling stockholders                     shares

Shares of common stock to be
  outstanding after this offering                                     shares

Overallot ment option                                           shares, of which up to             shares will be sold by JMP Group Inc.
                                                    and up to              shares will be sold by the selling stockholders.

Use of proceeds                                     We estimate that our net proceeds from this offering will be appro ximately
                                                    $          million, after deducting the estimated underwrit ing discounts and
                                                    commissions and estimated offering expenses. We intend to use the net proceeds
                                                    fro m this offering for general corporate purposes, including expansion of our existing
                                                    business activities, and to fund principal investments and strategic investments as
                                                    such opportunities may arise in the future. We will not receive any of the net
                                                    proceeds fro m the sale of shares of common stock by the selling stockholders.

Div idend policy                                    Following this offering and subject to legally available funds, we currently intend to
                                                    declare a quarterly cash dividend on all outstanding shares of common stock. The
                                                    first quarterly dividend will be for the second quarter of 2007 and will be p rorated for
                                                    the portion of that period subsequent to the completion of th is offering. Our div idend
                                                    policy permits the board of directors to exercise its discretion in determining the
                                                    appropriate level and timing of dividend payments. We intend to pay dividends out of
                                                    a portion of our current earnings for each quarter and do not intend to borrow funds
                                                    in order to pay dividends. The amount of such dividends will be determined by our
                                                    board of directors, who will take into account various factors, including, among
                                                    others, our financial performance, earnings, liquidity and the operating performance
                                                    of our segments as assessed by management. We do not intend to pay out all excess
                                                    cash and we do not plan to pay dividends on unvested shares of restricted stock units
                                                    or equity-based awards that we will issue prior to and in connection with this
                                                    offering. Ho wever, no assurance can be given that any dividends, whether quarterly
                                                    or otherwise, will or can be paid.

                                                    JMP Group Inc. will be a hold ing company and our ability to p ay dividends to our
                                                    stockholders will be subject to the ability of JM P Group LLC to provide cash to us.
                                                    Any distribution to us made by JMP Group LLC will be at the discretion of our board
                                                    of directors and will depend on contractual, legal and regulatory restrictions on

                                                                  7
Table of Contents

                                                           the payment of distributions by JMP Group LLC. In particular, JMP Group LLC’s
                                                           credit facility prohibits us fro m making any cash distributions if an event of default
                                                           has occurred and is continuing or would result fro m the cash distribution.
                                                           Additionally, SEC regulat ions also provide that JMP Securities may not pay cash
                                                           dividends to us if certain min imu m net capital requirements are not met.

Risk factors                                               See “Risk Factors” for a discussion of risks you should carefully consider before
                                                           deciding to invest in shares of our common stock.

Proposed New York Stock Exchange
  sy mbol                                                  JMP

      Unless we specifically state otherwise, the information in this prospectus gives effect to the corporate reorganization that we will
complete prior to this offering, but does not reflect (i) the sale of up to         shares of common stock that the underwriters have the option to
purchase fro m JMP Group Inc. to cover overallotments, (ii) the             shares of our common stock underlying restricted stock units that we
intend to grant to certain of our emp loyees in connection with this offering, (iii) an aggregate of 2,674,940 shares issuable upon the exercise of
outstanding options to purchase shares of our common stock as of December 31, 2006, or (iv )               shares reserved for issuance under the
2007 Equity Incentive Plan.

                                                                         8
Table of Contents

Summary Historical Consoli dated Financial and Other Data
      The following table shows summary consolidated financial and oth er data for the periods ended and as of the dates indicated. The
summary consolidated statements of financial condition data as of December 31, 2005 and 2006 and the summary consolidated statements of
income data for each of the three years in the period ended December 31, 2006 have been derived fro m our audited consolidated financial
statements and accompanying notes included elsewhere in this prospectus and should be read together with those consolidated f inancial
statements and accompanying notes.

      The summary consolidated statements of financial condition data as of December 31, 2002, 2003 and 2004 and the summary co nsolidated
statements of income data for the years ended December 31, 2002 and 2003 have been derived fro m audited consolidated financial statements
not included in this prospectus. The summary consolidated financial and other data should be read together with the sections entitled “Selected
Consolidated Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operat ions” and with our
consolidated financial statements and accompanying notes included elsewhere in this prospectus.

      The summary historical consolidated financial data as of and for the years ended December 31, 2002, 2003, 2004 and 2005 hav e been
restated for the matters discussed in Note 3 to the acco mpanying consolidated financial statements included herein.

      The unaudited pro forma data for the year ended December 31, 2006 have been derived fro m the pro forma data provided in “Unaudited
Pro Forma Condensed Consolidated Financial Informat ion” included elsewhere in this prospectus. The unaudited pro forma informat ion for the
years ended December 31, 2002 to 2005 have been calculated based on assumptions consistent with those used for the 2006 un audited pro
forma consolidated financial informat ion.

      The pro forma statement of inco me and pro forma statement of financial condition adjustments principally give effect to the c orporate
reorganizat ion as described in “Certain Relationships—Reorganizat ion Transactions and Corporate Structure,” including:

        •      the exchange of Class A common interests and Class B co mmon interests held by our non -employee members into shares of our
               common stock in connection with the corporate reorganization;
        •      the exchange of our Redeemable Class A member interests held by our employee members into shares of our common stock in
               connection with the corporate reorganization, and as a result (i) the capital related to the Redeemab le Class A member interests
               will be reclassified as equity, (ii) we will no longer allocate income and pay pro rata profit d istributions to the holders of the
               Redeemable Class A member interests and (iii) we will no longer make interest payments to the holders of the Redeemab le
               Class A member interests; and
        •      a provision for corporate inco me taxes as a corporation at an assumed co mbined federal, state and local income tax rate of 42% of
               our pre-tax net income.

                                                                          9
Table of Contents

(in thousands, except per share data and selected data
and operating metrics)                                                          As of or for the Year Ended December 31,
                                                                 2002                  2003                  2004                  2005              2006

                                                               (restated)            (restated)            (restated)            (restated)
Statement of Income Data
   Revenues
     Investment banking                                    $         5,878       $        25,267       $        37,413       $        62,880     $ 44,060
     Bro kerage revenues                                             8,981                15,883                22,579                23,536       30,185
     Asset management fees                                             876                 7,670                12,505                 8,538        4,531
     Principal t ransactions                                         1,147                 8,558                 1,775                (2,006 )      4,288
     Interest, dividends and other                                   2,858                 1,393                   545                 1,713        3,742

   Total revenues                                                   19,740                58,771                74,817                94,661         86,806

   Expenses
     Co mpensation and benefits                                     11,682                32,522                46,969                60,145         50,136
     Income allocation and
        accretion/(dilution)—Redeemable Class A
        member interests (1)                                         (1,151 )             13,093                 9,755                12,983         10,664
     Admin istration                                                    751                1,778                 2,640                 3,362          3,977
     Bro kerage, clearing and exchange fees                           1,769                1,484                 2,848                 3,170          4,133
     Interest and dividend expense                                      358                  654                 1,009                   933          1,686
     Other expenses                                                   4,119                6,041                 8,098                10,146         12,395

   Total expenses                                                   17,528                55,572                71,319                90,739         82,991
     Minority interest (2)                                              —                     —                     —                     —             428

   Net inco me (3)                                                   2,212                 3,199                 3,498                 3,922          3,387
     Increase in redemption value of Series B p referred
         units                                                       (3,493 )              (2,151 )                 (513 )                 —                —
     Distributions to Series A convertible preferred
         units                                                       (1,061 )                 (704 )                (469 )                 —                —

   Net inco me attributable to Class A and Class B
     common interests (3)                                  $         (2,342 )    $            344      $         2,516       $         3,922     $    3,387


   Net inco me per unit—Class A common
     interests (3)(4)
     Basic                                                 $         (14.52 )    $            2.45     $            2.12     $            1.04   $     0.91
     Diluted                                               $         (14.52 )    $            0.65     $            1.92     $            1.04   $     0.89
   Weighted average units outstanding—Class A
     common interests (4)
     Basic                                                             161                   141                 1,185                 1,474          1,435
     Diluted                                                         1,633                 1,613                 1,553                 1,474          1,468
   Net inco me per unit—Class B co mmon
     interests (3)(4)
     Basic                                                               —                      —      $            0.73     $            1.04   $     0.91
     Diluted                                                             —                      —      $            0.73     $            1.04   $     0.89
   Weighted average units outstanding—Class B
     common interests (4)
     Basic                                                               —                      —                   958                2,300          2,300
     Diluted                                                             —                      —                   958                2,300          2,353

                                                                        10
Table of Contents

(in thousands, except per share data and selected
data and operating metrics)                                                  As of or for the Year Ended December 31,
                                                             2002                  2003                  2004                  2005                2006

                                                           (restated)            (restated)            (restated)            (restated)
Pro Forma Statement of Income Data—C-Corp
  (Unaudited) (5)
  Total revenues                                       $        19,740       $        58,771       $        74,817       $        94,661       $    86,806
  Total expenses                                                17,528                55,572                71,319                90,739            82,991
     Addback: Income allocation and
        accretion/(dilution)—Redeemable Class A
        member interests (1) (6)                                 1,151               (13,093 )               (9,755 )            (12,983 )         (10,664 )
     Addback: Interest expense—Redeemable
        Class A member interests (7)                                (163 )                (577 )                (920 )                (888 )        (1,537 )

   Pro forma total expenses                                     18,516                41,902                60,644                76,868            70,790
      Minority interest (2)                                         —                     —                     —                     —                428

   Pro forma income before taxes                                 1,224                16,869                14,173                17,793            15,588
      Pro forma tax expense (42.0% assumed tax rate)
         (8)                                                        514                7,085                 5,953                 7,473             6,547

   Pro forma net inco me                               $            710      $         9,784       $         8,220       $        10,320       $     9,041

Pro forma net inco me per share of co mmon stock:
   Basic                                                                                                                                       $      0.61
   Diluted (9)                                                                                                                                 $      0.61
Pro forma weighted average number of co mmon
   shares outstanding:
   Basic                                                                                                                                            14,800
   Diluted (9)                                                                                                                                      14,886
Statement of Financial Condi tion Data
   Total assets                                        $        25,579       $        58,146       $        85,993       $        91,923       $ 103,699
   Notes payable                                                    —                     —                  2,500                    —               —
   Redeemable Class A member interests                           1,755                11,542                 5,897                11,517          12,914
   Total liabilities                                             9,210                39,281                40,573                45,275          51,208
   Total equity                                                 12,533                12,877                45,419                46,648          46,752
Pro forma Statement of Financial Condi tion
  Data—C-Corp (Unaudited) (5)
  Pro forma total liabilit ies (10)                                                                                                            $    38,294
  Pro forma total equity (10) (11)                                                                                                                  49,666
Selected Data and Operating Metrics (Unaudi ted)
  Nu mber of emp loyees—end of period                                77                  111                   141                   169              187
  Nu mber of emp loyees—average                                      63                    96                  127                   162              181
  Revenues per average employee                                   $313                  $612                  $589                  $584             $480
  Co mpensation and benefits as a % of revenues (12)               59.2 %                55.3 %                62.8 %                63.5 %           57.8 %
  Co mpanies covered by our research analysts                        93                  155                   198                   294              279
  Nu mber of co mp leted investment banking
     transactions                                                     11                    25                    55                    75                75



                                                                        11
Table of Contents

(1)   Prior to this offering we were organized as a limited liability company and issued to employee members, who are our managing directors,
      Redeemable Class A member interests, that were entitled to their pro rata share of our inco me. Our Third A mended and Restated Limited
      Liability Co mpany Agreement, as amended, provides that each employee member may elect to redeem their Redeemable Class A
      member interests upon resignation from us. Because of this repurchase feature, the Redeemab le Class A member interests are classified
      as a liability in our statement of financial condition. As a result of the liability classificat ion, the pro rata share of in co me allocated to the
      Redeemable Class A member interests based on ownership percentages and any changes in the redemption amount of the Redeemab le
      Class A member interests were recorded as expense in our statement of inco me.

(2)   Minority interest relates to the interest of third parties in JM P Realty Trust and in two asset management funds, Harvest Con sumer
      Partners and Harvest Technology Partners.
(3)   Prior to this offering we were a limited liability co mpany and our earnings did not reflect the inco me taxes we will pay as a corporation.
(4)   We issued 2,300,000 units of Class B common interests in a private offering in August 2004, wh ich represented 15.5% of our
      outstanding membership interests. Because there is a direct relationship between the number of Class B co mmon interests outstanding
      and the ownership percentage in our equity, we were ab le to determine the number of units associated with the C lass A commo n interests
      outstanding. As a result, we were able to determine earnings per share, based on an implied nu mber of Class A common interests and an
      existing number of Class B co mmon interests outstanding. We have reflected this imp lied nu mber o f units for purposes of determining
      earnings per share in all periods presented.

(5)   The amounts for all periods presented reflect pro forma results of operations as if the corporate reorganization had occurred on January 1,
      2002.
(6)   As a limited liability company, we allocated inco me and paid profit distributions to the holders of our Redeemable Class A member
      interests based on their pro rata ownership. These profit distributions were in addition to performance -based bonus compensation paid to
      our emp loyee members. As a corporation, our Redeemab le Class A member interests will be exchanged into shares of our common stock
      and we will no longer pay pro rata profit distributions to the holders of the Redeemab le Class A member interests.
(7)   As a limited liability company, we made interest payments based on contributed capital to the holders of the Redeemab le Class A
      member interests. As a corporation, our Redeemable Class A member interests will be exchanged into shares of our common stock an d
      we will no longer make interest payments to the holders of the Redeemable Class A member interests.

(8)   As a limited liability company, we were not subject to income taxes. The pro forma tax expense for all periods presented includes
      adjustments for assumed federal, state and local inco me taxes as if we were organized as a corporation for each period fro m Jan uary 1,
      2002 at an assumed comb ined federal, state and local inco me tax rate of 42% of our income befo re taxes.
(9)   The pro forma d iluted numbe r of shares outstanding includes the dilutive impact of outstanding options by application of the Treasury
      Stock method in accordance with SFAS 128, Earnings per Share .
(10) Reflects the exchange of our Redeemable Class A member interests into shares of common stock.

(11) Reflects distributions prior to this offering of $10.0 million related to earnings previously allocated to our members for pe riods prior to
     December 31, 2006 that have not yet been distributed.
(12) Co mpensation and benefits include salaries and performance-based bonus payments to our managing directors and other emplo yees.
     Following this offering, we expect that our annual total compensation and benefits, including that payable to our managing directors, but
     excluding equity awards granted prior to and in connection with this offering, will be appro ximately 60% of revenues each yea r;
     however, we retain the discretion to change this percentage in the future.

                                                                           12
Table of Contents

                                                                  RIS K FACTORS

     An investment in our shares of common stock involves a high degree of risk. You should consider carefully the following infor mation
about these risks, together with the other information contained in this prospectus, before deciding to buy our common stock . If any of the
events or developments described below actually occur, our business, results of operations and financial condition would like ly suffer. In these
circumstances, the market price of our common stock could decline, and you may lose all or part of your investment in our common stock.

Risks Related to Our Business
 We focus principally on specific sectors of the economy, a nd deterioration in the business environment in t hese sectors or a decline in the
 market for securities of companies within these sectors could harm our busi ness.
       We focus principally on six target industries: business services, consumer, financial services, healthcare, real estate, and technology.
Vo latility in the business environment in these industries or in the market for securities of co mpanies within these industries could adversely
affect our financial results and the market value of our co mmon stock. The business environment for co mpanies in these indust ries has been
subject to substantial volatility over time, and our financial results have consequently been subject to significant variations fro m year to year.
The market for securit ies in each of our target industries may also be subject to industry -specific risks.

      As an investment bank focused principally on specific growth sectors of the economy, we also depend significantly on private company
transactions for sources of revenues and potential business opportunities. Most of these private company clients are init ially fun ded and
controlled by venture capital funds and private equity firms. To the extent that the pace of these private company transactions slows or the
average transaction size declines due to a decrease in venture capital and private equity financings, difficu lt market condit ions in our target
industries or other factors, our business and results of operations may be harmed.

      Underwrit ing and other corporate finance transactions, strategic advisory engagements and related sales and trading activitie s in our
target industries represent a significant portion of our business. This concentration of activity in our target industries exposes us to the risk of
declines in revenues in the event of downturns in these industries.

 Our financial results from investment banking activities may fluctuate substantially from pe riod to period, which may impair our stock
 price.
       We have experienced, and expect to experience in the future, significant variat ions from period to period in our revenues and results of
operations from investment banking activities. For example, our annual investment banking revenues decreased fro m $62.9 million for the year
ended December 31, 2005 to $44.1 million for the year ended December 31, 2006 due to the fact that we generated fewer mergers and
acquisitions and underwriting transactions in our homebuild ing and financial services groups during the year ended December 31, 2006. As a
percentage of total investment banking revenues, investment banking revenues fro m the homebuilding sector fell fro m 31.2% for the year
ended December 31, 2005 to 15.4% for the year ended December 31, 2006, and investment banking revenues from the financial services sector
fell fro m 31.1% for the year ended December 31, 2005 to 21.4% for the year ended December 31, 2006. Future variat ions in in vestment
banking revenues may be attributable in part to the fact that our investment banking revenues are typically earned upon the successful
complet ion of a transaction, the timing of wh ich is uncertain and beyond our control. In most cases, we receive little o r no payment fo r
investment banking engagements that do not result in the successful complet ion of a transaction. As a result, our business is highly dependent
on market conditions as well as the decisions and actions of our clients and interested third parties. For examp le, a c lient’s acquisition
transaction may be delayed or terminated because of a failure to agree upon final terms with the counterparty, failure to obt ain necessary
regulatory consents or board or stockholder approvals, failure to secure necessary financing, adv erse market conditions or unexpected financial
or other problems in the business of a client or a counterparty. If the parties fail to co mplete a transaction on which we are advising or an
offering in which we are part icipating,

                                                                          13
Table of Contents

we will earn little or no revenue fro m the contemplated transaction. In addition, we pay significant expenses related to a co ntemplated
transaction regardless of whether or not the contemplated transactio n generates revenues. This risk may be intensified by our focus on growth
companies in the business services, consumer, financial services, healthcare, real estate and technology industries, as the market for securities
of these companies has experienced s ignificant variations in the number and size of equity offerings. Recently, mo re co mpanies init iating the
process of an initial public offering are simultaneously exp loring merger and acquisition opportunities. Our investment banking revenues would
be adversely affected in the event that a company conducting an initial public offering fo r which we are act ing as an underwriter we re to be
preempted by the sale of that company, if we are not also engaged as a strategic advisor. As a result, we may not achieve steady and predictable
earnings on a quarterly basis, which could in turn adversely affect our stock price.

 Our ability to retain our senior professionals and recruit additional professionals is critical to the success of our busines s, and our failure
 to do so may adversely affect our reputation, business, results of operations and financial condition.
       Our people are our most valuable resource. Our ab ility to obtain and successfully execute the transactions that generate a significant
portion of our revenues depends upon the reputation, judgment, business generation capabilities and project execution skills of our senior
professionals, particularly the members of our executive co mmittee. The reputations and relationships of our senior professio nals with our
clients are a crit ical element in obtaining and executing client engagements. Turnover in the investment banking industry is high and we
encounter intense competition for qualified employees fro m other co mpanies in the investment banking industry as well a s fro m businesses
outside the investment banking business, such as hedge funds and private equity funds. In addition, fo llo wing this offering, we intend to limit
total annual compensation and benefits, excluding expenses relating to equity -based awards made prior and in connection with this offering, to
approximately 60% of revenues each year, although we may change this rate at any time. As a result, our senior professionals may receive less
compensation than they otherwise would have received prior to this offering and may receive less compensation than they otherwise would
receive at other firms. Such a reduction in co mpensation (or the belief that a reduction may occur) could make it more d iffic u lt to retain our
senior professionals. If we were to lose the services of any of our investment bankers, senior equity research, sales and trading professionals,
asset managers, or executive officers to a new or existing co mpetitor or otherwise, we may not be able to retain valuable relatio nships and some
of our clients could choose to use the services of a compet itor instead of our services. For examp le, Gerald L. Tuttle, Jr., our co -founder and
co-director of investment banking, recently passed away due to a sudden illness. If we are unable to retain our senior p rofessionals or recru it
additional professionals, our reputation, business, results of operations and financial condition will be adversely affected.

 We face strong competition from larger firms, some of which have greater resources and name recognition than we do, which may impede
 our ability to grow our business.
      The investment banking industry is intensely competitive, and we expect it to remain so. We compete on the basis of a number of factors,
including client relationships, reputation, the abilities of our professionals, market focus and the relative quality and price of our services and
products. We have experienced intense price co mpetition in our various businesses. Pricing and other competitive pressures in investment
banking, including the trends toward multip le book runners, co-managers and mu ltiple financial advisors handling transactions, could adversely
affect our revenues, even as the size and number of our investment banking transactions may increase.

      We are a relatively s mall investment bank with 187 emp loyees as of December 31, 2006, and revenues of $86.8 million fo r the year
ended December 31, 2006. Many of our co mpetitors have a broader range of products and services, greater financial and marketing resources,
larger customer bases, greater name recognition, mo re senior professionals to serve their clients ’ needs, greater global reach and more
established relationships with clients than we have. These larger and better capitalized co mpetitors may be better able to re spond to changes in
the investment banking industry, compete for skilled professionals, finance acquisitions, fund internal growth and

                                                                        14
Table of Contents

compete for market share generally. These firms have the ability to support investment banking with co mmercial banking, insur ance and other
financial services in an effort to gain market share, which has resulted, and could further result, in pricing press ure in our businesses. In
particular, the ability to provide financing has become an important advantage for some of our larger co mpetitors and, becaus e we do not
provide such financing, we may be unable to co mpete as effectively fo r clients in a significa nt part of the investment banking industry. If we
are unable to compete effectively with our co mpetitors, our business, results of operations and financial condition will be a dversely affected.

 Pricing and other competitive pressures may impair the revenues of our sales and trading business.
      We derive a significant portion of our revenues fro m our sales and trading business, which accounted for 35% of our revenues for the
year ended December 31, 2006, and 25% of our revenues for the year ended December 31, 2005. Along with other investment banking firms,
we have experienced intense price competit ion in this business in recent years. In particular, the ability to execute trades electronically and
through alternative trading systems has increased the downward pressure on trading commissions and spreads. We expect this trend toward
alternative trading systems and downward pricing pressure in the business to continue. We believe we may experience co mpetitive pressures in
these and other areas in the future as some of our co mpetitors seek to obtain market share by competing on the basis of price or by using their
own capital to facilitate client trading activ ities. In addit ion, we face pressure fro m our larger co mpetitors, which may be better able to offer a
broader range of comp lementary products and services to clients in order to win their trading business. As we are committed to maintaining and
improving our co mprehensive research coverage in our target sectors to support our sales and trading business, we may be required to make
substantial investments in our research capabilit ies to remain co mpetit ive. If we are unable to compete effectively in these areas, the revenues
of our sales and trading business may decline, and our business, results of operations a nd financial condition may be harmed.

       Some of our large institutional sales and trading clients in terms of brokerage revenues have recently entered into arrangeme nts with us
and other investment banking firms under wh ich they will separate payments for re search products or services from t rading commissions for
sales and trading services, and will pay for research direct ly in cash, instead of compensating these firms through trading c ommissions (referred
to as “soft dollar” practices). In addition, we have entered into a few co mmission sharing arrangements in which institutional clients will
execute trades with a limited number of bro kers and instruct those brokers allocate a portion of the commission directly to o ther broker-dealers
for research or to an independent research provider. If mo re of such arrangements are reached between our clients and us, or if similar pract ices
are adopted by more firms in the investment banking industry, it may further increase the competit ive pressures on trading co mmissions and
spreads and reduce the value our clients place on high quality research. Conversely, if we are unable to make similar arrange ments with other
investment managers that insist on separating trading commissions from research products, volumes and trading commissions in our sales and
trading business also would likely decrease.

 We face strong competition from middle-market investment banks.
      We compete with specialized investment banks to provide financial and investment banking services to small and middle -market
companies. Middle -market investment banks, including, without limitation, CIBC World Markets Corp., Cowen and Co mpany, LLC,
Fried man, Billings, Ramsey & Co., Inc., Jefferies & Co mpany, Inc., Piper Jaffray & Co., Ray mond James & Associates, Inc., RBC Capital
Markets Corporation, Robert W. Baird & Co., Inc., Thomas Weisel Partners LLC and William Blair & Co mpany, provide access to capital and
strategic advice to small and middle -market co mpanies in our target industries. We compete with those investment banks on the basis of a
number of factors, includ ing client relat ionships, reputation, the abilit ies of our professionals, market focus and the relat ive quality of our
products and services. Competit ion in the middle-market may fu rther intensify if larger Wall Street investment banks expand their focus to this
sector of the market. Increased competit ion could reduce our market share fro m investment banking services and our ability to generate fees at
historical levels.

                                                                          15
Table of Contents

 Our corporate finance and strategic advisory engagements are singular in nature and do not generally provide for subsequent
 engagements.
      Our investment banking clients generally retain us on a short-term, engagement-by-engagement basis in connection with specific
corporate finance, merger and acquisition transactions and other strategic advisory services, rather than on a recurring basis under long-term
contracts. As these transactions are typically singular in nature and our engagements with these clients may not recur, we must seek new
engagements when our current engagements are successfully co mpleted or are terminated. As a result, high activity levels in a ny period are not
necessarily indicat ive of continued high levels of activity in any subsequent period. If we are unable to generate a substantial number of new
engagements that generate fees fro m new o r existing clients, our business, results of operations and financial condition could be adversely
affected.

 Larger and more frequent capital commitments in our trading and underwriting businesses increase the potential for significan t losses.
       There is a trend toward larger and mo re frequent commit ments of capital by financial services firms in many of th eir act ivities. For
example, in order to win business, investment banks are increasingly committ ing to purchase large blocks of stock fro m public ly traded issuers
or significant stockholders, instead of the more trad itional marketed underwrit ing process in which marketing is typically co mp leted before an
investment bank commits to purchase securities for resale. We may part icipate in this trend and, as a result, we may be subje ct to increased
risk. Furthermore, we may suffer losses as a result of the positions taken in these transactions even when economic and market conditions are
generally favorable for others in the industry.

      We may increasingly co mmit our own capital as part of our trad ing business to facilitate client sales and trading activities. The number
and size of these transactions may adversely affect our results of operations in a given period. We may also incur significan t losses fro m our
sales and trading activities due to market fluctuations and volatility in our results of operations. To the extent that we own assets, i.e., have long
positions, in any of those markets, a downturn in the value of those assets or in those markets could result in losses. Conve rsely, to the extent
that we have sold assets we do not own, i.e., have short positions , in any of those markets, an upturn in those markets could exp ose us to
potentially large losses as we attempt to cover our short positions by acquiring assets in a rising market.

 The asset management business is intensely competitive.
       Over the past several years, the size and number of asset management funds, including hedge funds and private equity funds, has
continued to increase. If this trend continues, it is possible that it will become increasingly difficult for our funds to ra ise capital. More
significantly, the allocation of increasing amounts of capital to alternative investment strategies by institutional and individu al investors leads
to a reduction in the size and duration of pricing inefficiencies. Many alternative investment strategies seek t o exploit these inefficiencies and,
in certain industries, this drives prices for investments higher, in either case increasing the difficulty of achiev ing targe ted returns. In addition,
if interest rates were to rise or there were to be a prolonged bull market in equit ies, the attractiveness of our funds relative to inv estments in
other investment products could decrease. Competit ion is based on a variety of factors, including:

        •      investment performance;
        •      investor perception of the drive, focus and alignment of interest of an investment manager;
        •      quality of service provided to and duration of relat ionship with investors;

        •      business reputation; and
        •      level of fees and expenses charged for services.

                                                                           16
Table of Contents

      We compete in the asset management business with a large nu mber o f investment management firms, private equity fund sponsors, hedge
fund sponsors and other financial institutions. A number of factors serve to increase our competitive risks, as follows:

        •      investors may develop concerns that we will allow a business to grow to the detriment of its performance;
        •      some of our co mpetitors have greater capital, lower targeted returns or greater sector or investment strategy specific expert ise
               than we do, which creates competit ive disadvantages with respect to investment opportunities;
        •      some of our co mpetitors may perceive risk differently than we do which could allo w them either to outbid us for investments in
               particular sectors or, generally, to consider a wider variety of investments;

        •      there are relatively few barriers to entry impeding new asset management firms, and the successful efforts of new entrants in to
               our various lines of business, including former “star” portfolio managers at large diversified financial institutions as well as such
               institutions themselves, will continue to result in increased competition; and
        •      other industry participants in the asset management business continuously seek to recruit our best and brightest investment
               professionals away fro m us.

       These and other factors could reduce our earnings and revenues and adversely affect our business. In addition, if we are forc ed t o
compete with other alternative asset managers on the basis of price, we may not be able to maintain our current base manageme nt and incentive
fee structures. We have historically co mpeted primarily on the performance of our funds, and not on the level of our fees relativ e to those of
our competitors. Ho wever, there is a risk that fees in the alternative investment management ind ustry will decline, without regard to the
historical perfo rmance of a manager, including our managers. Fee reductions on our existing or future funds, without correspo nding decreases
in our cost structure, would adversely effect our revenues and distributable earnings.

 Poor investment performance may decrease assets under management and reduce revenues from and the profitability of our asset
 management business.
      Revenues from our asset management business are primarily derived fro m asset management fees. As set management fees are comprised
of base management and incentive fees. Management fees are typically based on assets under management, and incentive fees are earned on a
quarterly or annual basis only if the return on our managed accounts exceeds a certa in threshold return, or “highwater mark,” fo r each investor.
We will not earn incentive fee inco me during a particular period, even when a fund had positive returns in that period, if we do not generate
cumulat ive performance that surpasses a highwater mar k. If a fund experiences losses, we will not earn incentive fees with regard to investors
in that fund until its returns exceed the relevant highwater mark.

      In addition, investment performance is one of the most important factors in retaining existing inve stors and competing for new asset
management business. Investment performance may be poor as a result of difficult market or economic conditions, including ch a nges in
interest rates or inflation, terrorism or political uncertainty, our investment style, th e particular investments that we make, and other factors.
Poor investment performance may result in a decline in our revenues and income by causing (i) the net asset value of the assets under our
management to decrease, which would result in lower management fees to us, (ii) lower investment returns, resulting in a reduction of incentive
fee inco me to us, and (iii) investor redemptions, which would result in lo wer fees to us because we would have fewer assets under
management.

      To the extent our future inves tment performance is perceived to be poor in either relative or absolute terms, the revenues and profitability
of our asset management business will likely be reduced and our ability to grow existing funds and raise new funds in the fut ure will likely be
impaired.

                                                                          17
Table of Contents

 The historical returns o f our funds may not be indicative of the future results of our funds.
       The historical returns of our funds should not be considered indicative of the future results that should be expected fro m su ch funds or
fro m any future funds we may raise. Our rates of returns reflect unrealized gains, as of the applicable measurement dat e, wh ich may never be
realized due to changes in market and other conditions not in our control that may adversely affect the ultimate value realized from the
investments in a fund. The returns of our funds may have also benefited fro m investment opportunities and general market conditions that may
not repeat themselves, and there can be no assurance that our current or future funds will be able to avail themselves of pro fitable investment
opportunities. Furthermore, the historical and potential future retu rns of the funds we manage also may not necessarily bear any relat ionship to
potential returns on our common stock.

 Our asset management clients may redeem their investments, which could reduce our asset management fee revenues.
      Our asset management account agreements generally permit investors to redeem their investments with us after an in itial “lockup” period
during which redempt ions are restricted or penalized. However, any such restrictions may be waived by us. Thereafter, redempt ions are
permitted at quarterly or annual intervals. If the return on the assets under our management does not meet investors ’ expectations, investors
may elect to redeem their investments and invest their assets elsewhere, including with our co mpetitors. For examp le, due to the unsatisfactory
performance of some of our funds, the assets which we had under management declined fro m $596.8 million at December 31, 2004 to $208.2
million at December 31, 2006. We believe that the decline was due to the fact that the returns generated by some of our funds did not match
those produced in prior periods or did not reach established benchmarks for those funds. Our management fee revenues correlat e directly to the
amount of assets under our management; therefore, redemptions have caused our fee revenues to decrease. To the extent that investors in our
funds redeem additional investments in the future, our asset management fees will decrease. Investors may decide to reallocat e their capital
away fro m us and to other asset managers for a nu mber of reasons, including poor relative investment performance, changes in prevailing
interest rates which make other investments more attractive, changes in investor perception regarding our focus or alignment of interest,
dissatisfaction with changes in or a broadening of a fund’s investment strategy, changes in our reputation, and departures or changes in
responsibilit ies of key investment professionals. For these and other reasons, the pace of redemptions and corresponding redu ction in our assets
under management could accelerate. In the future, redemptions could require us to liquidate assets under unfavorable circu mstances, which
would further harm our reputation and results of operations.

 We invest our own principal capital in equities that expose us to a significant risk of capital loss.
      We use a portion of our own capital in a variety of principal investment activities, each of which involves risks of illiquid ity, loss of
principal and revaluation of assets. At December 31, 2006, our principal investments represented $14.8 million invested in non-marketable
securities and other investments, $12.4 million invested in marketable securities in long positions and $7.5 million invested through short
positions on marketable securities. The co mpanies in which we invest may rely on new or developing technologies or novel business models,
or concentrate on markets which have not yet developed and which may never develop sufficiently to support successful operations. As a
result, we may suffer losses from our principal investment activities.

 We may make principal investments that have limited liquidity, which may reduce the return on those investments to our sto ckh olders.
     We may purchase equity securities and, to a lesser extent, debt securities, in venture capital and other high risk financings of early-stage,
pre-public or “mezzanine stage” and turnaround companies. We risk the loss of capital we have invested as a principal in these activities.

     We may use a portion of the net proceeds that we receive fro m this offering toward p rincipal investments in privately held securit ies that
may be illiquid and volatile. The equity securities of a privately -held entity in which

                                                                        18
Table of Contents

we make a principal investment are likely to be restricted as to resale and may otherwise be highly illiquid. We expect that there will be
restrictions on our ability to resell the securities of any private company that we acquire for a period of at least one year after we acquire those
securities. Thereafter, a public market sale may be subject to volume limitat ions or dependent upon securing a registration s tatement fo r a
secondary offering of the securities. We may make principal investments that are sig nificant relative to the overall capitalizatio n of the investee
company and resales of significant amounts of these securities might adversely affect the market and the sales price for the securit ies in wh ich
we invest.

      Even if we make an appropriate inves tment decision based on the intrinsic value of an enterprise, we cannot assure you that general
market conditions will not cause the market value of our investments to decline. For examp le, an increase in interest rates, a general decline in
the stock markets, or other market conditions adverse to companies of the type in which we invest and intend to invest could result in a de cline
in the value of our investments or a total loss of our investment.

 Limitations on our access to capital could impair our liquidity and our ability to conduct our businesses.
       Liquidity, or ready access to funds, is essential to financial services firms, includ ing ours. Failures of financial institut ions have often
been attributable in large part to insufficient liquidity. Liquidity is of particular importance to our sales and trading business, and perceived
liquid ity issues may affect the willingness of our clients and counterparties to engage in sales and trading transactions wit h us. Our liqu idity
could be impaired due to circu mstances that we may be unable to control, such as a general market disruption or an operational problem that
affects our sales and trading clients, third parties or us. Further, our ability to sell assets may be impaired if other market participants are
seeking to sell similar assets at the same time.

       JMP Securities LLC, our broker-dealer subsidiary, is subject to the net capital requirements of the SEC, the NASD and various
self-regulatory organizations of wh ich it is a member. These requirements typically specify the minimu m level of net capital a broker-dealer
must maintain and also mandate that a significant part of its assets be kept in relat ively liquid form. Any failure to comp ly with these net capital
requirements could impair our ab ility to conduct our business. Furthermore, JM P Securit ies LLC is subject to laws that authorize regulatory
bodies to block or reduce the flow of funds fro m it to JMP Group Inc. As a holding company, JMP Group Inc. depends on dividen ds,
distributions and other payments from its subsidiaries to fund dividend payments and to fund all pay ments on its obligations, in cluding debt
obligations. As a result, regulatory actions could impede access to funds that JMP Group Inc. needs to make payments on oblig ations, including
debt obligations, or dividend payments. In addition, because JMP Group Inc. holds equity interests in the firm’s subsidiaries, its rights as an
equity holder to the assets of these subsidiaries may not materialize, if at all, until the claims of the cred itors of t hese subsidiaries are first
satisfied.

 There are contractual, legal and other restrictions that may prevent us from paying cash dividends on our common stock and, a s a result,
 you may not receive any return on investment unless you sell your commo n stock for a price greater than the price for which you paid.
      Although we currently intend to declare and pay dividends on our common stock, there can be no assurance that sufficient cash will be
available to pay such dividend and our board of directors may at any time mod ify or revoke our current dividend policy. An y decision to
declare and pay dividends in the future will be made at the discretion of our board of d irectors and will depend on, among ot her things, our
results of operations, financial condition, cash requirements, contractual restrictions and other fac tors that our board of directors may deem
relevant. We do not intend to borrow funds in order to pay dividends. In addition, we are a hold ing company that does not con duct any business
operations of our own, and therefore, we are dependent upon cash dividends and other transfers from our subsidiaries to make dividend
payments on our common stock. The amounts available to us to pay cash dividends are restricted by our subsidiaries ’ existing credit agreement
under certain circu mstances and may be restricted by our or our subsidiaries’ future debt agreements. In general, under the cred it agreement
governing our revolving line of credit with City Nat ional Bank, which exp ires on June 30, 2008, JMP Group LLC is restricted under certain
circu mstances from paying div idends or making other distributions to us if an event

                                                                           19
Table of Contents

of default has occurred under that agreement. SEC regulat ions also provide that JMP Securities may not pay cash dividends to us if certain
minimu m net capital requirements are not met. In addition, Delaware law permits the declaration of d ividends only to the exte nt of our surplus
(which is defined as total assets at fair market value minus total liabilit ies, minus statutory c apital), or if there is no surplus, out of our net
profits for the then current and/or immediately preceding fiscal years. In the event we do not pay cash dividends on our common stock in the
amount currently intended as a result of these restrictions, you may not receive any return on an investment in our co mmon stock unless you
sell your co mmon stock for a price greater than the price for which you paid.

 Our risk management policies and procedures may leave us exposed to unidentified or unanticipated risk s.
     Our risk management strategies and techniques may not be fully effective in mit igating our risk exposure in all market enviro nments or
against all types of risk.

      We are exposed to the risk that third parties that owe us money, securities or other assets will not perform their obligations. These parties
may defau lt on their obligations to us due to bankruptcy, lack of liquidity, operational failure, breach of contract or other reasons. We are also
subject to the risk that our rights against third parties may not be enforceable in all circu mstances. As an introducing broker, we could be held
responsible for the defaults or misconduct of our customers. Although we regularly rev iew credit exposures to specific client s and
counterparties and to specific industries and regions that we believe may present credit concerns, default risks may arise fro m events or
circu mstances that are difficult to detect, foresee or reasonably guard against. In addition, concerns about, or a default by , one institution could
lead to significant liquid ity problems, losses or defaults by other institutions, which in turn could adversely affect us. If any o f the variety of
instruments, processes and strategies we utilize to manage our exposure to various types of risk are not effective , we may incur losses.

 Our operations and infrastructure and those of the service providers upon which we rely may malfunction or fail.
       Our businesses are highly dependent on our ability to process, on a daily basis, a large nu mber of transactions across divers e markets, and
the transactions we process have become increasingly co mplex. The inability of our systems to accommodate an increas ing volume of
transactions could also constrain our ability to expand our businesses. If any of these systems do not operate properly or are dis abled, or if there
are other shortcomings or failures in our internal processes, people or systems, we could suffer impairments, financial loss, a disruption of our
businesses, liab ility to clients, regulatory intervention or reputational damage.

      We have outsourced certain aspects of our technology infrastructure, including data centers, disaster recovery systems, a nd wid e area
networks, as well as some trad ing applications. We are dependent on our technology providers to manage and monitor those func tions. A
disruption of any of the outsourced services would be out of our control and could negatively impact our business. We have experienced
disruptions on occasion, none of which has been material to our operations and results. However, there can be no guarantee th at future
disruptions with these providers will not occur.

      We also face the risk of operational failure or termination of relations with any of the clearing agents, exchanges, clearing houses or other
financial intermediaries we use to facilitate our securities transactions. Any such failu re or termination could adversely affect o ur ability to
effect transactions and to manage our exposure to risk.

      In addition, our ability to conduct business may be adversely impacted by a disruption in the infrastructure that supports ou r businesses
and the communities in which we are located. This may affect, among other things, our financial, accounting or other data processing systems.
This may include a d isruption involving electrical, co mmunications, transportation or other services used by us or third part ies with which we
conduct business, whether due to fire, earthquakes or other natural disasters, power or co mmunications failure, act of terro ris m or war or
otherwise. Nearly all of our emp loyees in our primary locations in San Francisco, New Yo rk City, Boston and Chicago work in c lose pro ximity
to each other. Although we have a formal disaster recovery plan in place, if

                                                                          20
Table of Contents

a disruption occurs in one location and our emp loyees in that location are unable to commun icate with or travel to other loca tions, our ability to
service and interact with our clients may suffer, and we may not be able to implement successfully contingency plans that dep end on
communicat ion or travel.

        Our operations also rely on the secure processing, storage and transmission of confidential and other information in our comput er systems
and networks. Although we take protective measures and endeavor to modify them as circu mstances warrant, our co mputer 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 mo re of such events occur, this could jeopardize our o r 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, to investigate and remediate vulnerab ilit ies or other exposures or to make required notifications, and we may be subject to
lit igation and financial losses that are either not insured or not fully covered through any insurance maintained by us.

 We are subject to risks in using prime brokers and custodians.
       Our asset management subsidiary and its managed funds depend on the services of prime bro kers and custodians to implement cer tain
securities transactions. In the event of the insolvency of a prime broker or custodian, our funds might not be able to recover equivalent assets in
whole or in part as they will ran k among the prime broker’s and the custodian’s unsecured creditors in relation to assets which the prime bro ker
or custodian borrows, lends or otherwise uses. In addition, cash held by our funds with the prime bro ker or custodian will not be segregated
fro m the prime bro ker’s or custodian’s own cash, and the funds will therefore rank as unsecured creditors in relation thereto.

 Strategic investments or acquisitions and joint ventures, or our entry into new business areas, may result in additional risks and
 uncertainties in our business.
       We intend to grow our core businesses both through internal expansion and through strategic investments, acquisitions or join t ventures.
When we make strategic investments, acquisitions or enter into joint ventures, we expect to face numerous risks and unc ertainties in comb ining
or integrating the relevant businesses and systems. In addition, conflicts or disagreements between us and the other members of a venture may
negatively impact our businesses. In addition, future acquisitions or joint ventures may involve the issuance of additional shares of our co mmon
stock, wh ich may dilute your ownership in our firm. Furthermo re, any future acquisitions of businesses or facilit ies by us co uld entail a nu mber
of risks, including:

        •      problems with the effect ive integration of operations;
        •      the inability to maintain key pre-acquisition business relationships and integrate new relat ionships;
        •      increased operating costs;

        •      exposure to unanticipated liabilities;
        •      risks of misconduct by employees not subject to our control;
        •      difficult ies in realizing projected efficiencies, synergies and cost savings; and

        •      exposure to new or unknown liabilit ies.

      Any future growth of our business, such as our further expansion of our asset management or principal investment activities, may require
significant resources and/or result in significant unanticipated losses, costs or liabilit ies. In addition, expansions, acquisitions or joint ventures
may require significant managerial attention, which may be d iverted fro m our other operations. These capital, equity and managerial
commit ments may impair the operation of our businesses.

                                                                           21
Table of Contents

 We have identified material weaknesses in our internal control over financial reporting for periods prior to January 1, 2006 that caused
 us to restate our historical consolidated financial statements. If in the future we fail to maintain effective internal control over financial
 reporting, we could fail to prevent or detect material misstatements in our a nnual or interim consolidated financial statemen ts in the
 future w hich could harm our ability to timely and accurately report our financial results and adv ersely affect our stock price.
       Our consolidated financial statements for the years ended December 31, 2003, 2004 and 2005 have been restated to record our
Redeemable Class A member interests as stock-based compensation in accordance with SFAS 123, Accounting for Stock -Based Compensation
. In addition, we corrected a co mputational error in the determination of investing and operating cash flows for the years en ded December 31,
2004 and 2005. These restatements are further discussed in Note 3 to our audited consolidated financial statements included elsewhere in this
prospectus. Our independent registered public accounting firm notified our executive committee of the board of directors that these errors in
our consolidated financial statements, and the resulting restatements, were a result of material weaknesses in our internal control over financial
reporting. See “Management’s Discussion and Analysis of Financial Condition and Results of Operation —Material Weaknesses in Internal
Control Over Financial Reporting.” A material weakness is a control deficiency, or co mbination of control deficiencies, that results in a more
than remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or de tected. As of
December 31, 2006, we believe we have remed iated the identified material weaknesses by improving our processes for selecting and
implementing comp lex accounting policies applicable to stock-based compensation, and have improved our preparation and review proce sses
in connection with our consolidated statements of cash flow. In addit ion, we have hired and expect to hire addit ional finance and accounting
personnel to assist us in addressing the requirements of a public co mpany.

      In addition, Sect ion 404 of the Sarbanes-Oxley Act of 2002 requires annual management assessments of the effectiveness of our internal
control over financial reporting and a report by our independent registered public accounting firm addressing these assessmen ts. We will be
required to comp ly for the first time with Section 404 in connection with our annual report on Form 10-K for the year ending December 31,
2008. We are currently in the process of further documenting our system of internal control over financial reporting and we will add additional
controls and procedures as needed in order to satisfy the requirements of Section 404. During the course of our testing, we may in the future
identify deficiencies wh ich we may not be able to remed iate in t ime to co mply with Section 404.

      If we fail to maintain the adequacy of our internal controls, we may not be able to conclude on an ongoing basis that we have effective
internal control over financial reporting in accordance with Section 404. Failure to achieve and maintain an effective internal co ntrol system
could give rise to misstatements in our financial statements and cause us to fail to meet our reporting obligations, which ma y cause investors to
lose confidence in our reported financial information and cause an adverse impact on the value of our stock.

 The demands of running a public company could result in additional costs and require our senior management to devote more tim e to
 regulatory and other requirements.
      Following our init ial public o ffering, we will be subject to significant additional regulatory and reporting requirements, including under
the Securities Exchange Act of 1934, as amended, the Sarbanes -Oxley Act and the NYSE listed company rules. We will incur additional costs
on an ongoing basis in order to co mply with these additional requirements. These costs include those related to expanding our internal control
and compliance functions, and recruiting and retaining additional staff. The historical consolidated financial in formation in this prospectus does
not reflect the added costs that we expect to incur as a public co mpany or the resulting changes that will have occurred in our capital structure
and operations. For more information, see our historical consolidated financial statements and accompanying notes included elsewhere in this
prospectus.

      In addition, our senior management may be required to devote more of their time to meeting these additional requirements. Sin ce
inception, our senior management has been actively involved in the revenue generating activities of our ope rations. For examp le, Joseph
Jolson, our chief executive officer, continues to

                                                                        22
Table of Contents

manage Harvest Opportunity Partners II, L.P. and its related funds, which are our largest investment funds. In the future, th e demands of
managing a public co mpany may require Mr. Jolson to be less actively involved in portfolio management responsibilities and to rely on others
to a greater extent for these responsibilit ies. If our senior management is required to devote more t ime to the additional re quirements of
managing a public co mpany, and we are unable to successfully transition some or all of the direct revenue generating responsibilit ies of our
senior management to other suitable professionals, our reputation, business, results of operations and financial condition ma y be harmed.

 Evaluation of our prospects may be more difficult in light of our limit ed operating history.
      We were founded in 1999, and we have a limited operating history upon which to evaluate our business and prospects. As a rela tively
young enterprise, we are subject to the risks and uncertainties that face a company during its formative develop ment. So me o f t hese risks and
uncertainties relate to our ability to attract and retain clients on a cost-effective basis, expand and enhance our service offerings, raise additional
capital and respond to competitive market conditions. We may not be able to address these risks adequately, and our failure to d o so may harm
our business and the value of your investment in our co mmon stock.

Risks Related to Our Industry
 Difficult market conditions could adversely affect our business in many ways.
       Difficult market and economic conditions, the level and volatility of interest rates, investor sentiment and polit ical events have in the past
adversely affected and may in the future adversely affect our business and profitability in many ways. Weakness in equity markets and
dimin ished trading volume of securities could adversely impact our sales and trading business. Industry -wide declines in the size and number
of underwritings and mergers and acquisitions transactions also would likely have an adverse e ffect on our revenues. In addition, reductions in
the trading prices for equity securities also tend to reduce the transaction value of investment banking transactions, such a s underwrit ing and
mergers and acquisitions transactions, which in turn may reduce the fees we earn fro m these transactions. As we may be unable to reduce
expenses correspondingly, our net income and net inco me margins may decline.

 Significantly expanded corporate governance and public disclosure requirements may result in fewer initia l public offerings and
 discourage companies from engaging in capital market transactions, which may reduce the number of investment banking opportun ities
 available to pursue.
      Highly-publicized financial scandals in recent years have led to investor concern s over the integrity of the U.S. financial markets, and
have prompted the U.S. Congress, the SEC, the NYSE and Nasdaq to significantly expand corporate governance and public disclos ure
requirements. To the extent that private companies, in order to avoid b ecoming subject to these new requirements, decide to forgo initial public
offerings, our equity underwriting business may be adversely affected. In addit ion, provisions of the Sarbanes -Oxley Act and the corporate
governance rules imposed by self-regulatory organizations have diverted the attention of many co mpanies away fro m capital market
transactions, including securities offerings and acquisition and disposition transactions. In particular, co mpanies that eith er are or are planning
to become public co mpanies are incurring significant expenses in comp lying with the SEC and reporting requirements relating t o internal
control over financial reporting, and companies that disclose material weaknesses in such controls under the new standards ma y have greater
difficulty accessing the capital markets. These factors, in addition to adopted or proposed accounting and disclosure changes, may have an
adverse effect on our business.

 Financial services firms have been subject to increased scrutiny over the last several years, increasing the risk of financial liability and
 reputational harm resulting from adverse regulatory actions.
      Firms in the financial services industry have been operating in a difficult regulatory environment. The industry has experien ced increased
scrutiny from a variety of regulators, including the SEC, the NYSE, the

                                                                          23
Table of Contents

NASD and state attorneys general. Penalties and fines sought by regulatory authorities have increased substantially over the last several years.
This regulatory and enforcement environ ment has created uncertainty with respect to a number of transactions that had historically been
entered into by financial services firms and that were generally believed to be permissible and appropriate. We may be adversely affected by
changes in the interpretation or enforcement of existing laws and rules by these governmental authorities and self-regulatory organizations.
Each of the regulatory bodies with jurisdiction over us has regulatory powers dealing with many aspects of financial services , including, but not
limited to, the authority to fine us and to grant, cancel, restrict or otherwise impose conditions o n the right to carry on particular businesses. For
example, a failure to co mply with the obligations imposed by the Securities Exchange Act of 1934, as amended, on broker -dealers and the
Investment Advisers Act on investment advisers, including record -keeping, advertising and operating requirements, disclosure obligations and
prohibitions on fraudulent activities, or by the Investment Co mpany Act of 1940, could result in investigations, sanctions an d reputational
damage. We also may be adversely affected as a result of new o r rev ised legislation or regulations imposed by the SEC, other United States or
foreign governmental regulatory authorities or the NASD or other self-regulatory organizations that supervise the financial markets. Substantial
legal liability or significant regulatory action against us could have adverse financial effects on us or cause reputational harm to us, which could
harm our business prospects.

       In addition, financial services firms are subject to numerous conflicts of interests or perceived conflicts. The SEC and other federal and
state regulators have increased their scrutiny of potential conflicts of interest. We have adopted various policies, controls and procedures to
address or limit actual or perceived conflicts and regularly review and update our policies, controls and procedures. However, appropriately
addressing conflicts of interest is complex and difficult and our reputation could be damaged if we fail, o r appear to fail, to appropriately
address conflicts of interest. Our policies and procedures to address or limit actual or perceived conflicts may also result in increased costs and
additional operational personnel. Failure to adhere to these policies and procedures may result in regulatory sanctions or litigation against us.
For examp le, the research operations of investment banks have been and remain the subject of heightened regulatory scrutiny w hich has led to
increased restrictions on the interaction between equity research analysts and investment banking professionals at securities firms. Several
securities firms in the Un ited States reached a global settlement in 2003 and 2004 with certain federal and state securities regulators and
self-regulatory organizations to resolve investigations into the alleged conflicts of int erest of research analysts, which resulted in rules that have
imposed additional costs and limitations on the conduct of our business.

      Asset management businesses have experienced a number of h ighly publicized regulatory inquiries concerning market timing, late trading
and other activities that focus on the mutual fund industry. These inquiries have resulted in increased scrutiny within the industry and new rules
and regulations for mutual funds, investment advisers and broker-dealers. Although we do not act as an investment adviser to mutual funds, we
are registered as an investment advisor with the SEC and the regulatory scrutiny and rulemaking init iatives may result in an increase in
operational and compliance costs or the assessment of significant fines or penalties against our asset management business, and may otherwise
limit our ability to engage in certain activ ities. In addit ion, the SEC staff has conducted studies with respect to soft dollar practices in the
brokerage and asset management industries . In October 2005, the SEC proposed interpretive guidance regarding the scope of permitted
brokerage and research services in connection with soft dollar practices. The SEC staff has indicated that it is considering additional
rulemaking in this area, and we cannot predict the effect that additional rulemaking may have on our asset management or bro kerage business
or whether it will be adverse to us.

 Our exposure to legal liability is significant, and damages and other costs that we may be required to pay i n connection with litigation and
 regulatory inquiries, and the reputational harm that could result from legal action against us, could adversely affect our bu sinesses.
      We face significant legal risks in our businesses and, in recent years, the volume of claims and amount of damages sought in litigation
and regulatory proceedings against financial institutions have been increasing. These risks include potential liability under securit ies or other
laws for materially false or misleading statements made

                                                                          24
Table of Contents

in connection with securities offerings and other transactions, employ ment claims, potential liab ility for “fairness opinions” and other advice
we provide to participants in strategic transactions and disputes over the terms and conditions of complex trad ing arrangements. Generally,
pursuant to applicable agreements, investors in our funds do not have legal recourse against us or JMP Asset Management for
underperformance or errors of judg ment in connection with the funds, nor will any act or o mission be a breach of duty to the fund or limited
partner unless it constituted gross negligence or willful v iolation of law.

       As an investment banking and asset management firm, we depend to a large extent on our reputation for integrity and high -caliber
professional services to attract and retain clients. As a result, if a client is not satisfied with our services, it may be more damag ing to our
business than to other businesses. Moreover, our role as advisor to our clients on important underwriting or mergers and acqu isitions
transactions involves complex analysis and the exercise of professional judg ment, includ ing rendering “fairness opinions” in connection with
mergers and acquisitions and other transactions. Therefore, our activ ities may subject us to the risk of significant legal liabilit ies to our clients
and aggrieved third parties, including stockholders of our clients wh o could bring securities class actions against us. Our investment banking
engagements typically include broad indemnities fro m our clients and provisions to limit our exposure to legal claims relatin g t o our services,
however, there can be no assurance that these provisions will protect us or be enforceable in all cases. As a result, we may incur significant
legal and other expenses in defending against litigation and may be required to pay substantial damages for settlements and a dverse judgments.
Substantial legal liab ility or significant regulatory action against us could harm our results of operations or cause reputational ha rm to us, which
could adversely affect our business and prospects.

 Misconduct by our employees or by the employees of our busi ness partners could harm us and is difficult to detect and prevent.
      There have been a number of h ighly publicized cases involving fraud or other misconduct by employees in the financial service s industry
in recent years, and we run the risk that employee misconduct could occur at our firm. Fo r examp le, misconduct could involve the improper use
or disclosure of confidential information, which could result in regulatory sanctions and serious reputational or financial h arm. It is not always
possible to deter misconduct and the precautions we take to detect and prevent this activity may not be effect ive in all cases. Our ability to
detect and prevent misconduct by entities with who m we do business may be even mo re limited. We may suffer reputational harm for any
misconduct by our employees or those entities with who m we do business.

 We may be required to make payments under certain indemnification agreements.
        Prior to this offering and the corporate reorganization, we will enter into agreements that provide for the in demnification of our members,
managing directors, executive officers and certain other persons authorized to act on our behalf against certain losses that may arise out of this
offering or the corporate reorganizat ion, certain liabilities of our managing d irectors relating to the time they were members of JMP
Group LLC, and certain tax liabilit ies of our members that may arise in respect of periods prior to this offering when we operated as a limited
liab ility co mpany. We may be required to make pay ments un der these indemnification agreements, which could adversely affect our financial
condition.

 If we were deemed an investment company under the Investment Company Act of 1940, applicable restrictions could make it impra ctical
 for us to continue our b usiness as contemplated and could have an adverse effect on our business.
      We are not an investment company under the Investment Co mpany Act of 1940. However, if we were to cease operating and controlling
the business and affairs of JMP Securities LLC and JMP Asset Management LLC or if either o f these subsidiaries were deemed to be an
investment company, our interest in those entities could be deemed an investment security for purposes of the Investment Co mp any Act of
1940. We intend to conduct our operations so that we will not be deemed an investment co mpany. However, if we were to be d eemed an

                                                                          25
Table of Contents

investment company, restrictions imposed by the Investment Co mpany Act of 1940, including limitations on our capital structur e and our
ability to transact with affiliates, could make it impract ical for us to continue our business as contemplated and would harm our business and
the price of our co mmon stock.

Risks Related to this Offering and Our Shares
 Because there has not been any public market for our common stock, the market price and trading volume of our commo n stock ma y be
 volatile.
     Prior to this offering, there has been no public market for our co mmon stock. A lthough we will apply to have our common stock
approved for listing on the NYSE, an act ive public market for our common stock may not develop. The market price of our commo n stock
could be subject to significant fluctuations due to factors such as:

        •      actual or anticipated fluctuations in our financial condition or results of operations;
        •      the success or failure of our operating strategies and our perceived prospects and those of the financial services industry in
               general;
        •      realization of any of the risks described in this section;

        •      failure to be covered by securities analysts or failure to meet the expectations of securities analysts;
        •      a decline in the stock prices of peer co mpanies; and
        •      a discount in the trading multip le of our co mmon stock relat ive to that of common stock of certain of our peer co mpan ies due to
               perceived risks associated with our smaller size.

      As a result, shares of our common stock may trade at prices significantly belo w the public offering price o f our co mmon stock.
Furthermore, declines in the price of our co mmon stock may adversely affect our ab ility to conduct future offerings or to recruit and retain key
emp loyees, including our managing directors and other key professional emp loyees.

 Your interest in our firm may be diluted if we issue additional shares of common stock.
      In general, selling stockholders and potential investors do not have preemptive rights to any common stock issued by us in the future .
Therefore, investors purchasing our common stock in this offering may experience d ilution of their equity investment if we is sue additional
shares of common stock in the future, includ ing shares issuable under our 2007 Equity Incentive Plan, or if we issue securities that are
convertible into shares of our common stock.

 Provisions of our organizational documents may discourage an acquisition of us.
       Our organizational documents will contain provisions that will impede the removal of directors and may discourage a third par ty fro m
making a proposal to acquire us. Our board will have the ability to take defensive measures that could impede or thwart a takeo ver such as,
under certain circu mstances, adopting a poison pill, or causing us to issue preferred stock that has greater voting rights th an our common stock.
If a change of control or change in management that our stockholders might otherwise consider to be favorable is prevented or delayed, the
market price of our co mmon stock could decline.

                                                                            26
Table of Contents

 Our managing directors, directors, executive officers and other employees will be able to determine matters requiring stockho lder
 approval, which could delay or prevent a change of control or which otherwise may not be in the best interest of our stockhol ders.
      Immediately fo llo wing this offering, our managing directors, directors, executive officers and other employees will o wn
approximately        % of our co mmon stock. In addit ion, we intend to use our equity as a component of our compensation program on ce we
are a public co mpany, which will result in our emp loyees owning a greater percentage of our outstanding common stock. Consequ ently, our
managing directors, directors, executive officers and other employees collectively may be able to determine matters submitted for stockholder
action, including the elect ion of our board of directors and approval of significant corporate transactions, including business comb inations,
consolidations and mergers and the determination of our day -to-day corporate and management policies. This concentration of ownership of
our common stock could delay or prevent pro xy contests, mergers, tender offers, open -market purchase programs or other purchases of our
common stock that might otherwise give you the opportunity to realize a premiu m over the then-prevailing market price of our common stock.
In addition, these stockholders could exercise their influence in a manner that is not in the best interest of our other stoc kholders.

 Future sales of our common stock could cause our stock price to decline.
      Sales of substantial amounts of our common stock by our employees and other stockholders, or the possibility of such sales, may
adversely affect the price of our co mmon stock and impede our ability to raise capital through the issuanc e of equity securities. See “Shares
Eligible for Future Sale” for a discussion of possible future sales of common stock.

      Immediately after this offering, there will be            shares of our common stock outstanding. Of these shares, the               shares of our
common stock sold in this offering (or             shares if the underwriters’ option to purchase additional shares of our common stock is
exercised in full) will be freely transferable without restriction or further reg istration under the Securities Act. Subject to certain exceptions, the
remain ing shares of our common stock will be available for future sale upon the expiration or the waiver of transfer restrict ions or in
accordance with registration rights. See “Shares Elig ible for Future Sale” for a discussion of the shares of our common stock that may be sold
into the public market in the future.

 Our common stock may trade at prices below the initial public offering price.
      The price of our co mmon stock after this offering may fluctuate greatly, depending upon many factors, including our perceived prospects
and those of the financial services industry in general, d ifferences between our actual financial and operating results and those expected by
investors, changes in general economic or ma rket conditions, broad market fluctuations and failu re to be covered by securities analysts. Our
common stock may trade at prices significantly belo w our init ial public offering price. Declines in the price of our co mmon s tock may
adversely affect our ability to recruit and retain key emp loyees, including our managing directors, which could harm our results of operation.

 Our historical and unaudited pro forma financial information may not permit you to predict our costs of operations.
      The historical consolidated financial information in this prospectus does not reflect the added costs that we expect to incur as a public
company or the resulting changes that have occurred in our capital structure and operations. Because we historically operated through
partnerships and limited liability co mpanies prior to our transition to corporate form prior to this offering, we paid little or no taxes on profits
and paid relatively modest salaries to our managing directors. In preparing our unaudited pro forma condensed consolidated financial
informat ion, we deducted and charged to earnings estimated statutory income taxes based on an estimated blended tax rate, wh i ch may be
different fro m our actual tax rate in the future. The estimates we used in our unaudited pro forma co nsolidated financial information may not be
similar to our actual experience as a public

                                                                          27
Table of Contents

company. For mo re informat ion on our historical financial statements and unaudited pro forma condensed consolidated financial informat ion,
see “Unaudited Pro Forma Condensed Consolidated Financial Information ” and our historical consolidated financial statements and
accompanying notes included elsewhere in this prospectus.

 You will experience immediate and substantial dilution in the book value of your common stock.
        The init ial public offering price of our co mmon stock will be substantially h igher than the pro forma net tangible book value per share of
our common stock. Pro forma net tangible book value represents the amount of our tangible assets on a pro forma basis, less our pro forma total
liab ilit ies. As a result, we currently expect that you will incur immed iate dilution of $         per share based upon the initia l p ublic offering
price fo r this offering of $            per share. For more information, see “Dilution.”

 We will have broad discretion over the use of the net proceeds to us from this o ffering.
       We will have broad discretion to use the net proceeds to us from this offering, and you will be rely ing on the judgment of our b oard of
directors and our management regarding the application of the net proceeds from this offering. Although we expect to use the net proceeds
fro m this offering for general corporate purposes, including support and expansion of our underwrit ing, sales and trading, asset management
businesses, strategic acquisitions and principal investment opportunities, we have not allocated these net proceeds for specific p urposes. In
addition, we may not be successful in investing the net proceeds from this offering to yield a favorable return. For mo re information, see “Use
of Proceeds.”

                                                                          28
Table of Contents

                                   SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

      We make forward-looking statements in this prospectus that are subject to risks and uncertainties. These forward -looking statements
include info rmation about possible or assumed future results of our business, financial condit ion, liquidity, results of operations, plans and
objectives. They also include statements concerning anticipated revenues, income or loss, capital expenditures, dividends, ca pital structure or
other financial terms. The statements we make regard ing the follo wing subject matters are forward -looking by their nature:

        •      the opportunity to grow our investment banking and sales and trading businesses because of the prevalent demand for our
               services in our six target industries;
        •      the possibility to generate stable investment banking revenues due to our ability to eng age in mult iple types of transactions;
        •      our ability to increase our roles as a co-manager or a lead manager in capital markets transactions;

        •      the growth of our mergers and acquisitions and other strategic advisory business derived from our positions as a lead manager or
               senior co-manager of public and private securities offerings;
        •      the characteristics of the asset management business, including its co mparatively h igh margins, the recurring nature of its
               fee-based revenues, and its dependence on intellectual capital;
        •      the past performance of our funds are not indicative of our future performance;

        •      the ongoing emergence of s mall asset managers and institutional investment managers that rely on outside sources to provide
               equity research;
        •      a heightened demand for alternative asset management products and services;
        •      our plans to sponsor additional hedge funds and other alternative asset management products;

        •      our plans to generate principal investing opportunities from our investment banking and asset management relationships;
        •      our ability to attract and retain top professionals;
        •      projections of our annual total compensation and benefits as a percentage of revenues;

        •      our plans to launch additional hedge fund products, alternative and other asset management collective investment vehicles and
               structured finance products;
        •      our plans to hire additional senior research professionals;
        •      our intention to declare dividends and our expected dividend rate;

        •      our ability to increase the number of co mpanies under coverage by our equity research analysts;
        •      our plans to expand the group of institutional investors to which we market our equity research and sales and trading products and
               services by increasing the frequency with which we do business with these investors; and
        •      our ability to increase assets under management and develop new asset management products.

       The forward-looking statements are based on our beliefs, assumptions and expectations of future performance, taking into account the
informat ion currently available to us. These forward-looking statements, may include projections of our future financial performance, based on
our growth strategies and anticipated trends in our business. These statements are only predictions based upon our current expectations and
projections about future events. There are important factors that could cause our actual results, level of activ ity, performance or achievements
to differ materially fro m the results, level of activ ity, performance or achievements expressed or imp lied by the forward-looking statements. In
particular, you should consider the numerous risks provided under “Risk Factors” in this prospectus.

                                                                          29
Table of Contents

       These risks are not exhaustive. Other sections of this prospectus may include additional factors which could adversely impact o ur
business and financial performance. Moreover, we operate in a very co mpetitive and rap idly changing environment. New risk fac tors emerge
fro m t ime to time and it is not possible for us to predict all risk factors, nor can we assess the impact of all factors or t he effect which any
factor, or co mb ination of factors, may have on our business. Actual results may differ materially fro m those contained in any forward -looking
statements.

      When we use the words “will likely result,” “may,” “shall,” “will,” “believe,” “expect,” “anticipate,” “project,” “intend,” “estimate,”
“goal,” “objective,” or similar expressions, we intend to identify forward-looking statements. Although we believe the expectations reflected in
the forward-looking statements are reasonable, we cannot guarantee future results, levels of activ ity, performance or achievements. Moreover,
neither we nor any other person ass umes responsibility for the accuracy or co mpleteness of any of these forward -looking statements. You
should not rely upon forward-looking statements as predictions of future events. We undertake no duty to update any of these forward -looking
statements after the date of this prospectus to conform prior statements to actual results or revised expectations unless otherwise require d by
law.

                                                                         30
Table of Contents

                                                               DIVIDEND POLICY

       Following this offering and subject to legally available funds, we currently intend to declare a quarterly cash dividend on a ll outstanding
shares of common stock. The first quarterly dividend will be for the second quarter of 2007 and will be prorated for the portion of that period
subsequent to this offering. Ho wever, our d ividend policy permits the board of directors to exercise its discretion in determ in ing the appropriate
level and timing of d ividend payments. We intend to pay dividends out of a portio n of our current earn ings for each quarter and do not intend to
borrow funds in order to pay dividends. The amount of such dividends will be determined by our board of directors, who will t ake into account
various factors, including, among others, our financial performance, earnings, liquidity and the operating performance of our segments as
assessed by management. We do not intend to pay out all excess cash and we do not plan to pay dividends on unvested shares of restricted
stock units or equity-based awards that we will issue prior to and in connection with this offering. Ho wever, no assurance can be given that any
dividends, whether quarterly or otherwise, will o r can be paid.

       Because we are a holding co mpany, the funding of dividends, if declared by the board of directors, will occur as follo ws: (i) as the sole
manager of JMP Group LLC, our board of directors will cause JMP Group LLC to make distributions to us out of legally available funds, and
(ii) we will distribute the proceeds to our common stockholders on a pro rata basis, subject to any preferences that may be applicable to any
holders of our outstanding preferred stock.

 Restrictions on Dividend Payments
       As a holding company our ability to pay dividends to our stockholders will be subject to the a bility of JMP Group LLC to provide cash to
us. Any distribution to us made by JMP Group LLC will be at the discretion of our board of directors and will depend on contr actual, legal and
regulatory restrictions on the payment of distributions by JMP Group LLC, and such other factors as our board of directors considers to be
relevant. In part icular, under Delaware law, JMP Group LLC is prohibited fro m making a distribution to the extent that its liabilities, after such
distribution, exceed the fair value of its assets. After giving effect to the corporate reorganizat ion, JMP Group LLC ’s operating agreement does
not contain any restrictions on its ability to make cash distributions, except that no distributions shall be made in v iolation of Delaware law. In
addition, under JMP Group LLC’s credit agreement with City National Bank, it is prohibited fro m making any cash distributions if (a) an event
of default (as defined in the credit agreement) has occurred and is continuing, (b) no event, act or occurrence has occurred and is continuing
which, with the giving of notice or the passage of time, would beco me an event of default, or (c) an event of default wou ld result fro m the cash
distribution. The events of default under the credit agreement are typical of such ag reements and include payment defaults, failure to comply
with cred it agreement covenants, cross -defaults to material indebtedness, bankruptcy and insolvency, and change of control. The City Nat ional
Bank revolving cred it facility has no balance outstanding as of December 31, 2006 and the credit facility expires on June 30, 2008. In addit ion,
SEC regulat ions provide that JMP Securities may not pay cash dividends to us if certain min imu m net capital requirements are not met.

      Our div idend policy has certain risks and limitations, particularly with respect to liquidity. Although we expect to pay dividends
according to our dividend policy, we may not consistently apply our policy or pay dividends at all if, among other things, we do not have the
necessary cash. By paying cash dividends rather than investing that cash in our future growth, we also risk slowing the pace of our growth or
not having a sufficient amount of cash to fund our operations or unanticipated capital expenditures, should the need arise.

 Historical Distributions
       Historically, we have made quarterly profit distributions to members of JM P Group LLC with respect to their member interests. Profit
distributions in 2006 to members of JM P Group LLC with respect to their Redeemab le Class A member interests, Class A common interests
and Class B co mmon interests totaled approximately $11.4 million, $1.5 million and $1.9 million, respectively. Pro fit d istrib utions in 2005 to
members

                                                                         31
Table of Contents

of JMP Group LLC with respect to their Redeemable Class A member interests, Class A common interests and Class B co mmo n interests
totaled approximately $7.6 million, $1.3 million and $1.4 million, respectively.

      The following table sets forth the cash dividends declared by JMP Holdings Inc., the predecessor of JMP Group Inc., fo r the periods
indicated:


                                                                                                          Common Di vi dends Declared
                                                                                                       Per Share         Di vi dend Type

2004
Third quarter                                                                                         $        0.02         Regular dividend
Fourth quarter                                                                                        $        0.07         Regular dividend

2005
First quarter                                                                                         $        0.08         Regular dividend
Second quarter                                                                                        $        0.08         Regular dividend
Third quarter                                                                                         $        0.08         Regular dividend
Fourth quarter                                                                                        $        0.08         Regular dividend
                                                                                                      $        0.18         Special dividend

2006
First quarter                                                                                         $        0.08         Regular dividend
Second quarter                                                                                        $        0.08         Regular dividend
Third quarter                                                                                         $        0.08         Regular dividend
Fourth quarter                                                                                        $        0.08         Regular dividend


                                                                      32
Table of Contents

                                                                                    DILUTION

      If you invest in our co mmon stock in this offering, upon the completion of this offering, your interest will be d iluted to th e extent of the
difference between the initial public offering price per share and the pro forma net tangible book value per share of our co mmo n stock.

       Our pro forma net tangible book value as of December 31, 2006, was approximately $               million, or appro ximately $          per
share of common stock. Pro forma net tangible book value per share is determined by dividing our tangible net worth, total tangible assets less
total liab ilit ies, by the aggregate number of shares of common stock outstanding on a pro forma basis after giving effect to the pro forma
adjustments described under “Unaudited Pro Forma Condensed Consolidated Financial Informat ion.” After g iving effect to the sale by us of the
shares of common stock in this offering, at the init ial offering price of $       per share, the mid-point of the price range on the cover of this
prospectus, after deducting underwriting discounts and commissions and estimated offering expenses and the receipt and application of the net
proceeds, our pro forma net tangible book value as of December 31, 2006, would have been approximately $                  million, o r approximately
$           per share. Th is represents an immediate increase in pro forma net tangible book value to existing stockholders of $          per share
and an immediate d ilution to new investors of $            per share.

      Dilution is determined by subtracting pro forma net tangible book value per share after this offering fro m the in itial public offering price
per share.

      The following table illustrates this per share dilution:


Initial public offering price per share                                                                                                                                           $
       Pro forma net tangible book value per share as of December 31, 2006                                                                                      $
       Pro forma increase in net tangible book value per share attributable to new investors

Pro forma net tangible book value per share after offering

Pro forma dilution per share to new investors                                                                                                                                     $

      The table above does not reflect the impact of an aggregate of 2,674,940 shares issuable upon the exercise of outstanding opt ions to
purchase shares of our common stock as of December 31, 2006, or the               shares of our co mmon stock underlying restricted stock units
that we intend to grant to certain of our employees in connection with this offering. Assuming these options and restricted s tock units fully vest
and all the options are exercised, the effect would be a decrease of our pro forma net tan gible book value per share after this offering
by        per share, and the dilution to new investors in this offering would increase by        per share, assuming the underwrit ers do not
exercise their option to purchase additional shares.

      The following table summarizes, as of December 31, 2006, on a pro forma basis the total number of shares of common stock purchased
fro m us, the total consideration paid to us (before deducting the estimated underwriting discount and commissions and offerin g expenses
payable by us in connection with this offering) and the average price per share paid by existing stockholders and by new inve stors purchasing
shares of our common stock in th is offering:


                                                                                                                                                                     Average Price
                                                                    Shares Purchased                               Total Consi deration                               Per Share
                                                                  Numbe
                                                                     r         Percent                         Amount                       Percent

Existing stockholders                                                                              %      $                    (1)                       %       $
New investors

      Total                                                                                        %      $                                              %       $

(1)   Represents the book value of the contribution of members’ equity interests in JMP Group LLC contributed in exchange for shares of our common stock in the reorganizati on
      transactions described under the caption “Certain Relationships and Related Transactions—Reorganization Transactions and Corporate Structure.”

                                                                                          33
Table of Contents

                                                              US E OF PROCEEDS

      We will receive net proceeds from our sale of shares of common stock in this offering of appro ximately $               million
($         million if the underwriters’ overallotment option is exercised in full), assuming an in itial public offering price o f $  per share,
the midpoint of the price range on the cover page of this prospectus, and after deducting estimated underwriting discounts an d commissions and
estimated offering expenses. The above amounts do not include underwrit ing discounts a nd commissions that will be received by JMP
Securities LLC, our broker-dealer subsidiary, as an underwriter in this offering. We will not receive any of the net proceeds from the sale of
shares of our common stock by the selling stockholders.

      We intend to use the net proceeds from this offering for general corporate purposes, including support of and expansion of our existing
business lines. Although we have not designated funds for any specific purpose, we may use the net proceeds fro m this offerin g to take
advantage of principal investment opportunities, to expand our asset management business, including incubating additional ass et management
products and funds, to grow our investment banking business, to implement other new business activities or investme nt bankin g products or
services, or to fund strategic investments as they may arise in the future.

      Until we use the net proceeds of this offering, we intend to invest the funds in short -term, investment grade, interest-bearing securities,
U.S. government securities and other marketable securities. We cannot predict whether the net proceeds invested will yield a favorable return.

                                                                        34
Table of Contents

                                                                                  CAPITALIZATION

      The following table shows our capitalization as of December 31, 2006:

        •       on a historical basis;
        •       on a pro forma basis to reflect the corporate reorganization and related transactions pursuant to which JMP Group Inc. will
                succeed to the business of JMP Group LLC prio r to this offering, as more fu lly described under “Unaudited Pro Forma
                Condensed Consolidated Financial Informat ion;” and
        •       on a pro forma as adjusted basis to reflect the sale by us of              shares of our common stock pursuant to this offering,
                assuming an in itial public offering price of $        per share, the midpoint of the price range on the cover page of this
                prospectus, and after deducting the underwriting discounts and commissions and estimated offering expenses.

     The following table should be read together with “Management’s Discussion and Analysis of Financial Condition and Results of
Operations,” “Unaudited Pro Forma Condensed Consolidated Financial Informat ion ” and the consolidated financial statements and
accompanying notes appearing elsewhere in this prospectus.


As of December 31, 2006                                                                                                                                                           Pro
(in thousands, except share and per share data)                                                                                                                                Forma, as
                                                                                                                 Pro Forma, as                                                 Adjusted
                                                                                                                  Adjusted for                                                     for
                                                                                                                      the                                                         This
                                                                                Historical                       Reorganization                                                 Offering

Redeemable Class A member interests                                         $          12,914                $                        —(1)

Minority interest                                                                        5,739                                   5,739
Members’ equity and stockholders ’ equity:
  Class A common interests                                                             11,862                                         —(2)
  Class B common interests                                                             31,650                                         —(3)
  Co mmon stock, $0.001 par value per share;
     30,000,000 shares authorized;
     14,800,039 shares issued and
     outstanding on a pro forma basis,
     and           shares issued and
     outstanding on a pro forma basis
     adjusted for this offering                                                              —                                      148 (1)(2)(3)
Additional paid-in capital                                                                 269                                 49,518 (1)(2)(3)(4)(5)
Retained earnings                                                                        2,971                                        —(5)

Total members’ equity and stockholders ’
  equity                                                                               46,752                                  49,666

Total capitalization                                                        $          65,405                $                 55,405



(1)   Refl ects the issuance of shares of common stock to our members in exchange for our Redeemable Class A member interests. As of December 31, 2006, the Redeemable Class A
      member interests represented 74.8% of our membership interests and were exchangeable into 11,065,306 shares of common stock o n a pro forma basis.

(2)   Refl ects the issuance of shares of common stock to our members in exchange for our Class A common interests. As of December 31, 2006, Class A common interests represented
      9.7% of our membership interests and were exchangeable into 1,434,733 shares of common stock on a pro forma basis.

(3)   Refl ects the issuance of shares of common stock to our members in exchange for our Class B common interests. As of December 31, 2006, Class B common interests represented
      15.5% of our membership interests and were exchangeable into 2,300,000 shares of common stock on a pro forma basis.
(4)   Refl ects distributions prior to the completion of this offering of $10.0 million related to earnings previously allocated to our members for periods prior to December 31, 2006 that have
      not yet been distributed.

(5)   Retained earnings are recl assi fied to paid-in capital assuming a constructive distribution to the members, followed by a contribution of the capital to us.

                                                                                               35
Table of Contents

                      UNAUDITED PRO FORMA CONDENS ED CONSOLIDATED FINANCIAL INFORMATION

      The following unaudited pro forma condensed consolidated financial informat ion is based upon the historical consolidated fina ncial
statements of JMP Group LLC. The unaudited pro forma condensed consolidated statement of income information was prepared as if the
reorganizat ion transactions described under “Certain Relationships and Related Transactions —Reorganization Transactions and Corporate
Structure” had taken place on January 1, 2006. The unaudited pro forma condensed consolidated statement of financial conditio n informat ion
as of December 31, 2006 was prepared as if those reorganization transactions had taken place on December 31, 2006. As permitted by the rules
and regulations of the SEC, the Unaudited Pro Forma Condensed Consolidated Financial Informat ion is presented on a condensed basis.

        Prior to this offering we were organized as a limited liability company. We issued to employee members, who are our managin g
directors, Redeemable Class A member interests that were entitled to their pro rata share of our inco me. Our Third A mended and Restated
Limited Liab ility Co mpany Agreement, as amended, provides that each employee member may elect to redeem their Redeemable Clas s A
member interests upon resignation from us. Because of this repurchase feature, the Redeemab le Class A member interests were classified as a
liab ility in our statement of financial condition. As a result of the liab ility classification, the pro rata share of income allocated to the
Redeemable Class A member interests based on ownership percentages and any changes in the redemption amount of the Redeemab le Class A
member interests were recorded as expense in our statement of inco me.

      Likewise, as a limited liability company prior to this offering, we were not subject to U.S. federal o r state income taxes and our earnings
did not reflect the taxes we will pay as a corporation.

     In order to reflect our operating expenses as well as tax and capital structure if we were organized as a corporation, the unaudited pro
forma condensed consolidated financial info rmation gives effect to the reorganization transactions and the related transactio ns as described in
“Certain Relationships and Related Transactions —Reorganizat ion Transactions and Corporate Structure,” including:

        •      the exchange of Class A common interests and Class B co mmon interests held by our non -employee members into shares of our
               common stock in connection with the corporate reorganization;
        •      the exchange of our Redeemable Class A member interests held by our employee members into shares of our common stock in
               connection with the corporate reorganization, and as a result (i) the capital related to the Redeemab le Class A member interests
               will be reclassified as equity, (ii) we will no longer allocate income and pay pro rata profit d istributions to the holders of the
               Redeemable Class A member interests and (iii) we will no longer make interest payments to the holders of the Redeemab le
               Class A member interests; and
        •      a provision for corporate inco me taxes as a corporation at an assumed co mbined federal, state and local income tax rate of 42% of
               our pre-tax net income.

      As part of our corporate reorganization, we will effect an exchange of all the outstanding membership interest of JMP Group L LC for
shares of our common stock. We will exchange 2,300,000 outstanding units of Class B co mmon interests at a one -for-one exch ange ratio into
shares of common stock. Class A common interests and Redeemab le Class A member interests will be exchanged into 12,500,039 sh ares of
common stock by applying a one-for-one exchange ratio to their respective imp lied nu mber of membership units. The imp lied number of
membership units for Class A common interests and Redeemable Class A member interests is determined by calculat ing their resp ective
membership percentages in JMP Group LLC relative to the membership percentage represented by the Clas s B co mmon interests. In addition,
2,674,940 outstanding options to purchase Class B co mmon interests will be exchanged at a one -for-one exchange ratio into options to
purchase shares of our common stock.

      The pro forma ad justments above are based upon available information and certain assumptions that management believes are reasonable
and factually supportable. The unaudited pro forma condensed consolidated

                                                                         36
Table of Contents

financial informat ion and accompanying notes should be read together with the consolidated financial statements and related n otes.

      In connection with this offering, the vesting of 1,405,000 options that we granted in December 2006 will accelerate, and we w ill
grant       restricted stock units to certain of our employees. Because the expenses associated with these transactions are non -recurring, the
unaudited pro forma condensed consolidated financial info rmation does not include adjustments for these transactions. We will record the
following expenses in connection with these transactions:

        •      the immediate recognition of $3.1 million in co mpensation expense related to the immed iate vesting of options granted in
               December 2006; and
        •      the recognition over the four year vesting period of $    million in co mpensation expense related to the grant of         millio n
               shares of our common stock underlying restricted stock units that we intend to grant to certain of our emp loyees in conn ection
               with this offering. The co mpensation expense assumes an initial public offering price of $      per share (the mid -point of the
               range on the cover page of this prospectus).

      The Unaudited Pro Forma Condensed Consoli dated Fi nancial Information presented is not necessarily indicati ve of the results of
operations or financial position that might have occurred had the above pro forma adjustments actually taken pl ace as of the dates
specified, or that may be expected to occur in the future.

                                                                         37
Table of Contents

                                           Unaudi ted Pro Forma Condensed Consoli dated
                                                 Statement of Income Information


For the Year Ended December 31, 2006                                                          Pro Forma               Total
(in thousands, except per share data)                                                        Adjustments              Pro
                                                                                               For the               Forma
                                                                                            Reorganization             as
                                                                         Historical           and Taxes             Adjusted

Total revenues                                                       $        86,806    $                 —           $86,806
Expenses
  Co mpensation and benefits                                                  50,136                                   50,136
  Income allocation and accretion—Redeemable Class A member
      interests                                                               10,664                 (10,664 )(1)          —
  Admin istration                                                              3,977                                    3,977
  Bro kerage, clearing and exchange fees                                       4,133                                    4,133
  Interest and dividend expense                                                1,686                  (1,536 )(2)         150
  Other expenses                                                              12,395                                   12,395

Total expenses                                                                82,991                 (12,200 )         70,791
Minority interest                                                                428                      —               428
Income before taxes                                                            3,387                  12,200           15,587
   Provision for inco me taxes                                                    —                   (6,547 )(3)      (6,547 )

Net inco me                                                          $         3,387    $              5,653          $ 9,040

Net inco me per unit—Class A common interests
  Basic                                                              $           0.91
  Diluted                                                            $           0.89
Weighted average units outstanding—Class A common interests
  Basic                                                                        1,435
  Diluted                                                                      1,468
Net inco me per unit—Class B co mmon interests
  Basic                                                              $           0.91
  Diluted                                                            $           0.89
Weighted average units outstanding—Class B co mmon interests
  Basic                                                                        2,300
  Diluted                                                                      2,353
Net inco me per share of common stock:
  Basic                                                                                                               $   0.61
  Diluted                                                                                                             $   0.61
Weighted average shares of common stock outstanding:
  Basic                                                                                                                14,800 (4)
  Diluted                                                                                                              14,886 (5)


The accompanying notes are an i ntegral part of the Unaudited Pro Forma Condensed Consoli dated Statement of Income Information .

                                                                38
Table of Contents

                                     Notes to Unaudited Pro Forma Condensed Consoli dated Statement
                                                          of Income Information

(1)   As a limited liability company, we allocated inco me and paid profit distributions based on the pro rata ownership percentage to the
      holders of our Redeemable Class A member interests. These income allocations and profit distributions were in addit ion to
      performance-based bonus compensation paid to our employee members. As a corporation, our Redeemab le Class A member interests
      will be exchanged into shares of our common stock and classified as equity. Therefore income al location and accretion expense will not
      be recorded as an expense. In addition, we will no longer pay pro rata profit distributions to the holders of our membership interests, but
      instead will pay div idends, if any, to all our stockholders as described in “Dividend Policy.”
      Following this offering, we expect that our annual total compensation and benefits, including that payable to our managing directors, but
      excluding equity awards made prior to and in connection with this offering, will be appro ximately 60% of revenues each year; however,
      we retain the discretion to change this percentage in the future.
(2)   As a limited liability company, we made interest payments based on contributed capital to the holders of the Redeemab le Class A
      member interests. As a corporation, our Redeemable Class A member interests will be exchanged into shares of our common stock and
      we will no longer make interest payments to the holders of the Redeemable Class A member interests.

(3)   As a limited liability company, we were not subject to income taxes. An adjustment has been made to include assumed income taxes at
      an effective tax rate of 42%, reflecting assumed federal, state and local inco me taxes. The Unaudited Pro Fo rma Condensed Con solidated
      Financial In formation does not include the effect, if any, of the tax indemnificat ion described in “Certain Relationships and Related
      Transactions—Tax Indemnification Agreement and Related Matters.”
(4)   Reflects an adjustment for the issuance of shares of our common stock to our members in exchange for their respective interests in JMP
      Group LLC in the corporate reorganizat ion prior to this offering. It does not reflect the planned grant of restricted stock u nits to a broad
      group of our emp loyees in connection with this offering, with respect to which up to an aggregate of                shares of our common
      stock will be deliverable.
(5)   Diluted shares of common stock includes the dilutive impact of 2,674,940 options to acquire Class B co mmon interests exchanged at a
      one-for-one exchange ratio for options to acquire shares of our common stock by application of the Treasury Stock method in accordanc e
      with SFAS 128, Earnings per Share .

                                                                         39
Table of Contents

                                        Unaudi ted Pro Forma Condensed Consoli dated Statement
                                                   of Fi nancial Conditi on Informati on


As of December 31, 2006                                                                                        Pro Forma,
(in thousands, except per share data)                                    Pro Forma                                 as
                                                                        Adjustments                             Adjusted
                                                                          For the                                For the
                                                    Historical         Reorganization                         Reorganization

Cash and cash equivalents                       $        52,329   $             (10,000 )(1)                          $ 42,329
Other assets                                             51,370                      —                                  51,370

   Total assets                                 $       103,699   $             (10,000 )                             $ 93,699

Redeemable Class A member interests             $        12,914   $             (12,914 )(2)                          $       —
Other liabilities                                        38,294                      —                                    38,294

   Total liabilities                                     51,208                 (12,914 )                                 38,294

Minority interest                                         5,739                      —                                     5,739
Members’ equity and stockholders ’ equity:
  Class A common interests                               11,862                 (11,862 )(3)                                  —
  Class B common interests                               31,650                 (31,650 )(4)                                  —
  Co mmon stock, par value $0.001 per
     share                                                   —                     148 (2)(3)(4)                             148
  Additional paid-in capital                                269                 49,249 (1)(2)(3)(4)(5)                    49,518
  Retained earnings                                       2,971                 (2,971 )(5)                                   —

Total members’ equity and stockholders ’
  equity                                                 46,752                   2,914                                   49,666

Total liabilities, minority interest,
  members’ equity and stockholders’
  equity                                        $       103,699   $             (10,000 )                             $ 93,699

Pro forma shares outstanding                                                                                              14,800 (6)
Pro forma book value per share                                                                                        $     3.36



 The accompanying notes are an i ntegral part of the Unaudited Pro Forma Condensed Consoli dated Statement of Financial Condi tion
                                                            Information.

                                                                  40
Table of Contents

                                     Notes to Unaudited Pro Forma Condensed Consoli dated Statement
                                                    of Fi nancial Conditi on Informati on

(1)   Reflects distributions prior to this offering of $10.0 million related to earnings previously allocated to our members for pe riods prior to
      December 31, 2006 that have not yet been distributed.
(2)   Reflects the issuance of shares of common stock to our members in exchange for our Redeemab le Class A member interests. As of
      December 31, 2006, the Redeemable Class A member interests represented 74.8% of our membership interests and were exchangeable
      into 11,065,306 shares of co mmon stock on a pro forma basis. Because of a repurchase feature, the Redeemab le Class A memb er
      interests are currently classified as a liability and carried at the redemption value which is equal to the member capital ac counts as
      maintained by us. Upon our corporate conversion, the Redeemable Class A member interests will be exchanged into shares of our
      common stock and an amount equal to the redemption value of $12.9 million as of December 31, 2006 will be classified as equit y.

(3)   Reflects the issuance of shares of common stock to our members in exchange for our Class A common interests. As of Decemb er 31,
      2006, Class A common interests represented 9.7% of our membership interests and were exchangeable into 1,434,733 shares of common
      stock on a pro forma basis.
(4)   Reflects the issuance of shares of common stock to our members in exchange for our Class B co mmon interests. As of December 3 1,
      2006, Class B co mmon interests represented 15.5% of our membership interests and were exchangeable into 2,300,000 shares of
      common stock on a pro forma basis.
(5)   Retained earnings are reclassified to paid-in capital assuming a constructive distribution to the members, fo llo wed by a contribution of
      the capital to the corporation.

(6)   On a pro fo rma basis, the shares outstanding reflect the issuance of shares of our common stock to our members in exchange fo r their
      respective interests in JMP Group LLC in the corporate reorganization prior to this offering. See “Certain Relationships and Related
      Transactions” for additional informat ion. It does not reflect the planned grant of restricted stock units to a broad group of our emp loyees
      in connection with this offering, with respect to which up to an aggregate of             shares of our common stock will be deliverable.

                                                                         41
Table of Contents

                                             S ELECTED CONSOLIDATED FINANCIAL DATA

      The following selected consolidated financial and other data of JMP Group LLC should be read together with “Management’s Discussion
and Analysis of Financial Condition and Results of Operations,” “Unaudited Pro Forma Condensed Consolidated Financial Informat ion” and
the consolidated financial statements and accompanying notes included elsewhere in this prospectus.

      The selected consolidated statements of financial condition data as of December 31, 2005 and 2006 and the selected consolidated
statements of income data for each of the three years in the period ended December 31, 2006 have been derived fro m our audited consolidated
financial statements and accompanying notes included elsewhere in th is prospectus and should be read together with those consolidated
financial statements and accompanying notes.

      The selected consolidated statements of financial condition data as of December 31, 2002, 2003 and 2004 and the selected consolidated
statements of income data for the years ended December 31, 2002 and 2003 have been derived fro m audited consolidated financial statements
not included in this prospectus. The selected consolidated financial and other data should be read together with the section entitled
“Management’s Discussion and Analysis of Financial Condition and Results of Operations ” and with our consolidated financial statements and
accompanying notes included elsewhere in this prospectus.

      The selected historical consolidated financial data as of and for the years ended December 31, 2002, 2003, 2004 and 2005 have been
restated for the matters discussed in Note 3 to the acco mpanying consolidated financial statements.

      The unaudited pro forma data for the year ended December 31, 2006 have been derived fro m the pro forma data provided in “Unaudited
Pro Forma Condensed Consolidated Financial Informat ion ” included elsewhere in this prospectus. The unaudited pro forma informat ion for the
years ended December 31, 2002 to 2005 have been calculated based on assumptions consistent with those used for the 2006 un audited pro
forma consolidated financial informat ion included herein.

      The pro forma statement of inco me and pro forma statement of financial condition adjustments principally give effect to the f ollowing
matters:

        •      the corporate reorganization as described in “Certain Relat ionships—Reorganization Transactions and Corporate Structure;”
        •      reclassification of profit d istributions to certain Class A members that are currently accounted for as stock-based compensation
               under SFAS 123 until December 31, 2005 and SFAS 123R since January 1, 2006. Prior to the corporate reorganization we were a
               limited liability co mpany that issued Redeemable Class A member interests to employee members who are entitled to their p ro
               rata share of our operating profits. As a corporation, our Redeemable Class A member interests will convert into permanent
               equity and we will no longer distribute pro rata profit allocations to the holders of the Redeemab le Class A member interests. All
               payments for services rendered by our managing directors will be included in our co mpensation and benefits;
        •      the exchange of our Redeemable Class A member interests held by our employee members into shares of our common stock in
               connection with the corporate reorganization and, as a result, we will no longer make interest payments to the holders of the
               Redeemable Class A member interests; and

        •      a provision for income taxes as a corporation at an assumed combined federal, state and local inco me tax rate of 42%.

                                                                        42
Table of Contents



(in thousands, except per share data and selected data
and operating metrics)                                                          As of or for the Year Ended December 31,
                                                                 2002                  2003                  2004                  2005               2006

                                                               (restated)            (restated)            (restated)            (restated)
Statement of Income Data
   Revenues
     Investment banking                                    $         5,878       $        25,267       $        37,413       $        62,880      $ 44,060
     Bro kerage revenues                                             8,981                15,883                22,579                23,536        30,185
     Asset management fees                                             876                 7,670                12,505                  8,538        4,531
     Principal t ransactions                                         1,147                 8,558                 1,775                 (2,006 )      4,288
     Interest, dividends and other                                   2,858                 1,393                   545                  1,713        3,742

   Total revenues                                                   19,740                58,771                74,817                94,661          86,806

   Expenses
     Co mpensation and benefits                                     11,682                32,522                46,969                60,145          50,136
     Income allocation and
        accretion/(dilution)—Redeemable Class A
        member interests (1)                                         (1,151 )             13,093                 9,755                12,983          10,664
     Admin istration                                                    751                1,778                 2,640                 3,362           3,977
     Bro kerage, clearing and exchange fees                           1,769                1,484                 2,848                 3,170           4,133
     Interest and dividend expense                                      358                  654                 1,009                   933           1,686
     Other expenses                                                   4,119                6,041                 8,098                10,146          12,395

   Total expenses                                                   17,528                55,572                71,319                90,739          82,991
     Minority interest (2)                                              —                     —                     —                     —              428

   Net inco me (3)                                                   2,212                  3,199                3,498                 3,922           3,387
     Increase in redemption value of Series B p referred
         units                                                       (3,493 )              (2,151 )                 (513 )                 —                 —
     Distributions to Series A convertible preferred
         units                                                       (1,061 )                 (704 )                (469 )                 —                 —

   Net inco me attributable to Class A and Class B
     common interests (3)                                  $         (2,342 )    $            344      $         2,516       $         3,922      $    3,387

   Net inco me per unit—Class A common
     interests (3)(4)
     Basic                                                 $         (14.52 )    $            2.45     $            2.12     $            1.04    $     0.91
     Diluted                                               $         (14.52 )    $            0.65     $            1.92     $            1.04    $     0.89
   Weighted average units outstanding—Class A
     common interests (4)
     Basic                                                             161                    141                1,185                 1,474           1,435
     Diluted                                                         1,633                  1,613                1,553                 1,474           1,468
   Net inco me per unit—Class B co mmon
     interest (3)(4)
     Basic                                                               —                        —    $            0.73     $            1.04    $     0.91
     Diluted                                                             —                        —    $            0.73     $            1.04    $     0.89
   Weighted average units outstanding—Class B
     common interests (4)
     Basic                                                               —                        —                 958                2,300           2,300
     Diluted                                                             —                        —                 958                2,300           2,353

                                                                         43
Table of Contents

(in thousands, except per share data and selected
data and operating metrics)                                                  As of or for the Year Ended December 31,
                                                             2002                  2003                  2004                  2005                2006

                                                           (restated)            (restated)            (restated)            (restated)
Pro Forma Statement of Income Data—C-Corp
  (Unaudited) (5)
  Total revenues                                       $        19,740       $        58,771       $        74,817       $        94,661       $    86,806
  Total expenses                                                17,528                55,572                71,319                90,739            82,991
     Addback: Income allocation and
        accretion/(dilution)—Redeemable Class A
        member interests (1) (6)                                 1,151               (13,093 )               (9,755 )            (12,983 )         (10,664 )
     Addback: Interest expense—Redeemable
        Class A member interests (7)                                (163 )                (577 )                (920 )                (888 )        (1,537 )

   Pro forma total expenses                                     18,516                41,902                60,644                76,868            70,790
      Minority interest (2)                                         —                     —                     —                     —                428

   Pro forma income before taxes                                 1,224                16,869                14,173                17,793            15,588
      Pro forma tax expense (42.0% assumed tax rate)
         (8)                                                        514                7,085                 5,953                 7,473             6,547

   Pro forma net inco me                               $            710      $         9,784       $         8,220       $        10,320       $     9,041

Pro forma net inco me per share of co mmon stock:
   Basic                                                                                                                                       $      0.61
   Diluted (9)                                                                                                                                 $      0.61
Pro forma weighted average number of co mmon
   shares outstanding:
   Basic                                                                                                                                            14,800
   Diluted (9)                                                                                                                                      14,886
Statement of Financial Condi tion Data
   Total assets                                        $        25,579       $        58,146       $        85,993       $        91,923       $ 103,699
   Notes payable                                                    —                     —                  2,500                    —               —
   Redeemable Class A member interests                           1,755                11,542                 5,897                11,517          12,914
   Total liabilities                                             9,210                39,281                40,573                45,275          51,208
   Total equity                                                 12,533                12,877                45,419                46,648          46,752
Pro forma Statement of Financial Condi tion
  Data—C-Corp (Unaudited) (5)
  Pro forma total liabilit ies (10)                                                                                                            $    38,294
  Pro forma total equity (10) (11)                                                                                                                  49,666
Selected Data and Operating Metrics (Unaudi ted)
  Nu mber of emp loyees—end of period                                77                  111                   141                   169              187
  Nu mber of emp loyees—average                                      63                    96                  127                   162              181
  Revenues per average employee                                   $313                  $612                  $589                  $584             $480
  Co mpensation and benefits as a % of revenues (12)               59.2 %                55.3 %                62.8 %                63.5 %           57.8 %
  Co mpanies covered by our research analysts                        93                  155                   198                   294              279
  Nu mber of co mp leted investment banking
     transactions                                                     11                    25                    55                    75                75



                                                                        44
Table of Contents

(1)   Prior to this offering we were organized as a limited liability company and issued to employee members, who are our managing directors,
      Redeemable Class A member interests, that were entitled to their pro rata share of our inco me. Our Third A mended and Restated Limited
      Liability Co mpany Agreement, as amended, provides that each employee member may elect to redeem their Redeemable Class A
      member interests upon resignation from us. Because of this repurchase feature, the Redeemab le Class A member interests are classified
      as a liability in our statement of financial condition. As a result of the liability classificat ion, the pro rata share of in co me allocated to the
      Redeemable Class A member interests based on ownership percentages and any changes in the redemption amount of the Redeemab le
      Class A member interests were recorded as expense in our statement of inco me.

(2)   Minority interest relates to the interest of third parties in JM P Realty Trust and in two asset management funds, Harvest Con sumer
      Partners and Harvest Technology Partners.
(3)   Prior to this offering we were a limited liability co mpany and our earnings did not reflect the inco me taxes we will pay as a corporation.
(4)   We issued 2,300,000 units of Class B common interests in a private offering in August 2004, wh ich represented 15.5% of our
      outstanding membership interests. Because there is a direct relationship between the number of Class B co mmon interests outstanding
      and the ownership percentage in our equity, we were ab le to determine the number of units associated with the Class A commo n interests
      outstanding. As a result, we were able to determine earnings per share, based on an implied nu mber of Class A common interests and an
      existing number of Class B co mmon interests outstanding. We have reflected this imp lied nu mber o f units for purposes of determining
      earnings per share in all periods presented.

(5)   The amounts for all periods presented reflect pro forma results of operations as if the corporate reorganization had occurred on January 1,
      2002.
(6)   As a limited liability company, we allocated inco me and paid profit distributions to the hold ers of our Redeemable Class A member
      interests based on their pro rata ownership. These profit distributions were in addition to performance -based bonus compensation paid to
      our emp loyee members. As a corporation, our Redeemab le Class A member interests will be exchanged into shares of our common stock
      and we will no longer pay pro rata profit distributions to the holders of the Redeemab le Class A member interests.
(7)   As a limited liability company, we made interest payments based on contributed capital to the holders of the Redeemab le Class A
      member interests. As a corporation, our Redeemable Class A member interests will be exchanged into shares of our common stock an d
      we will no longer make interest payments to the holders of the Redeemable Class A member interests.

(8)   As a limited liability company, we were not subject to income taxes. The pro forma tax expense for all periods presented includes
      adjustments for assumed federal, state and local inco me taxes as if we were organized as a corporation for each period fro m Jan uary 1,
      2002 at an assumed comb ined federal, state and local inco me tax rate of 42% of our income befo re taxes.
(9)   The pro forma d iluted numbe r of shares outstanding includes the dilutive impact of outstanding options by application of the Treasury
      Stock method in accordance with SFAS 128, Earnings per Share .
(10) Reflects the exchange of our Redeemable Class A member interests into shares of common stock.

(11) Reflects distributions prior to this offering of $10.0 million related to earnings previously allocated to our members for pe riods prior to
     December 31, 2006 that have not yet been distributed.
(12) Co mpensation and benefits include salaries and performance-based bonus payments to our managing directors and other emplo yees.
     Following this offering, we expect that our annual total compensation and benefits, including that payable to our managing directors, but
     excluding equity awards granted prior to and in connection with this offering, will be appro ximately 60% of revenues each yea r;
     however, we retain the discretion to change this percentage in the future.

                                                                           45
Table of Contents

                         MANAGEMENT’S DIS CUSSION AND ANALYS IS OF FINANCIAL CONDITION AND
                                              RES ULTS OF OPERATIONS

      The following discussion should be read together with our consolidated financial statements and the accompanying notes contained
elsewhere in this prospectus. In addition to historical information, the following discussion contains forward -looking statements that involve
risks and uncertainties. Our actual results and the timing of events may differ significantly from those projected in such forward -looking
statements due to a number of factors, including those discussed in the “Risk Factors” and elsewhere in this prospectus.

     As discussed in Note 3 to the consolidated financial statements, our consolidated financial statements have been restated. The following
discussion and analysis gives effect to that restatement.

Overview
     We are a fu ll-service investment banking and asset management firm headq uartered in San Francisco. We have a diversified business
model with a focus on small and middle-market co mpanies and provide:

        •      investment banking, including corporate finance, mergers and acquisitions and other strategic advisory services, to corporate
               clients;
        •      sales and trading, and related brokerage services to institutional investors;
        •      proprietary equity research in our six target industries; and

        •      asset management products and services to institutional investors, high net -worth individuals and for our own account.

       For segment reporting, we div ide our business into two segments, as follows: (i) Broker-Dealer; and (ii) Asset Management. These two
segments are operated through our two wholly-owned subsidiaries, JM P Securit ies and JMP Asset Management, respectively. JMP Securities
is a registered securities broker-dealer and a member of the NASD and provides investment banking, sales and trading, and equity research
services. For the years ended December 31, 2004, 2005 and 2006, the Bro ker-Dealer segment contributed to our total revenues $61.1 million,
$86.5 million, and $79.0 million, respectively. JMP Asset Management is an investment adviser registered with the SEC and manages a family
of five hedge funds, two funds of hedge funds, and, through an affiliate, an externally advised REIT. For the years ended Dec ember 31, 2004,
2005 and 2006, the Asset Management segment contributed to our total revenues $13.8 million, $8.1 million, and $7.8 million, respectively.

Business Environment
       Many external factors affect our revenues and profitability, including economic and market conditions, the level and volatility o f interest
rates, inflat ion, polit ical events, investor sentiment, legislat ive and regulatory developments and competition. These factor s influence levels of
equity securities issuance, and mergers and acquisitions activity generally, which affect our investment banking business. The same factors also
affect trading volu mes and valuations in secondary financial markets, which affect our sales and trading and asset management businesses.
Co mmission rates, market volatility and other factors also affect our sales and trading revenues and may cause our sales and trading revenues to
vary fro m period to period. Because these business environment issues are unpredictable and beyond our control, our earnings may fluctuate
significantly fro m year to year and quarter to quarter. We are also subject to various legal and regulatory actions that impact our business and
financial results.

      As measured by gross domestic product, or GDP, the U.S. economy experienced real growth of 2.5% in 2003, 3.9% in 2004, 3.2% in
2005 and 3.3% in 2006. Beginning in 2003, U.S. corporate earnings performance improved, along with investor confidence, leading to more
favorable equity market conditions, increased capital

                                                                          46
Table of Contents

market issuances and higher levels of merger and acquisition activity. The S&P 500 Index, a broad market measure of U.S. equity markets,
increased fro m 909.03 on January 1, 2003 to 1,418.30 on December 29, 2006, or 56.0%. The Russell 2000 Index, a broader equ ity market
measure that captures the performance of small and middle-market U.S. co mpanies, increased 100.6% during the same period. Aggregate
proceeds raised in U.S. in itial public offerings and follo w-on public equity offerings increased from $83.6 billion in 2003 to $169.2 billion in
2006, or 102.4%. During this period, the U.S. equity markets have continued to display strong mo mentum in terms of both price appreciation
and trading volumes, two important catalysts for our investment banking and sales and trading businesses. For the year ended December 31,
2006, the S&P 500 increased 11.8%, the Russell 2000 Index 15.1% and the Do w Jones Industrial Average, or DJIA, increased 14.9%. The
strong trends in the U.S. equity markets have continued, as have the strong trends in both U.S. and global mergers and acquisition activity,
which tend to be highly correlated with equity market performance. Aggregate proceeds fro m all public U.S. equity offerings f or the year ended
December 31, 2006 were $169.2 b illion, an increase of 30.8% fro m the aggregate proceeds for the year ended December 31, 2005. U.S. merger
and acquisition activity achieved record levels in 2006. For the year ended December 31, 2006, there were 11,341 announced U.S. merger and
acquisition transactions representing $1,252.1 b illion in announced transaction value, an increase of 23.7% co mpared to the y ear ended
December 31, 2005. During the period of robust equity market growth and merger and acquisition activity, the alternativ e asset management
sector of the global financial services industry has continued to expand. According to data from Hedge Fund Research, the tot al number o f
hedge funds globally has increased from appro ximately 6,300 as of December 31, 2003 to appro ximately 9,460 as of December 31, 2006.
Aggregate assets under management by all hedge funds increased fro m appro ximately $820 b illion as of December 31, 2003 to approximately
$1.4 trillion as of December 31, 2006 accord ing to Hedge Fund Research.

Components of Revenues
      We derive revenues primarily fro m fees earned fro m our investment banking business, net commissions on our trading activities in our
sales and trading business, and asset management fees in our asset management business. We also generate revenues from prin cipal
transactions, interest, dividends, and other inco me.

 Investment Banking
      We earn investment banking revenues from underwrit ing securities offerings, arranging private placements and providing adviso ry
services in mergers and acquisitions and other strategic advisory assignments.

 Underwriting Revenues
      We earn underwrit ing revenues from securit ies offerings in which we act as an underwriter, such as initial public offerings a nd follow-on
equity offerings. Underwriting revenues include management fees, underwriting fees and selling concessions. We record underwriting
revenues, net of related syndicate expenses, at the time the underwriting is completed. In syndicated underwritten transactio ns, management
estimates our share of transaction-related expenses incurred by the syndicate, and we recognize revenues net of such expense. On final
settlement by the lead manager, typically 90 days fro m the trade date of the transaction, we adjust these amounts to reflect the actual
transaction-related expenses and our resulting underwriting fee. We receive a higher proportion of total fees in underwritten transaction s in
which we act as a lead manager.

 Strategic Advisory Revenues
     Our strategic advisory revenues primarily include s uccess fees on closed merger and acquisition transactions, as well as retainer fees,
earned in connection with advising both buyers and sellers transactions. We also earn fees for related advisory work and othe r services such as
providing fairness and valuation opinions. We record strategic advisory revenues when the transactions or the services (or, if ap plicable,
separate components thereof) to be performed are substantially co mp lete, the fees are determinable and collect ion is reasonab ly assured.

                                                                        47
Table of Contents


 Private Placement Revenues
      We earn agency placement fees in non-underwritten transactions such as private placements of equity securities, private investments in
public equity, or PIPEs, Ru le 144A private offerings and trust preferred securities offerings. We record private placemen t reven ues on the
closing date of the transaction.

      Since our investment banking revenues are generally recognized at the time of comp letion of each transaction or the services to be
performed, these revenues typically vary between periods and may be consid erably affected by the timing of the closing of significant
transactions.

 Brokerage Revenues
       Our bro kerage revenues include commissions paid by customers fro m brokerage transactions in listed and over-the-counter, or OTC,
equity securities. Co mmissions are recognized on a trade date basis. Bro kerage revenues also include net trading gains and losses which result
fro m market making activ ities and fro m our co mmit ment of capital to facilitate customer t ransactions. Our brokerage revenues may vary
between periods, in part depending on commission rates, trading volumes and our ability to continue to deliver research and other value -added
services to our clients. The ability to execute trades electronically, through the Internet and through other alternative tra ding systems has
increased pressure on trading commissions and spreads. We expect this trend toward alternative trading systems, and pricing p ressures in our
brokerage business to continue. We are, to some extent, co mpensated through brokerage commissions fo r the value of research and other value
added services we deliver to our clients. These “soft dollar” practices have been the subject of discussion among regulators, the investment
banking commun ity and our sales and trading clients. In particular, co mmiss ion sharing arrangements have been adopted by some large
institutional investors. In these arrangements, these institutional investors concentrate their trading with fewer “execution” brokers and pay a
fixed amount for execution with an additional amount s et aside for pay ments to other firms for research or other brokerage services.
Accordingly, we may experience reduced (or eliminated) trad ing volume with such investors but may be co mpensated for our rese arch and
sales efforts through allocations of the designated amounts. Depending on the extent to which we adopt this practice and depending on our
ability to reach arrangements on terms acceptable to us, this trend would likely impair the revenues and profitability of our commission
business by negatively affecting both volumes and trading commissions in our commission business.

 Asset Management Fees
      Asset management fees include management fees and incentive fees earned fro m managing investment partnerships sponsored by us and
investment accounts owned by clients. Management fees earned by us are generally based on the fair value of assets under man agement and the
fee schedule for each fund and account. We also earn incentive fees that are based upon the performance of investment funds and accounts.
Such fees are based on a percentage of the excess of an investment return over a specified highwater mark or hurd le rate over a defin ed
performance period.

      Our asset management revenues are subject to fluctuations due to a variety of factors that are unpredictable , including the overall
condition of the economy and the securities markets as a whole and our core sectors. These conditions can have a material aff ect on the inflows
and outflows of assets under management, and the performance of our asset management fun ds. For examp le, a significant portion of the
performance-based or incentive revenues that we recognize are based on the value of securities held in the funds we manage. The value of these
securities includes unrealized gains or losses that may change from one period to another.

      In addition, emp loyees typically pay one-half the amount of fees charged to outside limited partners and portfolio managers do not pay
any fees with regard to their investments in the funds they manage.

                                                                       48
Table of Contents

 Principal Transactions
      Principal t ransactions revenues includes realized and unrealized net gains and losses resulting fro m our p rincipal investment s, which
includes investments in equity securities for our own account and as the general partner of funds managed by us, warrants we may receive fro m
certain investment banking assignments, as well as limited partner investments in private funds managed by third parties. We leverage our asset
management expert ise by investing a portion of our capital in a portfo lio o f equity securities managed by JMP Asset Management and in
side-by-side investments in the funds managed by us. In certain cases, we also co -invest alongside our institutional clients in private
transactions resulting fro m our investment banking business.

 Interest, Dividends and Other
     Interest, dividends and other includes interest and dividend income generated by our liquid assets and principal investments. Other
income also includes fees earned to raise capital fo r third -party investment partnerships, or funds.

Components of Expenses
      We classify our expenses as compensation and benefits, income allocation and accretion/(dilution)—Redeemable Class A member
interests, administration expense, brokerage, clearing and exchange fees, interest and dividend expense and other expenses. A significant
portion of our expense base is variable, including compensation and benefits, brokerage and clearance, co mmun ication and data processing,
and travel and entertainment expenses.

 Compensation and Benefits
      Co mpensation and benefits is the largest component of our expenses and includes employee and managing director base pay,
performance bonuses, sales commissions, related payroll taxes, medical and benefits expenses, as well as expenses for contractors and
temporary emp loyees. While members of a limited liab ility co mpany are typically co mpensated through pro rata profit distribut ions, our
emp loyee members receive the majority of their co mpensation in the form of individual performance-based bonuses. As is the widespread
practice in our industry, we pay bonuses on an annual basis, which for senior professionals typically make up a large portion of their total
compensation. Co mpensation is accrued based on a ratio of total co mpensation and benefits to total revenues. We accrue for the estimat ed
amount of these bonus payments ratably over the applicable service period. Bonus payments may have a greater impact on our ca sh position
and liquidity in the periods in wh ich they are paid than would otherwise be reflected in our consolidated statements of income. Following this
offering, we expect that our compensation and benefits expense, excluding equity -based awards made prior to and in connection with this
offering, will be appro ximately 60% of revenues each year, although we may change this rate at any time.

 Income Allocation and Accretion/(Dilution)—Redeemable Class A Member Interests
       Redeemable Class A member interests are issued to our employee members and are entitled to share in our inco me. Each holder of the
Redeemable Class A member interests is a party to our Third Amended and Restated Limited Liability Co mpany Agreement, as amended,
which provides that an employee member may elect to redeem his or her Redeemab le Class A member interests without our consent in
connection with such person’s resignation fro m us. Because of this repurchase feature the Redeemab le Class A member interests are classified
as a liability and measured at each balance sheet date based on the redemption amounts for the Redeemable Class A member in terests. The
redemption amount for an emp loyee member is the amount we are required to pay to an emp loyee member upon resignation to redee m all of
his or her Redeemab le Class A member interests and is equal to the capital account of such employee member as maintained by us.

                                                                       49
Table of Contents

      Redeemable Class A member interests are accounted for as stock-based compensation and classified as a liability. As a result, the share of
our income allocated to Redeemable Class A member interests, based on the membership percentage owned, and any additional changes in t he
redemption amount of Redeemable Class A member interests are recorded as “Income allocation and accretion/(dilution)—Red eemab le
Class A member interests” in our consolidated statements of income.

     Upon the completion of the corporate reorganization, our Redeemab le Class A member interests will be exchanged into shares of our
common stock and classified as equity. Therefore, inco me allocation and accretion/(dilution)—Redeemable Class A member in terests will no
longer be recorded as an expense after this offering.

 Administration
      Admin istration expense primarily includes the cost of hosted conferences, non -capitalized systems and software expenditures, insurance,
office supplies, recruiting, and regulatory fees.

 Brokerage, Clearing and Exchange Fees
     Bro kerage, clearing and exchange fees include the cost of floor and electronic brokerage and execution, securities clearance, an d
exchange fees. We currently clear our securities transactions through Automatic Data Processing, Inc. Changes in brokerage, c learing and
exchange fees fluctuate largely in line with the volu me of sales and trading activity.

 Interest and Dividend Expense
      Interest and dividend expense consists primarily of interest paid on net capital contributed by our employee members, who rec eive
interest payments at an annual rate equal to the Prime rate p lus 100 basis points. To a lesser extent it results from short -term borrowings and
dividend paying short positions in our principal investment portfolio. Upon complet ion of our corporate reorganization in connection with this
offering, our Redeemab le Class A member interests will be exchanged into shares of our common stock and we will no longer make interest
payments to holders of the Redeemable Class A member interests.

 Other Expenses
      Other operating e xpenses primarily include travel and business development, market data, occupancy, legal and accounting professional
fees and depreciation.

       As a result of this offering, we will no longer be a private co mpany and our costs for such items as insurance, acco unting and legal advice
will increase. We will also incur costs which we have not previously incurred for directors fees, investor relations expenses , expenses for
compliance with the Sarbanes -Oxley Act and rules imp lemented by the SEC and the NYSE, and various other costs of being a public co mpany.

 Minority Interest
      Minority interest relates to the interest of third parties in JM P Realty Trust and in the two asset management funds Harvest Consumer
Partners and Harvest Technology Partners. JMP Realty Trust is a real estate investment trust that was formed in June 2006. As of December 31,
2006, we o wned 50.6% of JMP Realty Trust and certain emp loyee members owned 24.7%. JMP Realty Trust is managed by JMP Realty
Advisors, an affiliate of JMP Asset Management. Because of the current ownership and external management position, we consolidate JMP
Realty Trust and record a minority interest. We have committed $10.3 million in capital to JMP Realty Trust, of wh ich, as of December 31,
2006, a total of $2.1 million had been drawn. JMP Asset Management is also the general partner of Harvest Consumer Partners and Harvest
Technology Partners, and as of December 31, 2006, JMP Asset Management, as general partner, and its affiliates, officers and immediate

                                                                        50
Table of Contents

family members provided 94.6% and 95.3%, respectively, of the invested capital in these funds. Due to the ownership and resulting control of
JMP Asset Management and related parties, management believes that limited partners currently do not have substantive rights to remove the
general partner and therefore these two funds are consolidated in the financial statements.

 Pro Forma Net Income
    Pro forma net inco me relates to our estimated net inco me upon our corporate reorganization prior to this offering and is used by our
management to analyze and manage the overall performance of our business.

Material Weaknesses in Internal Control Over Financi al Reporting
      In connection with the restatement of our consolidated financial statements for the years ended December 31, 2004 and 2005, o ur
independent registered public accounting firm identified material weaknesses in our internal control over financial reporting. A material
weakness is a control deficiency, or a co mbination of control deficiencies, that results in more than a remote likelihood tha t a material
misstatement of the annual or interim financial statements will not be prevented or detected. Our independent registered public accounting firm
communicated to our management and executive co mmittee of the board of directors the follo wing deficiencies in our internal c ontrol over
financial report ing, wh ich constitute material weaknesses:

        •      we did not have effective controls in p lace over the selection and application of generally accepted accounting principles to
               account for our Redeemable Class A member interests in accordance with SFAS 123, Accounting for Stock -Based Compensation
               , until December 31, 2005; and
        •      we did not have effective controls in p lace over the preparation and review of our statements of cash flows that caused us no t to
               detect certain computational errors in our investing and operating cash flows.

      These material weaknesses existed as of December 31, 2005 and resulted in a misstatement of significant accounts that would result in a
material misstatement to our interim o r annual consolidated financial statements that was not prevented or detected at the time our consolidated
financial statements were issued. As of December 31, 2006, we believe we have remediated the identified material weaknesses b y taking the
following measures:
        •      we improved our processes for selecting and imp lementing co mplex accounting policies, such as SFAS 123 and SFAS 123R, in
               order to properly record our Redeemable Class A member interests; and

        •      we improved our preparation and review processes in connection with our consolidated statements of cash flow.

      In addition, we have hired and expect to hire additional finance and accounting personnel to assist in the proper preparation of our
consolidated financial statements and compliance with Sect ion 404 of the Sarbanes-Oxley Act, and to assist us in addressing the requirements
of being a new public co mpany.

Results of Operations
 Year E nded December 31, 2006, Compared to Year Ended December 31, 2005
 Overview
      Total revenues decreased $7.9 million, or 8.3%, fro m $94.7 million for the year ended December 31, 2005 to $86.8 million for the year
ended December 31, 2006. This decrease was primarily due to decreases in investment banking revenues of $18.8 millio n and asset
management fees of $4.0 million, but was partially offset by increases of $6.6 million in bro kerage revenues and $6.3 million in principal
transaction revenues.

     Total expenses decreased $7.7 million, or 8.5%, fro m $90.7 million for the year end ed December 31, 2005 to $83.0 million for the year
ended December 31, 2006, primarily due to a decrease in compensation and benefits

                                                                         51
Table of Contents

due to lower managing director co mpensation and benefits. The decrease was partly offset by higher brokerage, clearing and exchange
expenses resulting from the increase in bro kerage revenues, higher interest expense due to the interest payments for additio nal capital
contributions combined with an increase in the average Prime rate, and higher occupancy and related office expenses associated with the
opening of our offices in New York and Boston.

      Net inco me decreased $0.5 million, or 13.6%, fro m $3.9 million for the year ended December 31, 2005, co mpared with $3.4 million for
the year ended December 31, 2006. Pro forma net inco me decreased $1.3 million, or 12.4%, fro m $10.3 million for the year ended
December 31, 2005 to $9.0 million for the year ended December 31, 2006.

 Revenues
      Investment Banking . Investment banking revenues decreased $18.8 million, or 30.0%, fro m $62.9 million for the year ended
December 31, 2005 to $44.1 million for the same period in 2006, and decreased as a percentage of total revenues from 66.4% t o 50.8%,
respectively. The decrease in revenues was primarily due to lower levels of activity in our underwrit ing and strategic adviso ry businesses. In
particular, we executed fewer mergers and acquisitions and underwriting transactions in our homebuild ing and financial services
industry groups during the year ended December 31, 2006 than for the year ended December 31, 2005 as a result of macroeconomic trends,
such as rising interest rates and a slowdown in the housing market. As a percentage of investment banking revenues, homebuild ing and
financial services revenue fell fro m 31.2% and 31.1% for the year ended December 31, 2005, to 15.0% and 21.4% for the year ended
December 31, 2006. The decrease in the homebuilding and financial services act ivity was partially offset by an increase in underwrit ing and
strategic advisory assignments in some of our other industry groups. During the year ended December 31, 2005, we participated in seven public
equity underwritings in wh ich we acted as a lead manager, fo r wh ich generally higher fees are earned, raising total gross proceeds of $899.1
million. During the year ended December 31, 2006, we participated in five public equity underwrit ings in which we were a lead manager,
raising total gross proceeds of $312.2 million. The decrease in the number of lead managed transactions along with the decrease in total gross
proceeds raised directly affects underwriting fees earned. Investment banking revenues were also impacted by a decrease in ou r average
mergers and acquisitions transaction size, which d irectly affect the size of fees paid to us, as fees are generally paid as a percentag e of gross
transaction size. Th is decrease was in part due to several large mergers and acquisitions transactions in the homebuilding industry during the
year ended December 31, 2005, which resulted in larger than average advisory fees for that time period compared to the year en ded
December 31, 2006. During the year ended December 31, 2006, we expensed deferred expenses of $1.0 million for investment banking
transactions that were not completed. We expensed no deferred expenses for investment banking transactions that were not comp leted for the
year ended December 31, 2005.

       Brokerage Revenues . Bro kerage revenues increased by $6.6 million, or 28.3%, fro m $23.5 million fo r the year ended December 31, 2005
to $30.2 million for the year ended December 31, 2006. This increase was a result of an increase in co mmissions of $9.0 millio n, fro m $24.7
million for the year ended December 31, 2005 to $33.7 million fo r the year ended December 31, 2006, but was partially offset by an increase in
net trading losses of $2.4 million, fro m $1.1 million for the year ended December 31, 2005 co mpared to $3.5 million for the year ended
December 31, 2006. The increase in net trading losses was primarily due to the fact that our trading desk took more frequent positions in
greater amounts to facilitate customer trades. The increase in co mmissions was due to an increase in the volume of shares tra ded for customers,
which increased 40.1% co mpared to the year ended December 31, 2005, as we experienced increased trading activity with existing and new
institutional clients. In the year ended December 31, 2006, trading activity benefited fro m favorable market conditio ns in our target sectors and
the equity markets generally, as the S&P 500 increased 11.8%, the Russell 2000 Index 15.1% and the Dow Jones Industrial Avera ge, or DJIA,
increased 14.9%. The nu mber of co mpanies under research coverage declined fro m 294 at Dec ember 31, 2005 to 279 at December 31, 2006, as
several of our research analysts realigned their coverage areas during 2006. Brokerage revenues increased as a percentage of total revenues,
fro m 24.9% fo r the year ended December 31, 2005, to 34.8% fo r the year ended December 31, 2006.

                                                                        52
Table of Contents

       Asset Management Fees. Asset management fees decreased $4.0 million, o r 46.9%, fro m $8.5 million for the year ended December 31,
2005 to $4.5 million for the year ended December 31, 2006. This decrease was primarily due to lower management fees, wh ich are earned as a
percentage of assets under management, resulting fro m a decline in assets under management as well as lower incen tive fees earned. Assets
under management decreased from $340.2 million at December 31, 2005, to $208.2 million at December 31, 2006. We believe that the decline
was due to the fact that the returns generated by certain of our funds did not match those produced in prior periods and equaled neither our
funds’ established benchmarks nor those of the broader market during 2005. In particu lar, the lower perfo rmance of Harvest Opportunity
Partners II, our largest fund, resulted in redemptions of client assets. The lower performance of our funds in 2005 negatively impacted our
incentive fees earned in the year ended December 31, 2006. We typically receive such fees as a percentage of an investment return in excess of
a specified highwater mark. During 2006, the net assets and gains in several funds had to reach investors ’ highwater marks in o rder for us to
earn incentive fees on the performance of the funds. For the three months ended of December 31, 2006, most of our investors w ere at or above
their respective highwater mark. As a percentage of total revenues, asset management fees decreased from 9.0% for the year ended
December 31, 2005 to 5.2% fo r the same period in 2006.

       Principal Transactions. Principal transaction revenues increased $6.3 million fro m a loss of $2.0 million fo r the year ended December 31,
2005 to a gain of $4.3 million for the year ended December 31, 2006. This increase was in part due to an increase in gains on equity
investments in publicly-held securit ies of $1.7 million, fro m $0.1 million for the year ended December 31, 2005 to $1.8 million for the year
ended December 31, 2006. The increase was also attributable to an increase in gains on investment partnerships of $3.2 million fro m a loss of
$0.6 million for the year ended December 31, 2005 to a gain of $2.6 million fo r the year ended December 31, 2006. These gains were partially
offset by unrealized losses in 2005 and 2006 of $1.5 million and $0.1 million, respectively, on warrant positions we had received fro m clients
in certain investment banking assignments.

    Interest, Dividends and Other. Interest, dividends and other increased $2.0 million, or 118.4%, fro m $1.7 million for the year ended
December 31, 2005 to $3.7 million for the same period in 2006. The increase was attributable to increa sed interest rates and mo re actively
managed cash, which returned higher yields.

 Expenses
      Compensation and Benefits . Co mpensation and benefits, which includes salaries and performance bonus compensation to our emp loyees
and managing directors, decreased $10.0 million, or 16.6%, fro m $60.1 million for the year ended December 31, 2005 to $50.1 million for the
year ended December 31, 2006. This decrease reflects a decrease in the amount of employee and managing director bonuses mainly as a result
of a decrease in investment banking revenues and asset management fees. The decrease was partially offset by an increase in salaries due to
additional headcount, which increased fro m 169 emp loyees at December 31, 2005 to 187 at December 31, 2006. As a percentage of revenues,
compensation and benefits decreased from 63.5% of total revenues for the year ended December 31, 2005 to 57.8% for the same period in
2006.

      Income Allocation and Accretion/(Dilution). Income allocation and accretion/(dilution) decreased $2.3 millio n, o r 17.9%, fro m $13.0
million for the year ended December 31, 2005 to $10.7 million fo r the year ended December 31, 2006. This increase is primarily due to lower
income allocated to the Redeemable Class A member interests. Income allocation and accretion/(dilution) increased fro m 13.7% of total
revenues for the year ended December 31, 2005 to 12.3% for the same period in 2006.

      Administration. Administration expenses increased $0.6 million, or 18.3%, fro m $3.4 million for the year ended December 31, 2005 to
$4.0 million for the year ended December 31, 2006. Th is increase was due primarily to additional hosted conference expenses associated with
the addition of two new conferences in 2006 and an increase in the length of our annual research conference fro m t wo days in 2005 to three
days in 2006. Ad min istration expense increased from 3.6% of total revenues for the year ended December 31, 2005 to 4.6% for the same period
in 2006.

                                                                       53
Table of Contents

      Brokerage, Clearing and Exchange Fees. Bro kerage, clearing and exchange fees increased $1.0 million, or 30.4%, fro m $3.2 million for
the year ended December 31, 2005 to $4.1 million for the year ended December 31, 2006. Th is increase was primarily due to an increase in
trading activity in our sales and trading business as shares traded for customer accounts increased from 585.0 million shares for the year ended
December 31, 2005 to 819.8 million shares for the year ended December 31, 2006. As a percentage of total revenues, our brokerage, clearing
and exchange fees increased fro m 3.3% for the year ended December 31, 2005 to 4.8% for the same period in 2006.

      Interest and Dividend Expense. Interest and dividend expense increased $0.8 million, or 80.7%, fro m $0.9 million fo r the year ended
December 31, 2005 to $1.7 million for the year ended December 31, 2006. The increase was primarily due to an increase in net contributed
capital of Redeemable Class A member interests entitled to interest payments, primarily as a result of contributions by new members, as well as
an increase in the average Prime rate used to determine the interest payments. As a percentage of total revenues, interest an d dividend expense
increased fro m 1.0% for the year ended December 31, 2005 to 1.9% for the same period in 2006.

      Other Expenses. Other expenses increased $2.2 million, or 22.2%, fro m $10.1 million for the year ended December 31, 2005 to $12.4
million for the year ended December 31, 2006. The increase in other expenses was due to increased travel and business development expenses
related to increased headcount, especially in the travel intensive investment banking, sales and research departments. In add ition, occupancy
and related office expenses increased in 2006 due to the opening of new offices in New York and Boston. As a percentage of total revenues,
our other expenses increased from 10.7% for the year ended December 31, 2005 to 14.3% for the same period in 2006.

       Minority Interest. There was no minority interest for the year ended December 31, 2005 co mpared to a $0.4 million minority in terest for
the year ended December 31, 2006. This relates to the inception of JMP Realty Trust, which was incorporated in Delaware in May 2006 and
initially funded in June 2006, and to the consolidation of the two funds, Harvest Consumer Partners and Harvest Technology Partners.

 Year E nded December 31, 2005, Compared to Year Ended December 31, 2004
 Overview
      Total revenues increased $19.8 million, o r 26.5%, fro m $74.8 million for the year ended December 31, 2004 to $94.7 million fo r the year
ended December 31, 2005. This increase was primarily due to an increase in investment banking revenues of $25.5 million, but was partially
offset by a decrease in asset management fees of $4.0 million and principal transaction revenues of $3.8 million.

      Total expenses increased $19.4 million, or 27.2%, fro m $71.3 million for the year ended December 31, 2004 to $90.7 million for the year
ended December 31, 2005, primarily due to an increase in co mpensation and benefits, income allocation and accretion/(dilution) and
administration expense resulting fro m the increase in revenues and headcount. Our headcount increased from 141 a t December 31, 2004 to 169
at December 31, 2005.

      Net inco me increased $0.4 million, or 12.1%, fro m $3.5 million for the year ended December 31, 2004 to $3.9 million for the y ear ended
December 31, 2005. Pro forma net inco me increased $2.1 million, or 25.5% , fro m $8.2 million for the year ended December 31, 2004 to $10.3
million for the year ended December 31, 2005.

 Revenues
      Investment Banking . Investment banking revenues increased $25.5 million, o r 68.1%, fro m $37.4 million for the year ended
December 31, 2004 to $62.9 million for the year ended December 31, 2005, and increased as a percentage of total revenues from 50.0% to
66.4%, respectively. The increase in revenues was primarily due to a significant increase in our strategic advisory activity and additional
private placement activity resulting fro m the origination of trust preferred securit ies transactions. For the year ended Dece mber 31, 2005, we
participated in 18 strategic advisory transactions and 29 private placements. This compares to nine strateg ic advisory transactions

                                                                        54
Table of Contents

and five private placements for the year ended December 31, 2004. We also advised on two large mergers and acquisitions transactions in the
homebuild ing industry during 2005 that resulted in larger than average advisory fees for that year. In addition, we increased the number and
size of transactions in which we were a lead manager, for wh ich higher fees are generally earned, fro m five transactions raising total gross
proceeds of $288.4 million in 2004 to seven transactions raising total gross proceeds of $899.1 million in 2005. For the year en ded
December 31, 2005, we expensed no deferred expenses for investment banking transactions that were not comp leted. We expensed deferred
expenses of $0.4 million for investment banking transactions that were not completed for the year ended December 31, 2004.

       Brokerage Revenues . Bro kerage revenues increased $1.0 million, or 4.2%, fro m $22.6 million for the year ended December 31, 2004 to
$23.5 million for the year ended December 31, 2005. This increase was a result of an increase in co mmissions of $1.8 million, from $22.9
million for the year ended December 31, 2004 to $24.7 million fo r the year ended December 31, 2005, partially offset by an increase in net
trading losses of $0.8 million, fro m $0.3 million for the year ended December 31, 2004 co mpared to $1.1 million for the year ended
December 31, 2005. The increase in co mmissions was due to the expansion of our research coverage universe, with companies under resear ch
coverage increasing fro m 198 at December 31, 2004 to 294 at December 31, 2005. This increase in co mpanies under research coverage was
mainly a result of an increase of senior research analysts from 14 analysts at December 31, 2004 to 20 analysts at December 3 1, 2005. We
increased our sales and trading and research staff to 82 professionals in 2005, an increas e fro m 74 professionals for the year ended
December 31, 2004. We increased our companies under coverage and our sales and trading and research staff in order to better serve our
institutional investor clients and to increase our trading activity with them. Co mmissions also benefited fro m favorable market conditions in our
target sectors and the equity markets generally, as the S&P 500 increased 3.8%, the Russell 2000 Index 5.1% and the Dow Jones Industrial
Average, or DJIA, decreased slightly by 0.1%. The volu me of shares traded for customers increased 10.4% for the year ended December 31,
2005. Brokerage revenues as a percent of total revenues decreased from 30.2% for the year ended December 31, 2004 to 24.9% for the year
ended December 31, 2005.

      Asset Management Fees . Asset management fees decreased $4.0 million, or 31.7%, fro m $12.5 million for the year ended December 31,
2004 to $8.5 million for the year ended December 31, 2005. This decrease was primarily due to lower management fees, wh ich are earned a s a
percentage of assets under management, resulting fro m a decline in assets under management of the funds we manage as well as lower
incentive fees earned. Assets under management declined fro m $596.8 million at December 31, 2004 to $340.2 million at December 31, 2005.
We believe that the decline was due to the fact that the returns generated by certain of our funds did not match those produc ed in prior periods
or did not reach the established benchmarks for those funds during 2005. The lower performance of certain of our funds resulted in
redemptions of client assets in the funds. The lower performance of our funds in the year ended December 31, 2005 as compared to the year
ended December 31, 2004 also negatively impacted our incentive fees earned for the year ended December 31, 2005. Asset management fees
decreased as a percentage of total revenues from 16.7% fo r the year ended December 31, 2004 to 9.0% fo r the same period in 2005.

      Principal Transactions . Principal transactions revenues decreased $3.8 million, fro m a gain of $1.8 million for the year ended
December 31, 2004 to a loss of $2.0 million for the year ended December 31, 2005. This decrease is main ly attributable to unrealized losses
related to the value of warrant positions we had received fro m clients in certain investment banking assignments of $1.5 million for the year
ended December 31, 2005. The decrease was also attributable to a loss of $0.6 million on investment partnerships, the majority of which were
investments in partnerships managed by our asset management segment. These losses were partially offset by a gain of $0.1 million on equity
investments in publicly-held securit ies.

      Interest, Dividends and Other . Interest, dividends and other increased $1.2 million, or 214.3%, fro m $0.5 million for the year ended
December 31, 2004 to $1.7 million for the year ended December 31, 2005. This increase was primarily attributable to a general increase in
short-term interest rates and more act ively managed cash, which returned higher yields during the year ended December 31, 2005.

                                                                        55
Table of Contents

 Expenses
      Compensation and Benefits . Co mpensation and benefits increased $13.2 million, or 28.1%, fro m $47.0 million for the year ended
December 31, 2004 to $60.1 million for the year ended December 31, 2005. This increase was primarily due to higher bonus payments as a
result of higher investment banking revenues. Salaries also increased as overall headcount increased from 141 at December 31, 2004 to 169 at
December 31, 2005. As a percentage of total revenues, compensation and benefits expense increased from 62.8% for the year ended
December 31, 2004 to 63.5% for the year ended December 31, 2005.

      Income Allocation and Accretion/(Dilution). Income allocation and accretion/(dilution) increased $3.2 million, or 33.1%, fro m $9.8
million for the year ended December 31, 2004 to $13.0 million fo r the year ended December 31, 2005. This increase was primarily due to a
higher amount of inco me allocated to Redeemable Class A member interests in 2005 and a decrease in the redemption amount in 2004 resulting
mostly fro m offering fee expenses allocated to Redeemab le Class A member interests. Income allocation and accretion/(dilutio n) increased
fro m 13.0% of total revenues for the year ended December 31, 2004 to 13.7% fo r the same period in 2005.

      Administration. Administration expenses increased $0.7 million, or 27.3%, fro m $2.6 million for the year ended December 31, 2004 to
$3.4 million for the year ended December 31, 2005. Th is increase was primarily due to increased overhead expenses related to a 20% increase
in our headcount. In addition, conference expenses increased due to an expense for fixed co mmit ments we had at December 31, 2 005 relat ing
to two new annual conferences scheduled for 2006. Ad ministration expenses increased slightly fro m 3.5% o f total revenues for the year ended
December 31, 2004, to 3.6% for the year ended December 31, 2005.

      Brokerage, Clearing and Exchange Fees. Bro kerage, clearing and exchange fees increased $0.3 million, or 11.3%, fro m $2.8 million for
the year ended December 31, 2004 to $3.2 million for the year ended December 31, 2005. Th is increase was due to the increase in sales and
trading activity, as the number of shares we traded for customers increased fro m 529.8 million shares for the year ended December 31, 2004 to
585.0 million shares for the year ended December 31, 2005. Brokerage, clearing and exchange fees decreased slightly fro m 3.8% of total
revenues for the year ended December 31, 2004 to 3.3% for the year ended December 31, 2005.

      Interest and Dividend Expense. Interest and dividend expense decreased $0.1 million, or 7.5%, fro m $1.0 million for the year ended
December 31, 2004 to $0.9 million for the year ended December 31, 2005. The decrease was primarily due to a decrease in net contributed
capital of Redeemable Class A member interests as a result of a redemption of Class A common interests partially allocated to emp loyee
members and partially offset by an increase in the average Prime rate. As a percentage of total revenues, interest and divide nd expense
decreased from 1.3% for the year ended December 31, 2004 to 1.0% for the same period in 2005.

      Other Expenses. Other expenses increased $2.0 million, or 25.3%, fro m $8.1 million for the year ended December 31, 2004 to $10.1
million for the year ended December 31, 2005. This increase was primarily due to increased market data and professional fees related to the
build-out of system infrastructure to meet the demand of increased revenues and headcount. As a percentage of total revenues, other operating
expenses decreased slightly fro m 10.8% for the year ended December 31, 2004 to 10.7% for the year ended December 31, 2005.

Business Segments
      In segment reporting, our business activities reflect the fo llowing two segments: (i) Bro ker-Dealer; and (ii) Asset Management. The
Bro ker-Dealer seg ment includes investment banking, sales and trading, and equity research activities con ducted through our wholly-owned
subsidiary, JMP Securit ies. The Asset Management segment includes our asset management services to investors and our own acco unt and is
conducted through our wholly -owned subsidiary, JMP Asset Management.

                                                                      56
Table of Contents

       The following data discusses revenues and income for our business segments. Each segment ’s operating expenses include
(i) co mpensation and benefits expense for employees and managing directors direct ly in support of the businesses of the segment, and
(ii) non-compensation expenses, which include directly incurred expenses for premises and occupancy, professional fees, travel and business
development, co mmunications and information services, equip ment, and indirect support costs (including co mpensation and other related
operating expenses) for admin istrative services. These indirect support costs are allocated to the relevant s egments based on various statistics
such as headcount, square footage and transactional volume. Corporate operating expenses include income allocation and
accretion—Redeemable Class A member interests and interest expense on Redeemab le Class A member interests. These expenses are not
allocated to the segments, because Redeemab le Class A member interests represent capital to us as a whole and the income allocation is based
on our consolidated results as opposed to segment results.

      The following table summarizes the results for the Bro ker-Dealer segment, the Asset Management segment and the consolidated entity,
for the years ended December 31, 2004, 2005 and 2006.


Summary Financial Data                                                                                        Year Ended December 31,
(dollars in thousands)                                                                                      2004       2005        2006

Broker-Dealer                     Revenues                                                              $ 61,063       $ 86,547      $    78,981
                                  Operating expenses                                                      51,306         70,270           66,830

                                  Segment income                                                        $    9,757     $ 16,277      $    12,151

                                  Segment assets                                                        $ 62,090       $ 76,478      $    74,545

Asset Management                  Revenues                                                              $ 13,754       $   8,114     $      7,825
                                  Operating expenses                                                       9,338           6,598            4,388

                                  Segment income                                                        $    4,416     $   1,516     $      3,437

                                  Segment assets                                                        $ 23,903       $ 15,445      $    29,154

Corporate                         Operating expenses                                                    $ 10,675       $ 13,871      $    12,200

Consolidated Entity               Revenues                                                              $ 74,817       $ 94,661      $    86,806
                                  Operating expenses                                                      71,319         90,739           83,418

                                  Net inco me                                                           $    3,498     $   3,922     $      3,388

                                  Total assets                                                          $ 85,993       $ 91,923      $ 103,699


 Broker-Dealer Results of Operations
 Year Ended December 31, 2006, Compared to Year Ended December 31, 2005
       Revenues . Revenues for the Bro ker-Dealer seg ment decreased $7.6 million, or 8.7%, fro m $86.5 million for the year ended
December 31, 2005 to $79.0 million for the year ended December 31, 2006. This decrease was primarily due to lower levels of activity in our
underwrit ing and strategic advisory businesses. In particular, we executed fewer mergers and acquisitions and underwriting tran s actions in our
homebuild ing and financial services industry groups in the year ended December 31, 2006 as a result of macroeconomic trends, such as raising
interest rates, a drop in mortgage originations and a slowdown in the housing market. The decrease in the homebuilding and fin ancial services
activity was partially offset by an increase in underwrit ing and strategic advisory assig nments in some of our other industry groups. The
decrease was also partially offset by an increase in co mmissions, resulting from an increase in the volu me of shares traded for customers, wh ich
increased 40.1% fro m the year ended December 31, 2005.

                                                                        57
Table of Contents

      Operating Expenses . Operating expenses for the Broker-Dealer segment decreased $3.5 million, o r 5.0%, fro m $70.3 million for the year
ended December 31, 2005 to $66.8 million for the year ended December 31, 2006. The decrease in operating expenses was primarily due to the
amount of bonuses accrued as a result of a decrease in investment banking revenues. This decrease was partially offset by inc reased travel and
business development expenses related to increased headcount, especially in the travel -intensive investment banking and research departments.
In addition, occupancy and related office expenses increased in 2006 due to the opening of new offices in New Yo rk and Boston.

     Segment Income . Seg ment income for the Bro ker-Dealer segment decreased $4.1 million, or 25.4%, fro m $16.3 million fo r the year
ended December 31, 2005 to $12.2 million for year ended December 31, 2006.

 Year Ended December 31, 2005, Compared to Year Ended December 31, 2004
      Revenues . Revenues for the Bro ker-Dealer seg ment increased $25.5 million, o r 41.7%, fro m $61.1 million for the year ended
December 31, 2004 to $86.5 million for the year ended December 31, 2005. The increase in Broker-Dealer revenues was primarily due to a
significant increase in our investment banking revenues due to increases in strategic advisory activity and additional privat e placement activity
resulting fro m the origination of trust preferred securities. Brokerage revenues also increased, primarily due to the expansion of our research
coverage universe, with companies under research coverage increasing fro m 198 at December 31, 2004 to 294 at December 31, 2005.

       Operating Expenses . Operating expenses for the Broker-Dealer segment increased $19.0 million, or 37.0%, fro m $51.3 million for the
year ended December 31, 2004 to $70.3 million for the year ended December 31, 2005. Th is increase was primarily due to increased
compensation and benefits expense associated with increased headcount and increased bonuses accrued due to the increase in investment
banking revenues. Expenses also increased due to additional hosted conference expenses and increased market data and professional fees
relating to the build-out of infrastructure, in part icular for systems in the sales and trading business.

    Segment Income . Seg ment income for the Bro ker-Dealer segment increased $6.5 million, or 66.8% fro m $9.8 million for the year ended
December 31, 2004 to $16.3 million for the year ended December 31, 2005.

 Asset Management Results of Operations
      Year Ended December 31, 2006, Compared to Year Ended December 31, 2005
      Revenue . Revenues for the Asset Management segment decreased $0.3 million, o r 3.6%, fro m $8.1 million for the year ended
December 31, 2005 to $7.8 million for the year ended December 31, 2006. This decrease was primarily due to lo wer management fees, which
are earned as a percentage of assets under management, resulting fro m a decline in assets under management of the funds we manage as well as
lower incentive fees earned. Assets under management decreased from $340.2 million at December 31, 2005, to $208.2 million at
December 31, 2006. The decrease in assets under management was primarily due to lo wer performance of our funds in 2005, in particular
Harvest Opportunity Partners II and its related funds, our largest funds, which caused redemptions of client assets from thes e funds.

      Operating Expenses . Operating expenses for the asset management segment decreased $2.2 million, o r 33.5%, fro m $6.6 million for the
year ended December 31, 2005 to $4.4 million for the year ended December 31, 2006. This decrease was primarily due to a lower bonus
accrual in 2006 based on the decrease in asset management revenues.

     Segment Income . Seg ment income for the Asset Management segment increased $1.9 million, or 126.7%, fro m $1.5 million for the year
ended December 31, 2005 to $3.4 million for the year ended December 31, 2006.

                                                                        58
Table of Contents

 Year Ended December 31, 2005, Compared to Year Ended December 31, 2004
       Revenues . Revenues decreased $5.6 million, or 41.0%, fro m $13.8 million for the year ended December 31, 2004 to $8.1 million for the
year ended December 31, 2005. This decrease was primarily due to lo wer management fees, which are earned as a percentage of assets under
management, resulting fro m a decline in assets under management of the funds we manage, as well as lower incentive fees earn e d. Assets
under management declined fro m $596.8 million at December 31, 2004 to $340.2 million at December 31, 2005. The decline in assets under
management was primarily due to lower performance of our funds in the year ended December 31, 2005, which resulted in redemptions of
client assets.

      Operating Expenses . Operating expenses for the Asset Management segment decreased $2.7 million, or 29.3%, fro m $9.3 million for the
year ended December 31, 2004 to $6.6 million for the year ended December 31, 2005. This decrease was primarily due to lower bonuses
accrued due to lower asset management revenues and no net increase in headcount from December 31, 2004 to December 31, 2005.

     Segment Income . Seg ment income for the Asset Management segment decreas ed $2.9 million, o r 65.7% fro m $4.4 million for the year
ended December 31, 2004 to $1.5 million for the year ended December 31, 2005.

Li qui di ty and Capital Resources
      We are the parent of JMP Securit ies and JMP Asset Management and dividends and other transfers fro m our subsidiaries are expe cted to
be our primary source of funds after this offering to satisfy our capital and liquidity requirements. Applicable laws and regulations, primarily
the net capital rules discussed below, may restrict div idends and transfers from JM P Securities to us. Our rights to particip ate in the assets of
any subsidiary are also subject to prior claims of the subsidiary’s creditors, including customers and trade creditors of JMP Securities and JMP
Asset Management.

      We have historically satisfied our capital and liquidity requirements primarily through member contributions from our managin g directors
and outside investors and internally generated cash from operat ions. We raised approximately $7.8 million in April 2000 through the private
issuance of Series A convertible preferred units, and indiv idual accred ited investors contributed approximately $6.7 million in cash and
securities in December 2001 in exchange for Series A convertible preferred units. The Series A convertible preferred units were converted into
Class A common interests as of April 1, 2004. We also raised net proceeds of approximately $31.7 million in August 2004 fro m institutional
and individual accred ited investors through the private issuance of Class B co mmon interests. Most of our operating cash flow is generated
fro m our investment banking and brokerage revenues and is invested in cash and cash equivalents, marketable securities or other investments,
partnerships in which JM P Asset Management is the investment manager.

      Our balance sheet is relat ively liquid and unleveraged. As of December 31, 2006, we had liquid assets of $71.3 million, primarily
consisting of cash and cash equivalents, marketable securities and other investments (main ly investments in funds managed by JMP Asset
Management). We have a $30 million revolving line of credit with City National Bank, which had no balance outstanding as of D ecember 31,
2006. Each draw bears interest at the Prime rate less 1.0% annually or at LIBOR plus 1.25% annually, at our election, and the facility exp ires
on June 30, 2008. We paid a closing fee of $75,000 in 2006. We will continue to pay an annual unused commit ment fee of 0.25% p ayable
quarterly in arrears. We have the option to extend the term of the line of credit by one year or convert the outstanding bala nce to a three-year
term loan. There are no periodic principal pay ments required for this facility. The facility is secured by a pledge of our assets, including the
membership interests in JMP Securities and JMP Asset Management.

      JMP Securities, our wholly-owned subsidiary and a registered securities broker -dealer, is subject to the net capital requirements of the
SEC’s Uniform Net Capital Rule described under the caption “Business—Regulation” in this prospectus. We use the basic met hod permitted
by the Uniform Net Capital Rule to compute net capital, which generally requires that the ratio of aggregate indebtedness to net capital shall
not exceed 15 to 1. SEC regulations also provide that equity capital may not be withdrawn or cash dividends paid if certain m in imu m net

                                                                         59
Table of Contents

capital requirements are not met. At December 31, 2006, JMP Securities ’ net capital under the SEC’s Uniform Net Capital Rule was
$33.9 million, or $33.4 million in excess of the min imu m required net capital.

       The timing of bonus compensation payments to our employees and managing directors may significantly affect our cash position and
liquid ity fro m period to period. While our employees and managing directors are generally paid salaries semi -monthly during the year, bonus
compensation payments, which make up a larger portion of total co mpen sation, are generally paid once a year. Bonus compensation payments
for a g iven year are generally paid at the end of January of the fo llo wing year.

      As of December 31, 2006, we had an outstanding capital commit ment to JMP Realty Trust of $8.2 million, which can be called by JMP
Realty Trust at any time. We currently have one other capital co mmit ments to a fund managed by a third party in the amount of $0.2 million.
However, in the future we may also commit our cap ital to other principal investments managed by us or third parties, or in ot her securities, as
opportunities arise.

       In connection with our corporate reorganization, we will make distributions to the members of JM P Group LLC, which will include
(i) distributions of all 2007 earn ings generated prior to the comp letion date of the corporate reorganizat ion, (ii) d istributions of $10.0 million
related to earnings previously allocated to the members for periods prior to December 31, 2006 that have not yet been distributed, and (iii)
distributions for estimated inco me tax obligations of the members attributable primarily to performance bonus accruals that w ill be allocated as
taxab le income to the members upon the corporate reorganization.

       Following this offering and subject to legally available funds, we intend to pay a quarterly cash dividend, commencing with t he second
quarter of 2007 and will be prorated fo r the portion of that period subsequent to th e completion of this offering. The declarat ion of this and any
other dividends and, if declared, the amount of any such dividend, will be subject to the ability of our subsidiaries to prov ide cash to us. The
declaration and payment of any future dividends will be at the sole discretion of our board of directors. Our board of directors will take into
account our finance performance, earnings, liquidity, the operating performance of our segments, contractual, legal, tax and reg ulatory
restrictions and imp licat ions on the payment of dividends by us to our stockholders or by our subsidiaries (including JMP Group LLC), and
such other factors as our board of directors may deem relevant. See “Dividend Policy.”

      Because of the nature of our investment banking and sales and trading businesses, liquid ity is important to us. Accordingly, we regularly
monitor our liquid ity position, including our cash and net capital positions. We believe that our available liquidity and cur rent level of equity
capital, co mb ined with the net proceeds to us from this offering and funds anticipated to be provided by operating activities, will be adequate to
meet our liquidity and regulatory capital requirements for the next 12 months.

Cash Fl ows
 Year E nded December 31, 2006
      Cash decreased by $9.4 million for the year ended December 31, 2006, primarily as a result of cash used in operating activities.

        Our operating activit ies used $12.7 million of cash fro m net inco me of $3.4 million, adjusted for the cash used in the change in operating
assets and liabilit ies of $15.4 million and by non-cash revenue and expense items of $0.7 million. The decrease in operating assets and
liab ilit ies was primarily due to an increase in marketable securities as a result of establishing a new investment account to more actively invest
our excess cash and an increase in restricted cash proceeds from short sales related to the new investment account.

      Our investing activities provided $1.5 million of cash primarily due to net sale of other investments.

      Our financing activit ies provided $1.9 million in cash primarily as a result of contributions from minority interest members in connection
with the formation of JM P Realty Trust, partially offset by distributions to our common members.

                                                                          60
Table of Contents

 Year E nded December 31, 2005
        Cash increased $25.9 million in the year ended December 31, 2005, primarily due to positive operating cash flows.

      Our operating activit ies provided $29.1 million of cash fro m net inco me of $3.9 million, adjusted for the cash provided fro m the change
in operating assets and liabilities of $20.6 million and by non -cash revenue and expense items of $4.6 million. The increase in cash from
operating assets and liabilities was primarily attributable to a $9.3 million decrease in marketable securities due to the liquidatio n of the
investment account based on a change in market outlook at the end of 2004 and a $5.6 million increase in Redeemable Class A member
interests.

     Our investing activities provided $2.0 million of cash primarily due to sales of investments partially o ffset by purchases of investments
and purchases of fixed assets.

    Our financing activit ies used $5.2 million of cash due to the full repay ment of our outstanding credit facility and distributions to our
common members.

 Year E nded December 31, 2004
        Cash increased $7.4 million in the year ended December 31, 2004, primarily due to positive cash flows fro m financing activities.

        Our operating activit ies used $7.3 million of cash fro m net income of $3.5 million, adjusted for the cash used in the change in operating
assets and liabilit ies of $5.2 million and by non-cash revenue and expense items of $5.6 million. The decrease in cash fro m operating assets and
liab ilit ies was primarily attributable to a decrease in Redeemable Class A member interests of $5.6 million due to lower amount of inco me
allocated to Redeemable Class A member interests and an increase in restricted cash and deposits and other assets of $3.8 mil lion attributable
to an increase in deposits due to a new lease and other assets due to an increase in other account receivables.

        Investing activities consisted mostly of $7.2 million of net purchases of other investments.

       Financing activit ies provided $25.5 million primarily through private issuance of Class B co mmon interests offset by the payment of
distributions and redemptions to common and preferred members.

Contractual Obligati ons
        The following table provides a summary of our contractual obligations as of December 31, 2006:


Payments Due by Period
(in thousands)                                                                 Total     2007           2008      2009       2010        2011

Operating lease obligations                                                 $ 9,726     $ 1,953        $ 1,878   $ 2,168   $ 2,168     $ 1,559
Other contractual obligations (1)(2)                                             —           —              —         —         —           —

Total                                                                       $ 9,726     $ 1,953        $ 1,878   $ 2,168   $ 2,168     $ 1,559

(1)     Excludes a capital co mmit ment to JMP Realty Trust of $8.2 million and $0.2 million for another private investment fund as of
        December 31, 2006, wh ich can be called at any time by the manager.
(2)     Excludes potential obligations for the redemption of Redeemable Class A member interests upon termination of an inside member, the
        amount and timing of wh ich cannot be determined at this time.

                                                                          61
Table of Contents

Off-Bal ance Sheet Arrangements
      We had no material off-balance sheet arrangements as of December 31, 2006. However, as described below under “Market Risk—Cred it
Risk,” through indemn ification provisions in our clearing agreements with our clearing broker, customer activ ities may expose u s to
off-balance sheet credit risk, which we seek to mitigate through customer screening and collateral requirements.

Market Risk
       Market risk represents the risk of loss that may result fro m the change in value of a financial instrument due to fluctuation s in it s market
price. Market risk may be exacerbated in times of trad ing illiquid ity when market participants refrain fro m transacting in no rmal quantities
and/or at normal b id-offer spreads. Our exposure to market risk is directly related to our role as a financial intermed iary in customer trading and
to our market making and investment activities. Market risk is inherent in financial instruments.

      Even though we trade in equity securities as an active participant in both listed and OTC markets and we make markets in over two
hundred stocks, we typically maintain very few securit ies in inventory overnight to min imize market risk. In addition, we act as agent rather
than principal whenever we can and may use a variety of risk management techniques and hedging strategies in the ordinary course of our
trading business to manage our exposures. Historically, in connection with our principal investments in publicly -t raded equity securities, we
have engaged in short sales of equity securities to offset the risk of p urchasing other equity securities. In the future, we may utilize other
hedging strategies such as equity derivative trades, although we have not engaged in derivative transactions in the past.

       In connection with our sales and trading business, management evaluates the amount of risk in specific trad ing activities and determines
our tolerance for such activities. Management monitors risks in its trading activities by establishing limits for the trading desk and reviewing
daily trading results, inventory aging, and securities concentrations. Typically, market conditions are evaluated and transaction details and
securities positions are reviewed. These activities seek to ensure that trading strategies are within acceptable risk toleran ce parameters.
Activities include price verification procedures, position reconciliations and reviews of transaction bookings. We believe these procedu res,
which stress timely co mmun ications between traders, trading management and senior management, are important elements of the r isk
management process.

 Equity Price Risk
      Equity price risk represents the potential loss in value due to adverse changes in the level or volatility of equity prices. We are exposed to
equity price risk through our trading activities in both listed and OTC equity markets and security positions in our principal inv estment
portfolio. We attempt to reduce the risk of loss inherent in our inventory of equity securities by establishing position limits, mo nitoring
inventory turnover and entering into hedging trans actions designed to mitigate our market risk p rofile.

      Our marketable securities owned consist of long positions in equity securities and were recorded at a fair value of $12.4 million as of
December 31, 2006. Our marketable securities sold but not yet purchased consist of short positions and were recorded at a fair value of
$7.5 million as of December 31, 2006. The net potential loss in fair value for our marketable securities portfolio as of December 31, 2006,
using a hypothetical 10% decline in prices, is estimated to be approximately $0.5 million. In addition, as of December 31, 2006 we have
invested $13.8 million of our own capital in our funds, which invest primarily in publicly traded equity securities. The net potential loss in fair
value for our investments at December 31, 2006, using a hypothetical 10% decline in the funds ’ investment portfolios, is estimated to be
approximately $1.4 million.

                                                                         62
Table of Contents

 Interest Rate Risk
      Interest rate risk represents the potential loss from adverse changes in market interest rates. As we may hold U.S. Treasury securit ies and
other fixed inco me securities and may incur interest-sensitive liabilit ies fro m t ime to t ime, we are exposed to interest rate risk arising fro m
changes in the level and volatility of interest rates and in the shape of the yield curve.

 Credit Risk
     Our bro ker-dealer subsidiary places and executes customer orders. The orders are then settled by an unrelated clearing organi zation that
maintains custody of customers ’ securities and provides financing to customers.

       Through indemnification provisions in our agreement with our clearing organization, customer activit ies may expose us to
off-balance-sheet credit risk. We may be required to purchase or sell financial instruments at prevailing market prices in the event a customer
fails to settle a trade on its original terms or in the event cash and securities in customer marg in accounts are not sufficient to fully cover
customer obligations. We seek to control the risks associated with brokerage services for our customers through customer screening and
selection procedures as well as through requirements that customers maintain margin co llateral in co mp liance with government a l and
self-regulatory organization regulat ions and clearing organizat ion policies.

 Inflation Risk
       Because our assets are generally liquid in nature, they are not significantly affected by inflation. However, the rate of inf lation affects
such expenses as employee co mpensation and communicat ions charges, which may not be readily recoverable in the price s of services we
offer. To the extent inflation results in rising interest rates and has other adverse effects on the securities markets, it may adversely affect our
combined financial condition and results of operations in certain businesses.

Critical Accounti ng Policies and Esti mates
      The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the report ed amounts
of assets and liabilities and of revenues and expenses during the reporting periods. We b ase our estimates and assumptions on historical
experience and on various other factors that we believe are reasonable under the circu mstances. The use of different estimate s and assumptions
could produce materially different results. For examp le, if facto rs such as those described in “Risk Factors” cause actual events to differ fro m
the assumptions we used in applying the accounting policies, our results of operations, financial condition and liquidity cou ld be adversely
affected.

     Our significant accounting policies are summarized in Note 2 to our consolidated financial statements included elsewhere in this
prospectus. On an ongoing basis, we evaluate our estimates and assumptions, particularly as they relate to accounting policie s that we believe
are most important to the presentation of our financial condition and results of operations. We regard an accounting estimate or assumption to
be most important to the presentation of our financial condition and results of operations where:

        •      the nature of the estimate or assumption is material due to the level of subjectivity and judgment necessary to account for h ighly
               uncertain matters or the susceptibility of such matters to change; and
        •      the impact of the estimate or assumption on our financial condit ion or operating performance is material.

                                                                          63
Table of Contents

        Using the foregoing criteria, we believe the fo llo wing to be our critical accounting policies:

  Valuation of Financial Instruments
      Substantially all of our financial instruments are recorded at fair value or contract amounts that approximate fair value. Th e fair value of a
financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a
forced or liquidation sale. “Marketable securit ies owned” and “other investments” including warrant positions and investments in partnerships
in wh ich JMP Asset Management is the general partner, are stated at fair value, with related changes in unrealized appreciation or depreciation
reflected in the line item “principal t ransactions” in our consolidated statements of income.

      As of December 31, 2006, our marketable securities and other investments totaled approximately $27.2 million. The fair value of
approximately $23.7 million of our marketable securities and other investments was determined fro m quoted market prices or b r oker o r dealer
price quotations, which involves no subjective judgment. Appro ximately $0.5 million of our marketable securities consisted of warrants , for
which we utilized the Black-Scholes options valuation model. In addit ion, appro ximately $3.0 million of our other investments are invested in
general partnership interests of funds of hedge funds or limited partnership interests which in each category third party gen eral partners
determine the fair value of the underlying investments. Accordingly, we do not exercise discretion in determining the fair value of our other
investments. Because many of the securities in the portfolios of these funds may trade infrequently or are non -marketable securities and,
therefore, do not have readily determinable fair values, the third party gen eral partner estimates the fair value of these securities using various
pricing models and the informat ion availab le. A mong the factors that they consider in determining the fair value of the under lying financial
instruments are discounted anticipated cash flows, the cost, terms and liquid ity of the instrument, the financial condition, operating results and
credit ratings of the issuer or underlying company, the quoted market price of publicly traded securities with similar duration and yield and
other factors generally pertinent to the valuation of financial instruments.

     The following table summarizes our marketable securit ies and other investments, as presented in our consolidated statements o f financial
condition, by valuation methodology as of December 3 1, 2006:

                                                                                                         Other Investments(3)
                                                                                                       General       Li mited                                                Total
                                                                                   General             Partner       Partner                                              Marketable
                                                                                   Partner             in Fund          in                                                 Securities
                                                                                      in                  of         Private                                              Owned and
                                                   Marketable                       Hedge               Hedge        Equi ty                   Total Other                   Other
Fair Value B ased on                              Securities(1)(2)                  Fund                Fund          Fund                     Investments                Investments

Quoted market prices                                                  90.1 %              79.9 %                                                            79.9 %                      82.5 %
Black-Scholes options
   valuation                                                           9.9 %                                                                                  0.0 %                      2.5 %
Valuation determined by
   third party general
   partners                                                                                                    4.0 %             16.1 %                     20.1 %                      15.0 %

Total                                                               100.0 %               79.9 %               4.0 %             16.1 %                   100.0 %                     100.0 %

(1)   Marketabl e securities owned and securities sold but not yet purchased consist mainly of U.S. listed and OTC equities, and to a lesser extent, warrants in public and private common
      stock.
(2)   Marketabl e securities owned net of securities sold but not yet purchased.

(3)   Other investments consist of general partnership interests in funds and funds of hedge funds managed by JMP Asset Management. The remaining amount is limited partnership interests
      in private investment funds managed by third parties that invest in predominately private securities.

                                                                                              64
Table of Contents

 Asset Management Investment Partnerships
       Investments in partnerships include our general partnership interests in investment partnerships. These interests are carried at estimated
fair value based on our capital accounts in the underlying partnerships. The net assets of the investment partnerships consist primarily of
investments in marketable and non-marketable securities. The underly ing investments held by such partnerships are valued based on quoted
market prices or estimated fair value if there is no public market. Such estimates of fair value of the partnerships’ non-marketable investments
are ultimately determined by our affiliates in their capacity as general partner. Due to the inherent uncertainty of valuatio n, fair values of these
non-marketable investments may differ fro m the values that would have been used had a ready market existed for these investments, and the
differences could be material. Adjustments to carrying value are made, if required by GAAP, if there are third -party transactions evidencing a
change in value. Down ward adjustments are also made, in the absence of third-party transactions, if the general partner determines that the
expected realizab le value of the investment is less than the carrying value.

      We earn management fees fro m the investment partnerships that we manage. Such management fees are generally based on the net assets
of the underlying partnerships. In addition, we are entit led to allocations of the appreciation and depreciation in the fair value of the underlying
partnerships from our general partnership interests in the partnerships. Such allocations are based on the terms of the respective partnership
agreements.

      We are also entitled to receive incentive fee allocations fro m the investment partnerships when the return exceeds certain th reshold
returns. Incentive fees are recorded after the quarterly or annual investment performance period is co mplete and may vary depending on the
terms of the fee structure applicable to an investor.

 Legal and Other Contingent Liabilities
      We are involved in various pending and potential co mplaints, arbitrations, legal actions, investigations and proceedings related to our
business from time to time. So me of these matters involve claims fo r substantial amounts, including claims fo r punitive and o ther special
damages. The number o f co mplaints, legal act ions, investigations and regulatory proceedings against financial institutions like us has been
increasing in recent years. We have, after consultation with counsel and consideration of facts currently known by management , recorded
estimated losses in accordance with SFAS 5, Accounting for Contingencies , to the extent that a claim may result in a probable loss and the
amount of the loss can be reasonably estimated. The determination of these reserve amounts requires significant judgment on t he part of
management and our ultimate liabilit ies may be mater ially different. In making these determinations, management considers many factors,
including, but not limited to, the loss and damages sought by the plaintiff or claimant, the basis and validity of the claim, the likelihood of
successful defense against the claim and the potential for, and magnitude of, damages or settlements fro m such pending and potential
complaints, legal act ions, arbitrations, investigations and proceedings, and fines and penalties or orders fro m regulatory ag encies.

      If a potential adverse contingency should become probable or resolved for an amount in excess of the established reserves during any
period, our results of operations in that period and, in some cases, succeeding periods could be adversely affected.

Recentl y Issued Accounting Standards
 FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes—An Interpretation of FASB Statement No. 109 (FIN 48)
      In July 2006, the Financial Accounting Standards Board, or FASB, issued FIN 48, wh ich became effective for us on January 1, 2007.
This standard clarifies the accounting for uncertainty in inco me taxes recognized in a co mpany ’s financial statements. A company can only
recognize the tax position in the financial statements if the po sition is more-likely-than-not to be upheld on audit based only on the technical
merits of the tax position. Th is

                                                                         65
Table of Contents

accounting standard also provides guidance on thresholds, measurement, derecognition, classification, interest and penalties, accounting in
interim periods, disclosure, and transition that is intended to provide better financial-statement co mparability among different companies. We
are currently evaluating the impact, if any, that the adoption of FIN 48 will have on our consolidated financial statements.

 SFAS No. 157, Fair Value Measurements (SFA S 157)
      In September 2006, FASB issued SFAS 157 which will beco me effective fo r us on January 1, 2008. Th is standard establishes a consistent
framework for measuring fair value in accordance with Generally Accepted Accounting Principles, and expands disclosures with respect to fair
value measurements. We are assessing SFAS 157 to determine the financial impact, if any, on our consolidated statements of financial
condition and income.

 SAB No. 108, Quantifying Financial Statement Misstatements (SAB 108)
      In September 2006, the SEC issued Staff Accounting Bulletin No. 108 (SAB 108). SA B 108 provides guidance on quantifying and
evaluating the materiality of unrecorded misstatements. SAB 108 is effect ive for years ending after November 15, 2006, with earlier
application encouraged for any interim period of the first year ending after November 15, 2006. The adoption of SAB 108 did n ot have a
material impact on our consolidated financial position and results of operations.

                                                                       66
Table of Contents

                                                                    B US INESS

Overview
      We are a fu ll-service investment banking and asset management firm that provides investment banking, sales and trading, and equity
research services to institutional and corporate clients and alternative asset management products and services to institutio nal in vestors, high
net-worth individuals and for our o wn account.

      We focus our efforts on small and middle-market co mpanies in the following six growth industries: business services, consumer,
financial services, healthcare, real estate, and technology. Our specialization in these areas has enabled us to develop recognized expertise and
to cultivate extensive industry relationships. As a result, we have established our firm as a key advisor for our corporate c lients, a trusted
resource for institutional investors, and an effective investment manager fo r our asset management clients.

       We were founded in 1999 by senior professionals from Montgomery Securities, a leading investment bank serving growth companie s
during the 1980s and 1990s, which now operates as Banc of A merica Securit ies. We were formed to take advantage of a void in the
marketplace created by the acquisition of established independent research boutiques by large co mmercial banks. Since the mid -1990s, more
than 40 research-oriented investment banks—including San Francisco-based Montgomery Securit ies, Hamb recht & Quist, Rob ertson Stephens
and Vo lpe Brown Whelan & Co mpany—were acquired by major financial institutions. This inter-industry consolidation has created large,
mu lti-product investment banks structured to serve larger market-capitalization clients and we believe has greatly reduced the investment
banking commun ity’s focus on middle-market co mpanies. Like our research-driven predecessors, as a growth-oriented, entrepreneurial firm,
we are dedicated to serving the needs of small and middle-market co mpanies and the institutions that invest in them.

      We believe that we are distinctly different both fro m larger co mpetitors —such as the consolidated Wall Street firms —and fro m smaller
product-specific or industry-specific boutique firms. We have differentiated ourselves from our co mpetitors by building a unique franchise that
combines a fu ll-service operating model and varied transactional capabilit ies with specialized industry knowledge. This co mbin ation allo ws us
to identify and meet the needs of corporate clients at various stages in their develop ment and to provide a perspective to in stitutional investors
that they may not receive fro m many other equity research and brokerage firms.

      Since our inception in 1999, we have achieved strong financial results, generating diversified revenues and consistent profit ability in a
variety of economic and capital markets environments, including a three-year industry downturn following the bursting of the Internet and
technology bubble. During the five years ended December 31, 2006, we increased annual revenues fro m $19.7 million to $86.8 mi llion and
grew our annual pro forma net income fro m $0.7 million to $9.0 million. Pro forma net inco me g ives effect to adjustments related to our
corporate reorganization as described in “Certain Relationships and Related Transactions —Reorganization Transactions and Corporate
Structure.”

      We currently serve clients nationwide fro m our headquarters in San Francisco and from additional offices in New Yo rk, Boston and
Chicago. As of December 31, 2006, we had 187 emp loyees, including 64 managing directors, who averaged 16 years of industry experience,
working both at major corporate investment banks and at specialized boutique firms. We believe that our managing directors and other
professionals have been attracted to our firm because of our focused industry coverage, our entrepreneurial culture and our d edication to
providing growth companies and growth investors with exceptional client service, object ive advice and innovative solutions.

Market Opportuni ty
      We believe that there is a significant opportunity for us to grow our business and to increase our share of the investment banking , sales
and trading, and asset management markets due to a variety of economic and competit ive factors.

                                                                         67
Table of Contents

 Industry Consolidation Creating a Void in Small and Middle-Market Investment Banking
     Since the mid-1990s, there have been more than 40 acquisitions involving U.S. brokerage and investment banking firms that would have
been considered our direct peers or competitors. Many of the resulting consolidated financial institutions have undergone r estructuring and
downsizing, choosing to pursue clients and transactions with larger market capitalizations, wh ich has led to a further reduct ion of investment
banking and brokerage resources allocated to small and middle -market co mpanies and their investors. As a consequence, many of these growth
companies now receive reduced research coverage, corporate finance and advisory services, and access to capital.

      We provide our corporate clients with a wide variety of services, including strategic advice and cap ital raising solutions, sales and trading
support, and equity research coverage. Additionally, we provide institutional investors with objective, informed investment r ecommendations
about segments of the capital markets and individual equities that are not widely followed. Moreover, we deliver our services through highly
experienced and talented professionals with a co mmit ment to client service. We believe that our concentration on small and mi ddle-market
companies, as well as our broad range of product offerings, positions us as a leader in an underserved and high-growth market.

 Target Industries Compose a Substantial Portion of the Broader Market
      We currently specialize in six growth industries: business services, consumer, financial services, health care, real estate, and technology.
Our six target industries offer us significant business opportunities, as they represent a substantial portion of the total U.S. economy. These
industries comprise approximately 69% of all co mpanies and 69% o f the market capit alization of the S&P 500. In addition, these industries
represent 79% of all co mpanies listed on the NYSE, AMEX and NASDAQ stock exchanges and 79% o f all such companies wit h market
capitalizat ions of less than $10 billion. Furthermore, these industries rep resent 55% of the total operating earnings of the S&P SmallCap 600
for the year ended December 31, 2006.

 Significant Capital Markets and M&A Activity in Our Target Industries
      According to Dealogic, fro m January 1, 2001 through December 31, 2006, the aggregate gross proceeds of U.S. init ial public o fferings
and follow-on equity offerings within our six target industries totaled approximately $427 billion, or 59% of all gross proceeds generat ed from
U.S. init ial public offerings and follow-on equity offerings during that period. According to Mergerstat, fro m January 1, 2001 t hrough
December 31, 2006, U.S. M&A transaction value within our six target industries totaled $2.2 trillion, or 47% of all M&A transaction vo lume
during that period.

      By devoting our resources to these key industries, we believe we will substantially grow our corporate finance and strategic advisory
businesses. Co mpanies in these industries require gro wth capital on a routine basis and must frequently consider their strate gic alternatives.
Similarly, investors in these industries frequently require investment research and brokerage services, which we believe will allow us to grow
our equity research and sales and trading platforms.

 Increasing Demand for High-Quality Equity Research and Sales and Marketing Services
      We believe that the industry trends that have led large consolidated investment banks to shrink their research and brokerage platforms,
combined with increasing needs of asset managers for specialized research, are fueling the growth in demand for h igh-quality research and
sales and trading services devoted to small and midd le-market co mpanies.

      Recent changes in the brokerage industry, such as program trading and the adoption of electronic trading systems, have put downward
pressure on commission rates and the profitability of equity sales and trading operations. In response, many large investment banks have opted
to reduce research coverage—particularly of

                                                                        68
Table of Contents

small and middle-market co mpanies—and to reduce sales and trading staff, choosing to devote remaining resources to the most liquid, largest
capitalizat ion equities. In contrast, we continue to employ seasoned research and sales and tra ding professionals and to focus primarily on
small-cap and mid-cap stocks, offering the institutions that invest in these companies informed investment advice and a superior level of
service.

      Certain larger institutions have opted to rely on their own analysis of large capitalization stocks, increasingly turning to outside sources
only for research on small and middle -market co mpanies. Additionally, we believe that the ongoing emergence of asset managers with limited
assets under management, lacking the res ources of larger institutions, presents a further opportunity for us. While some institutional investment
managers have internalized certain research functions in the face of regulatory scrutiny and economic pressures, asset manage rs with limited
assets under management must rely on independent research providers for timely informat ion about the growth equities that compose a
mean ingful portion of their hold ings.

 Increasing Investor Interest in Alternative Asset Management Strategies
       We believe that our asset management business is well positioned to benefit fro m an increasing demand for alternative asset management
products and services. According to data from Hedge Fund Research, the total nu mber of hedge funds globally increased fro m approximately
3,600 as of December 31, 1999 to appro ximately 9,462 as of December 31, 2006. During the same period, aggregate assets under management
by all hedge funds increased from appro ximately $460 billion to appro ximately $1.4 trillion according to Hedge Fund Research. We expect this
increased investor interest in alternative asset management strategies to enable us to grow client assets under management in ou r existing funds
and to launch additional hedge fund products and structured finance vehicles. Consequently, we are working to diversify our asset management
strategies by applying our proprietary intellectual property to the management of externally advised investment vehicles. For examp le, we have
capitalized and now manage JMP Realty Trust through one of our affiliates, JMP Realty Advisors.

Competiti ve Strengths
     We believe that the following factors distinguish us fro m other investment banking and asset management firms that serve our target
industries and that they are strengths which we believe will continue to drive our gro wth.

 Experienced and Focused Owner-Managers
      We believe we are led by a talented and experienced team of industry professionals that collectively owned appro ximately 75% of our
firm prior to this offering. Prior to founding or join ing our firm, many of our senior professionals held positions at leading investment banking
and investment management firms. Ou r 64 managing directors average 16 years of industry experience.

      A number of our founders and managing directors were ins trumental in building the financial services and real estate groups at
Montgomery Securities, which is now Banc of A merica Securit ies. While these individuals were emp loyed at Montgomery Securitie s, it
consistently ranked among the top investment banks serving the mortgage and specialty finance industries, as measured by the number and
aggregate value of mergers and acquisitions transactions completed, equity capital raised and shares traded —particularly for s maller market
capitalizat ion companies. Other managing directors at our firm have formerly held senior positions at financial institutions such as Alex,
Bro wn & Sons, Banc of A merica Securities, Bear Stearns, BlackRock, Go ld man Sachs, Jefferies & Co., Leh man Brothers, Merrill Lynch and
Robertson Stephens, among others.

 Diversified Business Model
     The selection of our six target industries, the development of mu ltiple products and services and the establishment of our th ree
revenue-producing business lines—investment banking, sales and trading, and asset

                                                                        69
Table of Contents

management—has created a diversified business model, especially when co mpared to that of our mo re specialized co mpetitors. In addition, our
target industries have historically performed, in certain respects, counter-cyclically to one another, allowing us to win business and generate
fees in various economic and capital markets conditions. Finally, we have been able to balance more volatile revenue streams derived fro m our
investment banking business and our incentive-based asset management fees with the more stable revenue streams tied to sales and trading
commissions and base asset management fees.

 Small Company and Middle-Market Specialization
       We believe that we have established our firm as a leading advisor to small and middle -market co mpanies within our six target industries.
Many majo r financial institutions have systematically reduced their product offerings to growth companies —significantly limit ing access to
capital and financial advisory services —and have decreased their co mmit ment to growth stock investors seeking investment research.
However, we have established ourselves as an active participant in this marketplace. We believe that the extensive experience and far-reach ing
relationships of our senior professionals, coupled with our proven ability to meet the special transactional and strategic needs of our clients, are
significant co mpetitive strengths for our firm. We believe our high degree of concentrated knowledge and skill differentiates us both from
newer firms that may be attempting to compete in the middle market and fro m larger firms that work with small clients only to supplement a
core business of serving large-capitalizat ion companies.

 Independence
       We are an independent firm o wned by our managing directors and by outside investors. We are not a part of a larger, d iversified financial
institution with mult iple business objectives. As a result, we are not subject to the conflicts of interest that may challeng e major financial
services firms with goals that are at times contrary to those of their clients. Many firms that once would have been our peers have since been
acquired by diversified financial institutions and have been directed to switch their focus fro m their core co mpetencies in o rder to pursue
larger-capitalization clients or product cross -selling strategies. We are not subject to such conflicts, and we believe that our exis ting and
prospective clients view us as a provider of independent, conflict-free advice.

 Highly Regarded Equity Research Product
       Proprietary equity research is the foundation of our business. Our 20 senior research analysts average 10 years of relevant industry
experience. As of December 31, 2006, we published equity research on 279 primarily s mall and midsized public co mpanies. During their
careers, a number of our analysts have received industry recognition for the quality of their research and their stock picking ability, ranking
high in polls conducted by the Wall Street Journal, Forbes/Starmine and Greenwich Associates. While many larger firms have re structured
their research departments due to economic and regulatory pressures and have significantly reduced coverage of companies below certain
market cap italization thresholds, we continue to devote the majo rity of our resources to smaller -capitalization co mpanies. The number o f
investment funds and the total assets under management co mmitted to small-cap and mid-cap stocks has grown considerably during the last
decade. However, managers of these funds are now presented with fewer sources of independent investment research. We continue to provide
objective investment recommendations on small and middle-market co mpanies, and we believe that our institutional investor clients depend on
us for informed, fundamental research.

 Highly Scalable Asset Management Business
      Since our inception, our asset management business has generally produced attractive returns for investors in a variety of economic
scenarios. We believe that several of the internally managed funds which we currently operate have produced historical return s that are
marketable to institutional investors and high net-worth individuals. We employ a team of market ing professionals that aim to substantially
increase assets under management, and believe we currently have the capacity to manage additional assets without a s ubstantial investment in
our infrastructure.

                                                                         70
Table of Contents

      In addition to our asset management activ ities on behalf of our clients, we expect the net proceeds of this offering will ena ble us to take
advantage of principal investment opportunities that may co me to our attention through our investment banking or asset manage ment
professionals.

 Strong Corporate Culture
      Our corporate culture is characterized by professionalism, accountabilit y, collegiality and a dedication to client service. We are united by
an entrepreneurial spirit and a desire to build a firm that is widely recognized for its excellence. As a growing, midsized b usiness, we are
keenly aware of the specific issues faced by our middle -market clients and are motivated to exceed their expectations. We are principally
owned and managed by our employees, who are d irectly and extensively involved in our daily operations. We take a disciplined approach to
expansion and have pursued reasoned growth, developing and promoting our existing emp loyees and opportunistically hiring experienced
senior individuals. Our firm cu lture has helped us to attract seasoned professionals from other respected financial services firms and to maintain
low attrition, with only five voluntary departures of managing directors since our inception. To a large degree, we attribute our success in
profitably growing our firm during and follo wing a three-year securities industry downturn on the strength of our firm’s culture and the
dedication of our employees.

Growth Strategy
    Our strategy for continued expansion is to enhance our market position as a leading growth -oriented investment bank and asset
management firm by leveraging our co mpetit ive strengths.

 Recruit Experienced and Successful Senior Professionals
      We intend to add senior professionals with proven skills and industry relationships on a highly selective basis. Our hiring p attern in a new
industry sub-sector typically involves the addition of an experienced senior research analyst to build institutional investor relat ionships,
followed by the hiring of sector-focused investment banking professionals to serve our corporate clients. In both cases, we expect our senior
professionals to demonstrate productivity prior to adding significant dedicated support personnel.

 Remain Committed to Small and Middle-Market Companies
       We believe that the securities industry consolidation over the past decade and the resulting decision by many of our co mpetit ors to
reassign or eliminate resources previously focused on small and middle -market clients has provided us with a substantial opportunity. It is our
intention to maintain our co mmit ment to serving the middle market and the growth economy and to continue to provide corporate clients and
institutional investors with proprietary equity research, high quality sales and trading execution, and customized investment banking solutions
that meet their unique needs.

 Continue to Offer Differentiated, Objective Investment Research
      We believe that our sales and trading clients turn to us for timely, differentiated investment advice. Our equity research fe atures
proprietary themes and actionable ideas about industries and companies that are not widely evaluated by many other investment banks without
our middle -market emphasis. We intend to expand our research franchise by promoting our most pro mising junior research professionals to
senior analyst positions and by recruiting highly regarded senior analysts fro m peer firms.

 Leverage Our Growing Research Franchise to Expand Relationships with Institutional Investors
     Many investment banks have reduced equity research coverage and market making activ ities for co mpanies with market capital izations
below certain thresholds. However, we continue to commit research and sales and

                                                                         71
Table of Contents

trading resources to smaller-capitalizat ion companies with the belief that institutional investors will pay for such specialized knowledge and
service. We intend to leverage our research product by increasing the amount of business conducted with our existing sales and trading clients,
with the aim of g rowing total revenues generated per institution. Additionally, we expect our sales and trading professionals to attract new
brokerage clients by promoting the value of our equity research and execution services. We may be able t o fu rther enhance our sales and
trading revenues by selectively recruiting additional sales and trading professionals with established investor relationships .

 Continue to Develop Our Investment Banking Relationships
        We intend to expand our capital raising and strategic advisory business by continuing to strengthen existing client relationships and by
initiat ing new client relationships. We build our investment banking client relationships by meeting with and learning about the needs of
corporate executives, financial sponsors—in particular, private equity and venture capital firms —and other professional service providers who
may serve as references for us. We depend on our senior professionals to maintain client relationships and expect them to do so by devoting
their fu ll attention to all aspects of a transaction, playing an active role in guiding clients through each process and brin ging their industry
knowledge and experience to bear to achieve management objectives and stockholder benefits. Our senior inv estment bankers maintain
exceptional client focus both during and follo wing a transaction, leading to a true advisory relat ionship and a pattern of as sisting companies
with mu ltip le transactions. We believe that maintain ing high levels of repeat business is another way that we can support and grow our
investment banking franchise.

 Expand the Size and Scope of Our Asset Management Business
      We intend to grow our assets under management by attracting additional investors to our existing hedge funds, by startin g new
industry-focused equity funds that utilize our specific industry expert ise, and by expanding into asset classes other than equities, s uch as
structured finance. Moreover, we intend to capitalize on the fundraising capabilit ies of our in -house market ing group by helping to launch and
incubate other promising asset management firms, in which we may also invest for our own account. The objective of these strategies is to
diversify both revenue and risk while maintain ing the attractive economics of the he dge fund model.

Principal Business Lines
     We operate our principal business lines through two subsidiaries, JM P Securit ies LLC, an SEC -registered broker-dealer and member of
the NASD, and JMP Asset Management LLC, an SEC-registered investment adviser.

      JMP Securities provides equity research, sales and trading to institutional brokerage clients and capital raising and strategic ad visory
services to corporate clients. As of December 31, 2006, JM P Securit ies had 172 fu ll-time emp loyees, including 38 in equity research, 51 in
sales and trading, 58 in corporate finance and 25 in operations and admin istration.

      JMP Asset Management is an alternative asset manager that actively manages a family of five hedge funds, two funds of hedge f unds,
and an externally advised REIT. As of December 31, 2006, JMP Asset Management had 15 fu ll-time employees and $208.2 million in client
assets under management, with an additional $13.8 million of our o wn capital invested in these investment vehicles.

 Investment Banking
       Our investment banking professionals provide capital raising, mergers and acquisitions transaction and other strategic advisory services to
corporate clients. Our investment banking group is composed of 51 professionals, including 19 managing directors with an aver age of 16 years
of relevant industry experience.

                                                                        72
Table of Contents

Dedicated industry coverage groups serve each of our six targeted sectors, enabling our investment bankers to develop expert ise in specific
markets and to form close relationships with corporate executives, private equity investors, venture capitalists and other key industry
participants. We offer our clients a high level of attention fro m senior personnel and have designed our organizational struc ture so that the
investment bankers who are responsible for securing and maintaining client relationships also actively participate in provid ing all related
transaction execution services to those clients.

      By focusing consistently on our target industries, we have developed a comprehensive understanding of the unique challenges and
demands involved in executing corporate finance and strategic advisory assignments in these sectors. A significant portion of o ur corporate
finance revenues is earned from small and mid-capitalization public co mpanies, and the balance is earned fro m transactions with private
companies. Our clients may retain us for our advisory and capital raising capabilities early during an accelerated growth phase as a priva te
company and often continue to work with us through an initial public o ffering or co mpany sale process. We maintain exceptiona l client focus
both during and follo wing a transaction, leading to a true advisory relat ionship and a pattern of assisting companies with mu ltip le transactions.
We believe that our clear expertise and proven capabilities in our six target industries enable us to assume a more pro minent role with each
subsequent transaction for a particular client. For the year ended December 31, 2006, more than 37% of our business was execu ted with repeat
clients, an increase fro m appro ximately 31% of our t ransactions for the year ended December 31, 2005 and nearly 24% for the year ended
December 31, 2004. Examp les of client relationships that have led to mult iple t ransactions include the following:

        •      Arbor Realty Trust, Inc. In June 2003, we executed a $120.2 million sole managed private stock offering fo r the company and
               then served as co-manager of the company’s $135.5 million init ial public offering in April 2004. In 2005 and again in 2006, we
               acted as placement agent in the issuance of a total of $40.0 million of trus t preferred securit ies for the company.
        •      CapitalSource Inc. We acted as co-manager of the company’s $339.7 million initial public offering in August 2003 and a $430.0
               million secondary offering in February 2004. Subsequently, in September 2005, we advised the company ’s board of directors in
               its decision to convert its corporate structure to a REIT. Since then, we served as co-book-running manager of a fo llo w-on equity
               offering, raising $429.3 million in October 2005, acted as placement agent in the issuance of trust preferred securities, raising
               $100.0 million in November 2005 and served as co-manager of a $413.6 million follow-on equity offering in March 2006,
        •      Jameson Inns, Inc. We served as co-manager of the company’s July 2004 follow-on equity offering, raising $82.6 million, and
               acted as sole placement agent of a September 2005 convertible n otes offering by the company, raising $35.0 million. We later
               acted as exclusive financial advisor to the special co mmittee of the board of directors in the company ’s $371.0 million sale to
               JER Partners, which closed in July 2006.

        •      Kenexa Corporation. We served as co-manager of the company’s $69.0 million in itial public offering in June 2005 and
               co-managed two fo llo w-on equity offerings totaling $303.5 million of aggregate gross proceeds, one in March 2006 and another
               in January 2007. We then served as exclusive financial advisor to the company in its $115.0 million acquisition of BrassRing,
               which closed in November 2006.
        •      OfficeTiger Holdings Inc. We acted as sole placement agent of a $52.3 million private stock offering for the company in June
               2004. In September 2005, we served as exclusive financial advisor to the company in the acquisition of MortgageRamp, and we
               subsequently advised the company on its April 2006 sale to R.R. Donnelley & Sons Company for $250.0 million.

      Since our inception in 1999 through December 31, 2006, we have comp leted 254 investment banking transactions with an aggregate
value of $26.8 billion, including 133 public equity offerings raising $19.0 b illion, 59 private securitie s offerings raising $2.5 billion and 62
mergers, acquisitions or advisory engagements with an aggregate value of $5.3 billion.

                                                                          73
Table of Contents

 Corporate Finance
      We assist our public and private corporate clients in capital raising activ ities, wh ich include the underwrit ing of a wide ra nge of
securities, including co mmon, preferred and convertible securit ies. Our public equity underwriting capabilit ies include in it ial p ublic offerings,
marketed and overnight follow-on equity offerings. We also act as an agent for private placements of equity and trust preferred securities and
arrange private investments in public equity, or PIPE, transactions on behalf of our public co mpany clients. In addition, we arrange registered
direct stock offerings, in wh ich we place the equity securities of a public co mpany but do not commit our o wn capital. We typ ically p lace
securities with our client base of institutional investors, private equity and venture capital funds and high net-worth investors.

      Because our clients are generally high-growth co mpanies, they are frequently in need of new capital. Many of our client relat ionships
develop early, when a client company is still private, in wh ich case we may facilitate private placements of the clients ’ securities. Thereafter, if
our client prepares for an init ial public offering, we are generally considered to act as an underwriter of that stock offering. Fro m the beginning
of 2003 through December 31, 2006, we executed 34 init ial public offerings, raising $6.5 b illion of gross proceeds. We also underwrote 78
follow-on equity offerings, raising $11.0 b illion of gross proceeds. Additionally, during this time, we underwrote seven preferred e quity
offerings totaling $572.2 million in gross proceeds. Since the beginning of 2005, we have expanded our private capital market s effort and
believe that there is a significant opportunity to capture additional market share in that area. Since the beginn ing of 2003, we have executed 24
private placements, including PIPE offerings and Rule 144A private offerings, raising a total of $989.3 million of gross proc eeds. In addition,
we acted as placement agent for trust preferred securit ies in 35 t ransactions and $1.6 billion in gross proceeds. Our ability to structure
innovative private offerings and to identify the likely buyers of such offerings makes us a valuable advisor for many small a nd middle-market
companies, as does our industry specialization. We expect that, wh ile the environ ment for init ial public offerings may not be consistently
favorable in the future, we should be able to depend on follow-on offerings, PIPEs and registered direct offerings to continue to generate
corporate finance revenues.

      Our objective is to win the role of bookrunning manager with more consistency in the future, as that role provides the greatest economic
opportunity to an underwriter. Moreover, we also expect to win a larger share of the transaction economics in offerings in wh ich we act as a
co-manager. We believe that as we are awarded increasingly larger roles as a co -manager, our reputation will gro w, leading to an increasing
number of bookrunning roles in the future. Additionally, we continue to focus on broadening our pa rticipation in equity offerin gs within our six
target industries. We believe that the incremental part icipation within each sector will enhance our underwriting position an d economic
standing on future offerings, enabling us to gain further scale as we build our client relationships. The increased frequency in which we serve as
a co-manager should lead to more p ro minent underwriting ro les and improved economics on subsequent equity offerings.

 Mergers and Acquisitions and Other Strategic Advisory
      We offer a wide range of mergers and acquisitions and other strategic advisory services. We provide our advice to management teams
and boards of directors of client companies in connection with transactions that typically are of significant strategic and financial importance to
these companies. We believe that our success as a strategic advisor stems from our ability to structure and execute co mplex t ran sactions that
create long-term stockholder value.

      We work with corporate clients on a broad range of key strategic matters, including mergers and acquisitions, divestitures and corporate
restructurings, strategic partnerships and joint ventures, hostile takeover defense strategies, valuations of businesses and assets, and fairness
opinions and special committee assignments.

      When we advise companies on the potential acquisition of another company or certain assets, our services may include the foll owing:

        •      evaluating potential acquisition targets;

                                                                           74
Table of Contents

        •      providing valuation analyses;

        •      evaluating and proposing financial and strategic alternatives;
        •      rendering, if appropriate, fairness opinions;
        •      providing advice regarding the timing, structure and pricing of a proposed acquisition; and

        •      assisting in negotiating and closing the acquisition.

      When we advise clients that are contemplat ing the sale of certain businesses, assets or their entire co mpany, our services may include the
following:
        •      evaluating and recommending financial and strategic alternatives with respect to a sale;
        •      advising on the appropriate sale process;

        •      providing valuation analyses;
        •      assisting in preparing an offering memorandu m or other appropriate sales materials;
        •      rendering, if appropriate, fairness opinions;

        •      identifying and contacting selected qualified acquirors; and
        •      assisting in negotiating and closing the proposed sale.

      Because of our focus on innovative and fast-growing companies, we are most often an advisor in company sale transactions, alt hough we
are taking steps to create an equilib riu m between representing corporate clients as buyers and selle rs. We believe that our position as a lead
manager or senior co-manager of public and private equity offerings will facilitate the growth of our mergers and acquisitions and advisory
businesses, as companies that have been issuers of securities mature and pursue acquisitions or exit events for their investors. We believe we
are well-positioned to capitalize on any cyclical upswings in underwriting and mergers and acquisitions activity as a result of the co ntinued
expansion of our brand, platform and market presence in our six target industries.

       Since inception through December 31, 2006, we have co mpleted 62 mergers and acquisitions and strategic advisory assignments with an
aggregate value of $5.3 billion. Because we serve clients at various stages of their corporate development—fro m emerging gro wth companies
to mature private and public co mpanies —the values of these transactions range in size. A mong our notable strategic engagements were the $1.7
billion sale of Transeastern Properties to a joint venture of Technical Oly mp ic USA and the Falcone Group in August 2005 and the sale of
Town and Country Ho mes to Hovnanian Enterprises in March 2005. Both of those transactions were the largest acquisitions of a private
homebuilder on record when they occurred. More recently, in Ju ly 2006, we served as exclusive financial advisor to a special committee of the
board of directors of Jameson Inns in its sale to JER Partners, a $371 million public co mpany buyout transaction. In April 2006, we acted as
exclusive financial advisor to OfficeTiger in its sale to R.R. Donnelley & Sons Company in a $250 million transaction. In November 2005, we
advised LeadClick Media on its sale to First Advantage Corp. and the First America Corp. for $150 million and, in August 2005, we advised
RxCrossroads on its sale to Omnicare for $235 million. In 2005, we co mp leted 18 M&A and other strategic advisory assignments and for the
year ended December 31, 2006, we also co mpleted 18 such assignments.

 Sales and Trading
      Our sales and trading operation distributes our equity research product and communicates our proprietary investment recommendations to
our growing base of institutional investors. In addition, our sales and trading staff executes equity trades on behalf of our clients and sells the
securities of companies for which we act as an underwriter. As a result, we depend on our institutional salespeople and traders to share our
comprehensive industry knowledge, unique insight and dedication to the highest levels of service.

                                                                         75
Table of Contents

      Our salespeople and traders are located in each of our four office locations: San Francisco, New York, Boston and Chicago. Ou r sales and
trading platform includes 46 professionals, including 22 managing directors with average industry experience of 18 years. We h ave established
a broad institutional client base characterized by longstanding relationships, which have been developed through a consistent focus on the
investment and trading objectives of our clients. Our sales and trading professionals work closely with our equity research s taff to provide
insight and differentiated investment advice to more than 500 institutional clients nationwide. For the ye ar ended December 31, 2006, we have
traded an average of approximately 5.5 million shares per day compared to an average of appro ximately 3.2 million shares per day for the year
ended December 31, 2005 and an average of 2.6 million shares per day for the year ended December 31, 2004.

       Despite the recent trend of a general industry-wide decline in co mmission rates, our brokerage revenues have continued to grow. We
believe this reflects the fact that our institutional clients value our specialized services, in cluding our proprietary, idea-driven research, industry
and sector-specific trading expert ise, and access to corporate finance transactions. Our specialization in s mall and middle -market companies
within our targeted industries allo ws our sales and trading staff to develop a thorough understanding of the dynamics of these sectors and their
constituent companies. Our research analysts also maintain active contact with our institutional client base, and frequent co mmunication
between our research department and our salespeople and traders enables us to provide investors with the most current, informed investment
advice. We plan to grow our sales and trading activities by increasing the frequency and number of trades for current clients and by developing
new client relationships through the efforts of our existing professionals or of other professionals we recruit, who may have addit ional client
relationships. We regularly identify and contact additional institutional investors that may be interested in our rese arch and sales and trading
services.

      Our objective is to be the preeminent equity sales firm within the industry segments we cover and to be a leading trader of t he equity
securities of the companies in those industries, with particu lar emphasis on the sto cks of companies for which we have acted as a lead or
co-managing underwriter. We seek to comb ine timely sales coverage and responsive trading execution with our research products to benefit our
clients, increase our recognition among institutional investo rs and generate higher commissions.

       Our sales and trading personnel are also central to our ability to market equity offerings and provide stabilization and afte r-market
support. Our equity capital markets group manages the syndication, marketing, executio n and distribution of equity offerings. Our syndicate
activities include managing the marketing and order-taking process of underwritten transactions, after-market stabilizat ion and initial market
making. Our syndicate staff is also responsible for developing and maintaining relationships with the syndicate departments of other investment
banks. Our corporate and venture services group manages share repurchase programs, structured buying and selling programs, an d sales of
restricted securities for corporate clients and financial sponsors.

      As an additional service to our clients, we frequently arrange non -deal road show meet ings between public co mpany management teams
and institutional investors in order to increase institutional investor knowledge about the businesses of these companies. These meet ings in turn
assist our corporate clients in developing their investor relations efforts.

 Equity Research
      Our equity research is the foundation of our firm. Our research department is comprised of 20 senior research analysts, including 11
managing directors with an average of 13 years of industry experience, and a total of 37 research professionals who as of Dec ember 31, 2006,
publish investment reco mmendations on 279 public co mpanies.

                                                                          76
Table of Contents

     Our equity research focuses on our six target industries —business services, consumer, financial services, healthcare, real estate and
technology—and the following sectors underlying each industry:

Business Services                                           Consumer                                                 Financi al Services
•   Business and Professional Services                      •  Lifestyle Retailing and Products                      •   Consumer Finance
• Data and Information Services                                                                                      •   Real Estate Finance
• Financial Processing and Outsourcing                                                                               • Specialty Finance
Healthcare                                                  Real Es tate                                             Technol ogy
•   Biotechnology                                           • Hotels and Resorts                                     •   Co mmunications
• Healthcare Information Technology                         • Housing                                                Equip ment
• Healthcare Services                                       • Housing Supply Chain                                   •   Consumer Technology
• Medical Dev ices                                          • Property Services                                      • Digital Media
                                                            • Specialty REITs                                        • Industrial Technology
                                                                                                                     • Internet
                                                                                                                     • Semiconductors
                                                                                                                     • Soft ware

     As of December 31, 2006, appro ximately 82% of the stocks under our research coverage had market capitalizat ions under $5 bill ion, and
were d ivided among our target sectors as follows:




       We believe that objective, fundamental analysis provides the basis for value-added equity research. We believe we distinguish ourselves
in the marketplace by providing differentiated, h igh-quality research to institutional investors. In order to develop an d effectively communicate
our specialized understanding of our target industries, we typically recruit research professionals with substantial Wall Street experience or,
fro m t ime to time, we draw h ighly skilled indiv iduals fro m a corporate setting who possess significant industry knowledge and technical
expertise.

     Our research department is charged with developing proprietary investment themes, anticipating secular and cyclical changes, and
producing action-oriented reports that will assist our clients with their investment

                                                                        77
Table of Contents

decisions. Our analysts cultivate proprietary sources of information in order to refine their quantitative and qualitative as sessments. Our
objective is to provide clients with a clear understanding of industry -specific and co mpany-specific issues that can impact their portfolio
returns.

       To facilitate dialogue and foster relationships among our brokerage clients and leading growth companies in our target indust ries, we host
regular research conferences, which we believe serve as valuable occasions for corpo rate executives to interact with existing and prospective
institutional stockholders.

 Asset Management
      The goal of our asset management business is to increase client assets under management and to provide investors with attract ive absolute
returns. We intend to grow our assets under management by attracting additional investors to our existing hedge funds, by starting new
industry-focused equity funds that utilize our specific industry expert ise, and by expanding into asset classes other than equities, s uch as
structured finance. Moreover, we intend to capitalize on the fund raising capabilities of our in -house marketing group by helping to launch and
incubate other promising asset management firms, in which we may also invest for our own account. The objec tive of our mult iple strategies is
to diversify both revenue and risk while maintaining the attractive economics of the hedge fund model. We view asset manageme nt as an
attractive business due to its high margins and the recurring nature of its fee-based revenues, as well as its dependence on intellectual capital,
which we believe is less susceptible to competitive threats fro m larger financial institutions.

      Through JMP Asset Management, we act ively manage a family of five hedge funds, two funds of hedge fu nds and an externally advised
REIT. As of December 31, 2006, we had a total of $208.2 million in client assets under management (including emp loyees and portfolio
managers) and had an additional $13.8 million of our o wn capital invested in these vehicles. In addition, we invested $14.2 million of our own
capital in a portfolio of equity securities managed by JMP Asset Management and $2.4 million in funds managed by third partie s. At that time,
JMP Asset Management had a total of 15 employees, includ ing seven portfolio managers with an average of 16 years of relevant industry
experience. A mong our emp loyees are three senior professionals who work in a fund marketing capacity and have extensive exper ience in
raising capital for hedge and other investment funds . One was most recently co-head of the private client group at BlackRock; another managed
private client assets for RCM Capital Management; and the third was previously a managing director at Banc of A merica Securit ies. In addit ion
to promoting our own hedge fund products, our fund marketing professionals, through a relationship with JMP Securit ies, also assist
unaffiliated funds on a contract basis in their structuring and placement activities. In connection with these activities, we have invested in
certain funds managed by unaffiliated third part ies.

      Joseph A. Jolson, our chairman and chief executive officer, manages our largest group of hedge funds, Harvest Opportunity Par tners II,
which had comb ined client assets under management of $98.1 million at December 31, 2006. These funds utilize a market-neutral strategy,
investing in U.S. equities wh ich are believed to be temporarily mispriced and likely to experience a p rice correction in the six t o 12 months
following our purchase of the stock. Follo wing a period of peak assets under management of more than $500 million in October 2004, Harvest
Opportunity Partners II experienced material redemptions because of unsatisfactory performance. However, performance has sinc e stabilized,
and we now believe that the funds’ long-term returns should again be marketable to institutional investors and high net -worth individuals.

       In addition, we manage four other hedge funds under the Harvest name, wh ich had a total of $37.5 million in client assets und er
management at Dece mber 31, 2006. They are Harvest Value Income Plus, L.P., a long -biased strategy that seeks to return income and capital
appreciation; Harvest Small Cap Partners, L.P., a direct ional strategy that focuses on U.S. equities with market capitalizat ions of less than $2.5
billion; and Harvest Consumer Partners, L.P., and Harvest Technology Partners, L.P., both sector-specific, directional U.S. equities strategies
that were launched in 2006.

    We also manage two funds of hedge funds under the JMP Masters name. JMP M asters Fund, L.P., previously known as Saw Island Asset
Management Fund, L.P., invests in established hedge funds; and JMP

                                                                         78
Table of Contents

Emerging Masters Fund, L.P., previously known as Saw Island Emerg ing Managers Fund, L.P., invests in early stage hedge funds.
Collectively, our JMP Masters funds had $84.4 million in client assets under management at December 31, 2006.

       In the second quarter of 2006 we formed JMP Realty Trust Inc., a privately held mortgage REIT, wh ich we expect will allow us to
leverage our financial services and real estate industry expert ise and to provide attractive risk-adjusted returns to investors through
opportunistic real estate-related investments. As of December 31, 2006, investors had committed $20.3 million of capital to JM P Realty Trust,
of which we co mmitted $10.3 million and third parties and certain of our employees committed $10.0 million. As of December 31, 2006, a
total of $4.1 million in capital had been drawn, $2.1 million fro m us and $2.0 million fro m other parties. JM P Realty Trust is externally advised
and managed by JMP Realty Advisors LLC, an affiliate of JM P Asset Management. Peter T. Pau l, an independent member of o ur board of
directors, is chairman of the board of directors of JMP Realty Trust.

     The following table represents certain information regard ing the investment returns, net asset values and fee structures of t he hedge funds,
funds of hedge funds and JMP Realty Trust managed by JMP Asset Management as of December 31, 2006.


Summary of Hedge Funds, Funds of Hedge Funds and REIT
(dollars in thousands, as of and for the year ended December 31, 2006)
                                                                                   JMP                 Annual           Annual
                                                            Net Asset              Group             Management       Management         Incentive                                    Incentive
                                              TWR             Value               Share of              Fee              Fee                Fee                Incentive                 Fee
                                               (1)           (NAV)                 NAV                  (%)               ($)              (%)                  Hurdle                   ($)

Hedge Funds (2)
Harvest Opportunity
  Partners II                                17.1% $           98,091.0 $            6,464.5           2.0%(3)        $    1,494.0       20%(5)                 None              $        631.3
Harvest Value Inco me Plus                    4.9%             12,367.9              2,247.2           1.5%(3)               249.0       20%(5)                 None                        84.9
Harvest Small Cap Partners                   22.7%             20,009.9              3,073.8           2.0%(3)               185.3       20%(5)                 None                       439.5
Harvest Consumer Partners                    12.1%              2,910.8                889.2           1.5%(3)                12.0       20%(5)                 None                        14.5
Harvest Technology Partners                   6.9%              2,254.7                546.4           2.0%(3)                 9.1       20%(5)                 None                         7.5

                                                        $     135,634.3 $          13,221.1                           $    1,949.4                                                $     1,177.7

Funds of Hedge Funds (2 )
JMP Masters Fund                             15.2% $           74,019.1 $              583.1           1.0%(3)        $       605.9       5%(5)                 None              $        575.5
                                                                                                                                           or                    or
                                                                                                                                         20%(6)                 10%
JMP Emerging Masters Fund                      4.7%            10,356.5                  N/A           1.5%(3)                133.2      10%(5)                 None                        29.1

                                                        $      84,375.6 $              583.1                          $       739.1                                               $        604.6

REIT
JMP Realty Trust Inc. (7)                      7.4% $            4,069.2 $           2,059.7           1.5%(4)        $         33.1     25%(8)          Greater of 7.5%          $         46.5
                                                                                                                                                              or 2%
                                                                                                                                                          plus 10-year
                                                                                                                                                          Treasury rate

(1)   Time-weighted rate of return, or TWR, is a measure of the compound rate of growth in a portfolio. When calculating the effect of v arying cash inflows is eliminated by assuming a
      single investment at the beginning of a period and measuring the growth or loss of market value to the end of that period.
(2)   All the hedge funds and funds of hedge funds are unregistered under the Investment Company Act of 1940.
(3)   Expressed as a percentage of net asset value.
(4)   Expressed as a percentage of stockholders’ equity.
(5)   Expressed as a percentage of the total returns of the funds subject to a highwater mark.
(6)   Expressed as a percentage of total returns in excess of the hurdle rate.
(7)   Results based on inception date of June 14, 2006.
(8)   Equal to the product of (a) the incentive fee percentage multiplied by (b) the difference by which (i) a speci fied measure of earnings exceeds (ii) JMP Realty Trust’s equity multiplied by
      the incentive fee hurdle return.

                                                                                               79
Table of Contents

      In addition to engaging in asset management activ ities on behalf or our clients, we intend to take advantage of proprietary p rincipal
investment opportunities that we expect to originate through our investment banking professionals. In the course of advising clients on strategic
or private capital raising transactions, our investment bankers routinely identify opportunities to commit our own capital to transactions in
which we are act ing as an agent. Historically, we did not have sufficient funds to consistently make such principal investments and did so
rarely. Nonetheless, we did invest in a venture debt business that we helped to structure and for wh ich we raised outside cap ital. In this
instance, we identified an experienced senior executive team, worked with these individuals to craft a business plan, provided a portion of the
seed capital and participated in a private stock offering. Since then, this company has executed an in itial public offering, and we have generated
an attractive return on our inves tment. We anticipate making similar principal investments more routinely after this offering. We have executed
75 investment banking transactions in each of the past two years and expect to generate similar o r increased volumes in the future. Many of
these transactions may afford us the opportunity to make principal investments, and we believe that we will be able to commit our c apital in
selected cases and earn an attractive return on our investment.

 Material Terms and Conditions
      Our funds are generally structured as limited partnerships with JMP Asset Management as the general partner. Neither we nor J MP Asset
Management has any commit ment to fund or to maintain a general partner investment in any of our hedge funds or hedge funds of funds.
However, to the extent that we determine to invest a portion of our capital in our hedge funds or funds of hedge funds throug h JMP Asset
Management as its general partner account, our investment committee, in consultation with management of JMP Asset Management and the
portfolio managers, determines the level of investment. Our investment in JMP Realty Trust was evaluated and authorized by ou r investment
committee.

      Management fees on our hedge funds are generally 1.5% to 2.0% per year of assets under management, payable at the beginning of each
quarter. We typically earn incentive fees of 20.0% of the net profits in a fund, measured and payable quarterly. Incentive fe es are subject to a
highwater mark in each investor’s capital account such that prior period losses must be recouped before an incentive fee is payable by such
investor. Investors may generally redeem their investments on a quarterly basis with 60 to 90 days ’ prior written notice. If withdrawals are
made in the first year, the investor is subject to a penalty of the management fee that would have been payable for the first year as well as any
incentive fee payable at such time. Further, the general partner may assess an administrative charge of up to 5.0% of an inve stor’s capital
account to defray administrative expenses otherwise borne by the fund or other investors if a withdrawal is made as of a t ime ot her than the end
of a quarter.

      Management fees on our funds of hedge funds are generally 1.0% to 1.5% per year of assets under management, payable at the beginning
of each quarter. We typically charge incentive fees of 5.0% to 10.0% of the net profits in a fund, measured and payable yearly. Incentive fees
are subject to a highwater mark in each investor’s capital account, such that prior period losses must be recouped before an incentive fee is
payable by such investor. Investors may generally redeem their investments on an annual basis with at least 90 days ’ prior writt en notice.

     JMP Realty Trust is the only fund category managed through JMP Asset Management that is subject to capital co mmit ments. As of
December 31, 2006, the total capital co mmit ments to JMP Realty Trust were $20.3 million, of which $16.2 million remains outstanding. W e
have committed $10.3 million to JMP Realty Trust, of which $2.1 million was contributed and $8.2 million remains outstanding to contribute.

      JMP Realty Advisors LLC, a wholly owned subsidiary of JMP Asset Management, has entered into an external management arrangeme nt
with JM P Realty Trust. Under the management agreement, JMP Realty Advisors is entitled to management fees of 1.5% per year on JMP
Realty Trust’s net capital and to an incentive fee equal to 25% of the pre-incentive fee return on equity wh ich exceeds the greater of 7.5% or
2.0% plus the 10-year Treasury bill rate, measured and payable quarterly.

                                                                        80
Table of Contents

      Our material agreements and the terms upon which we provide investment management services are generally set forth in our fund
offering memoranda and limited partnership agreements for our funds. Our separate accounts are governed by written agreements setting forth
the economic terms, investment guidelines and termination provisions applicable to such account. None of our hedge funds or funds of hedge
funds have “key man” provisions, however, investors in our hedge funds may generally withdraw their investment on a quarterly basis with 60
or 90 days’ advance notice and in our funds of funds, on an annual basis with 90 days ’ notice prior to the end of a calendar year if they are
dissatisfied with the performance of our funds.

     Investors in the funds may assert all available legal remedies availab le to them under applicable law and our agreements. Our agreements,
however, limit liability of JMP Asset Management to acts or omissions constituting gross negligence or willful v iolation of law. Because JMP
Asset Management is a separate limited liability company, we believe that any liability of JMP Group Inc. would be limited to its investment in
JMP Asset Management. We believe such limitation would be maintained unless a court were to determine that the separate legal identity of
JMP Asset Management should be set aside and permit p laintiffs to proceed against us directly, or for our act or o mission directly against the
funds or their investors that constituted gross negligence or a willfu l v iolation of law.

Competiti on
       All areas of our business are subject to a high level of co mpetition. The principal co mpetitive factors influencing our busin ess include the
ability of our professionals, industry expertise, client relationships, business reputation, market focus, and prod uct capabilities, and quality and
price of our products and services.

      Since the mid-1990s, there has been substantial consolidation among U.S. and global financial institutions. In particular, a nu mber of
large co mmercial banks, insurance companies and other diversified financial services firms have established or acquired broker -dealers or have
merged with other financial institutions.

       Currently, our co mpetitors are other investment banks, brokerage firms, merchant banks and financial advisory firms. Ou r focu s on our
six target industries also subjects us to direct competition fro m a nu mber of specialty securities firms and smaller investme nt banking boutiques
that specialize in provid ing services to these several industries.

       Many of these firms have the ability to offer a wider range of products than we do, including loans, deposit -taking and insurance, in
addition to brokerage, asset management and investment banking services, all of which may enhance their co mpetitive position relative to us.
These firms also have the ability to support investment banking and securities products with commercial banking, insurance and other fina ncial
services revenues in an effort to gain market share, wh ich could result in down ward pricing pressure in our businesses. This trend toward
consolidation has significantly increased the capital base and geographic reach of our co mpetitors. These larger and better -capitalized
competitors may be better able than we are to respond to changes in the investment banking industry, to rec ruit and retain skilled professionals,
to finance acquisitions, to fund internal growth and to compete for market share generally.

      In addition, the trend in the equity underwrit ing business toward mult iple book runners and co -managers has increased the competitive
pressure in the investment banking industry, and may lead to lower average transaction fees. We may experience co mpetitive p r essures in these
and other areas in the future as some of our co mpetitors seek to increase market share by reducing prices . We face strong competition fro m far
larger firms in part due to a trend toward financial industry consolidation.

      We face a high level of co mpetit ion in recruit ing and retaining experienced and qualified professionals. The success of our b usiness and
our ability to continue to compete effectively will depend significantly upon our continued ability to retain and incen tivize our existing
professionals and attract new professionals.

                                                                         81
Table of Contents

      As we seek to expand our asset management business, we face co mpetition in the pursuit of investors for our invest ment funds, in the
identification and complet ion of investments in attractive portfolio co mpanies, and in the recruit ment and retention of asset management
professionals.

Risk Management and Compliance
      As an investment bank, risk is an inherent part of our business. Global markets, by their nature, are prone to uncertainty and subject
participants to a variety of risks. The principal risks we face are credit, market, liquidity, legal, reputational and operat ional risks. We apply
quantitative analysis and sound practical judg ment before engaging in transactions to ensure that appropriate risk mit igants are in place. We
accomplish this objective by carefully considering the amount of capital allocated to each of our businesses, establishing tr ading limits, setting
credit limits for individual counterparties and, to the extent that we make principal investments, committ ing capital to tran sactions where we
have the advantage of industry or company-specific expert ise. As part of our principal investment activities , we conduct due diligence before
making any significant capital co mmit ment in order to assess the risk inherent in a transaction and all significant investmen ts must be approved
by our Investment Co mmittee. A ll of our part icipations in underwritten offerings are required to be approved by our Co mmit ment Co mmittee.
Our focus is balancing risk and return. We seek to achieve adequate returns from each of our businesses commensurate with the risks they
assume. Nonetheless, the effectiveness of our approach to managing risks can never be completely assured. For examp le, unexp ected large or
rapid movements or disruptions in one or more markets or other unforeseen developments could have an adverse effect on our re sults of
operations and financial condit ion. The consequences of these developments can include losses due to adverse changes in inventory values,
decreases in the liquid ity of trading positions, increases in our credit exposure to customers and counterparties, and increa ses in general
systemic risk.

Regulati on
      As a participant in the financial services industry, we are subject to comp lex and extensive regulation of most aspects of ou r business by
U.S. federal and state regulatory agencies, self-regulatory organizat ions, and securities exchanges. The laws, rules and regulatio ns comprising
the regulatory framework are constantly changing, as are the interpretation and enforcement of existing laws, rules and regulations. The effect
of any such changes cannot be predicted and may direct the manner of our o perations and affect our profitability.

      Our bro ker-dealer subsidiary, JMP Securities, is subject to regulations governing every aspect of the securities business, including the
execution of securities transactions, capital requirements, record-keeping and reporting procedures, relationships with customers, including the
handling of cash and margin accounts, the experience and training requirements for certain emp loyees, and business procedures with firms that
are not members of these regulatory bodies.

      JMP Securities is reg istered as a securities broker-dealer with the SEC and is a member of the NASD. The NASD is a self-regulatory
body composed of members such as our broker-dealer subsidiary that have agreed to abide by the rules and regulations of the NASD. The
NASD may expel, fine and otherwise discipline member firms and their emp loyees. JMP Securit ies is also licensed as a broker -dealer in each
of the 50 states, requiring us to comply with the laws, rules and regulations of each state. Each state may revo ke the license to conduct a
securities business, fine and otherwise discipline broker -dealers and their emp loyees.

      JMP Securities is also subject to the SEC’s Un iform Net Cap ital Ru le, Ru le 15c3-1, wh ich may limit our ab ility to make withdrawals of
capital fro m our bro ker-dealer subsidiary. The Unifo rm Net Capital Rule sets the min imu m level of net capital a broker-dealer must maintain
and also requires that a portion of its assets be relatively liquid. In addition, JM P Securit ies is subject to certain notification req uirements
related to withdrawals of excess net capital.

                                                                         82
Table of Contents

      We are also subject to the USA PATRIOT Act of 2001, wh ich has imposed new obligations regarding the prevention and detection of
money-laundering activ ities, including the establishment of customer due diligence and customer verification, and other co mpliance policies
and procedures. The conduct of research analysts is also the subject of rule-making by the SEC, the NASD and the federal government through
the Sarbanes-Oxley Act. These regulations require certain disclosures by, and restrict the activities of, research analysts and broker-dealers,
among others. Failure to co mply with these new requirements may result in monetary, regulatory and, in the case of the USA PATRIOT Act,
criminal penalties.

      Our asset management subsidiary, JMP Asset Management, is an SEC-registered investment adviser, and accordingly subject to
regulation by the SEC. Requirements under the Investment Advisors Act include record -keeping, advertising and operating requirements, and
prohibitions on fraudulent activities.

      Various regulators, including the SEC, the NASD and state securities regulators and attorneys general, are conducting both ta rgeted and
industry-wide investigations of certain practices relating to the asset managemen t industry, including market ing, sales practices, breakpoint
discounts, late trading, market timing and market and compensation arrangements. These investigations, which have been highly publicized,
have involved mutual fund co mpanies, broker -dealers, hedge fund investors and others.

      In addition, the SEC staff has conducted studies with respect to soft dollar practices in the brokerage and asset management ind ustries. In
October 2005, the SEC proposed interpretive guidance regarding the scope of permitted b rokerage and research services in connection with soft
dollar p ractices.

Accounti ng, Administration and Operati ons
      Our accounting, administration and operations personnel are responsible for financial controls, internal and external financial reporting,
compliance with regulatory and legal requirements, office and personnel services, management information and teleco mmunications systems
and the processing of our securities transactions.

       Our emp loyees perform most of these functions, other than (i) our human resources administration and payroll and benefits
administration and processing, which are performed by an unaffiliated human resources outsourcing provider, Gevity HR, Inc.; and (ii) our
clearing operations, which are currently performed by Automat ic Data Processing, Inc. All of our data processing functions are performed by
our management info rmation systems personnel. We believe that our continued future growth will require imp lementation of new and
enhanced communications and information systems and training of our personnel or the hiring of an outsourced provider to operate such
systems. Any difficulty or significant delay in the implementation or operation of new systems or the training of personnel c ould harm our
ability to manage growth.

Legal and Regulatory Proceedings
      As we grow our business, we may in the future become involved in lit igation in the ordinary course of our business, including litigation,
both private sector and government/regulatory, material to our business. For examp le, because we act as an underwriter or a financial advisor in
the ordinary course of our business, we may be subjected to class action claims that seek substantial damages. In addit ion, d efending
emp loyment claims against us could require the expenditure of substantial resources. Regulatory agencies, including the SEC and NASD, plus
states’ attorneys general, may and have also served notice of requests for informat ion and other data from time to time. We cannot ma ke any
assurances that such inquiries will not result in further proceedings or litigation. Such proceedings and such litigation are inherently uncertain
and ultimate resolution of such could be determined by factors outside of our control. However, we do not believe that we hav e any material
legal or regulatory proceedings currently pending or threatened against us.

                                                                       83
Table of Contents

Empl oyees
      As of December 31, 2006, we emp loyed 187 people. None of our emp loyees is subject to any collective bargaining agreements, and we
believe our relationship with our employees to be satisfactory.

Properties
      We occupy four principal offices, with our headquarters located in San Francisco, other offices in New York, Boston and Chicago, and
additional space in Atlanta, all of which are leased. Our San Francisco headquarters is located at 600 Montgomery Street and comprises
approximately 37,650 square feet of leased and subleased space, pursuant to lease agreements expiring in 2011. In New Yo rk, we lease
approximately 9,940 square feet at 450 Park Avenue pursuant to a lease agreement expiring in 2011. Our Boston office is locat ed at 265
Franklin Street and consists of approximately 2,490 square feet of leased space pursuant to a lease agreement expiring in 2007. In Ch icago, we
sublease approximately 240 square feet at 200 South Wacker Drive pursuant to a sublease agreement exp iring in 2008. In Atlan t a, we lease
approximately 300 square feet at 4200 Northside Parkway, pursuant to a lease exp iring in 2007. We expect to need additional o ffice space fro m
time to time in the future, particularly in San Francisco.

                                                                      84
Table of Contents



                                                                MANAGEMENT

Board of Directors, Executi ve Officers and Key Employees
     We provide below informat ion concerning the members of our board of d irectors, our executive officers and other key employees . We
expect to appoint additional directors over time who are not our employees or otherwise affiliated with our management.


Name                                                Age                                             Titles

Directors and Executi ve Officers
Joseph A. Jolson                                      48   Director; Chairman and Chief Executive Officer; Chief Executive Officer of JM P
                                                              Asset Management
Peter T. Paul                                         62   Director
Edward J. Sebastian                                   59   Director
Craig R. Johnson                                      52   Director; President
Carter D. Mack                                        44   Director; Co-President of JMP Securities; Director of Investment
                                                              Banking of JMP Securities
Mark L. Leh mann                                      42   Director; Co-President of JMP Securities; Director of Equities of JM P Securities
Thomas B. Kilian                                      41   Chief Financial Officer
Key Empl oyees
James J. Fo wler                                      45   President of JMP Realty Trust
Maureen McCarthy                                      43   Director of Trading of JM P Securit ies
Chantal Miklosi                                       36   Chief Financial Officer of JM P Securit ies and JMP Asset Management
Gil Mogavero                                          51   Chief Co mpliance Officer of JM P Securities and JMP Asset Management
Jeffrey H. Spurr                                      49   Director of Institutional Sales of JMP Securities
Janet L. Tarkoff                                      39   Chief Legal Officer
James F. Wilson                                       45   Director of Research of JMP Securities


      Joseph A. Jolson co-founded JMP Group LLC in 1999, and is our chief executive officer, the chairman o f the board of directors, and a
member of our executive co mmittee. Mr. Jo lson is also the chief executive officer o f JMP Asset Management, JMP Realty Trust and is a
portfolio manager of Harvest Opportunity Partners II, L.P., our largest hedge fund. Previously, Mr. Jolson was a senior managing director and
senior research analyst at Montgomery Securities, now Banc of A merica Securities, for 15 years. Prior to that, he was a consulting research
analyst at Fidelity Management and Research in Boston in 1983 and 1984 and at Donaldson, Lufkin & Jen rette in New York from 1980
through 1982. Mr. Jo lson was named to Institutional Investor magazine’s All-A merica Research Team for 10 consecutive years, between 1986
and 1995 for h is coverage of the savings and loan industry and was also selected as an All-Star Analyst by the Wall Street Journal in the
financial services category in 1996 and 1997. Additionally, he was ranked as a top -five thrift analyst every year fro m 1985 through 1994 by
Greenwich Associates. Mr. Jolson received a M BA degree with distinction fro m The Wharton School at the University of Pennsylvania and a
BA degree fro m Yale Un iversity.

      Peter T. Paul serves as a member of our board of directors. Mr. Paul is the president of Paul Financial, LLC, a mo rtgage banking
company he founded in 2003, and the owner and chairman of Grove Street W inery. Previously, Mr. Paul was chief executive officer of
Headlands Mortgage Co mpany, a residential mortgage banking firm wh ich he founded in 1986, took public in 1998 and merged with
Greenpoint Financial Corporation in 1999. Following the merger, M r. Paul served as vice chairman of Greenpoint Financial, president and
chief executive officer of Greenpoint Mortgage, and subsequently as president and chief executive officer of Greenpoint Credit. Mr. Paul
resigned from the board of directors of Greenpoint Financial in Ju ly 2003. Mr. Pau l is chairman of the board of directors of JM P Realty Trust,
chairman of the board of d irectors of Sequoia National Bank and chairman of the

                                                                        85
Table of Contents

board of directors of the Headlands Foundation, a non-profit organization he founded in 1996. Mr. Pau l was the recipient of Ernst and Young’s
Financial Services Entrepreneur of the Year Award in 1999. M r. Paul received a M BA degree fro m Boston University and a BA degree fro m
the University of New Hampshire.

       Edward J. Sebastian serves as a member of our board of directors. Mr. Sebastian is the founder, chairman and chief executive o fficer of
SMR Group LLC, a private equity investment firm located in Newport Beach, California. Mr. Sebastian is the former chairman and chief
executive officer of Resource Bancshares Mortgage Group, a residential mortgage co mpany headquartered in Co lu mbia, South Caro lina,
founded by Mr. Sebastian as a division of Republic National Ban k in May 1989. Resource Bancshares Mortgage Group went public in 1993
and merged with NetBank, Inc., of Atlanta, Georg ia, in March 2002. Prior to that, Mr. Sebastian was vice chairman of Bankers Trust of South
Caro lina and corporate executive vice president of NCNB Corporation, wh ich are both now part of Bank of A merica. Mr. Sebastian is a current
member of the board of d irectors of the South Financial Group, a financial institution headquartered in Greenville, South Car olina, and is
currently active on the boards of advisors of various venture capital funds, including Baker Co mmunication Fund of Ne w York, New Yo rk, and
Vaxa Cap ital of Greenville, South Caro lina. Mr. Sebastian received a BS degree fro m Pennsylvania State University.

      Craig R. Johnson joined us in January 2002 and is president of JMP Group and a member of our executive co mmittee. Mr. Joh nson also
serves as a member o f our board of d irectors. He prev iously served as President of JMP Securities, fro m January 2002 until Ja n uary 2007.
Mr. Johnson was a founding member of Saw Island Asset Advisors, LLC, an alternative investment firm special izing in hedge fund
investments which was acquired by JMP Asset Management in January 2003. Prior to founding Saw Island Asset Advisors, Mr. Johnson spent
20 years, 1980 through 2000, at Montgomery Securities, now Banc of A merica Securities, most recently as director of g lobal institutional sales
and a member of the firm’s executive co mmittee. M r. Johnson serves on the board of directors of Corticon Technology, a rules -based enterprise
software platform for decision management. Mr. Johnson received a BA degree fro m Stanford University.

      Carter D. Mack , a co-founder of JMP Group LLC, is director of investment banking and co -president of JMP Securit ies and is a member
of our executive co mmittee. Mr. Mack also serves as a member of our board of directors. Prior to co-founding JMP Group, Mr. Mack was a
managing director in the financial services group at Montgomery Securities, now Banc of A merica Securities, for three years, where he focused
on corporate finance and mergers and acquisitions for finance companies, depository institutions and other financial intermediaries. Mr. Mack
also spent five years working with financial institutions in the investment banking group at Merrill Lynch, t wo years in corp orate finance at
Security Pacific Corp. and three years in strategic planning at Union Ban k of Californ ia. Mr. Mack received a MBA degree fro m the UCLA
Anderson School of Management and a BA degree fro m the Un iversity of Californ ia, Berkeley.

      Mark L. Lehmann joined us in October 2003, is director of equities and co-president of JMP Securities and is a member of our executive
committee. Mr. Leh mann also serves as a member of our board of directors. Previously, Mr. Leh mann was a managing director at U.S.
Bancorp Piper Jaffray, where he in itiated and managed the firm’s middle -market sales effort. He previously served as both the global director
of institutional sales and the global director of equity research at Banc of A merica Securities after serving as an institutional salesperson at the
firm and its predecessor, Montgomery Securities, for 10 years. Mr. Leh mann was also a founding partner of Baypoint Trading, a provider of
trading execution services to investment managers. Mr. Leh mann received a JD degree fro m the New Yo rk Un iversity School of Law and a BA
degree fro m the Un iversity of Illinois. He is a certified public accountant.

      Thomas B. Kilian joined us in April 1999 and is a managing director and chief financial officer o f JMP Group. Fro m 1998 to 1999,
Mr. Kilian was in the investment banking group at Montgomery Securities, now Banc of A merica Securities, focusing on corporate finance
matters for financial services clients. Fro m 1992 until 1996, Mr. Kilian served as an assistant vice president in Deutsche Bank’s corporate
development group in Fran kfurt, Germany, focusing on strategic planning and business development. Mr. Kilian holds a MBA degree fro m
Stanford University and a masters degree in industrial engineering fro m Karlsruhe Un iversity in Germany.

                                                                         86
Table of Contents

Key Empl oyees
       James J. Fowler joined us in February 2001 and is a managing director and president of JMP Realty Trust. Fro m February 2001 until
February 2007, Mr. Fo wler was a senior research analyst at JMP Securities, serving additionally as co -director of research beginning in June
2005. Prev iously, Mr. Fo wler was a principal and research analyst at Thomas Weisel Partners, where he followed the financial t echnology
sector. Fro m 1995 through 1999, he was a principal and senior research analyst following non -bank financial services co mpanies in the equity
research department at Montgomery Securit ies, now Banc of A merica Securit ies. Prior to join ing Montgomery Securit ies, Mr. Fowler managed
mortgage investments and mortgage trading positions at both Oppenheimer & Co. and Ocwen Financial Corporation. In 2004, Mr. Fo wler was
included in the annual “Best on the Street” analyst survey conducted by the Wall Street Journal , ranking second as a stock picker in both the
real estate and diversified financial services categories. In 2003 and 2001, he p laced first and fifth, respectively, in the real estate category. Mr.
Fowler received a BS degree fro m Go lden Gate Un iversity.

      Maureen McCarthy joined us in April 2004 and is a managing director and director of trading. Previously, Ms. McCarthy spent six years,
fro m 1996 through 2002, at Robertson Stephens, most recently as a managing director and head of trading. Fro m 1990 to 1996, M s. McCarthy
was a principal and NASDAQ trader at Montgomery Securities, now Banc of A merica Securit ies. M s. McCarthy began her career as a
NASDA Q trader with Kidder Peabody in 1987. Ms. McCarthy received a BA degree fro m Vassar College.

      Chantal Miklosi joined us in January 2005 and is a managing director and chief financial officer o f JMP Securities and JMP A sset
Management. Previously, Ms. Miklosi served as a senior finance executive for Orrick, Herrington & Sutcliffe LLP, a national law firm. She
was previously senior director of financial planning and analysis at Versata, a publicly traded software company, where in addition to
overseeing finance functions she was responsible for investor relat ions and sales operations. Additionally, Ms. Miklosi has five years of
experience as an investment banker, having worked at both Thomas Weisel Partners and Montgomery Securities. Ms. Miklosi received a MBA
degree fro m the Un iversity of Western Ontario, Ivey School of Business and a BBA degree fro m HEC Montreal.

      Gil Mogavero joined us in January 2000 and is a managing director and chief co mp liance officer of JMP Securit ies and JMP Asset
Management. Previously, Mr. Mogavero was vice president of Mitchum, Jones & Temp leton, Inc., where he was head of comp liance and
operations and where he also served as chief financial officer and chief ad ministrative officer. Before that, Mr. Mogavero served as the director
of comp liance and operations at Vo lpe, Welty & Co mpany, where he established the firm’s brokerage operation, co mpliance fu nctions and
communicat ions infrastructure and oversaw the department for ten years. Mr. Mogavero has more than 25 years of experience in compliance
and operations at various securities firms, including Robertson Stephens, Donaldson, Lufkin & Jenrette and Oppenheimer & Co . Mr. Mogavero
received an AAS degree fro m the Parsons School of Design.

      Jeffrey H. Spurr jo ined us in October 2003 and is a managing director and director of institutional sales. Previously, Mr. Spurr was a vice
president in equity sales at Morgan Stanley with coverage of major west coast institutional clients. Before that, he served a s a managing
director in institutional sales at NationsBanc Montgomery Securit ies, now Banc of A merica Securit ies. Mr. Spurr was formerly a portfolio
manager of Reindeer Capital, L.P. and the general partner of The Steelhead Fund, L.P. M r. Spurr received a M BA degree fro m the Amos Tuck
School of Business Administration at Dart mouth College and a BA degree fro m the University of Vermont.

      Janet L. Tarkoff joined us in July 2003 and is a managing d irector, general counsel of JMP Securit ies and JMP Asset Managem ent and
will serve as our chief legal officer. Prev iously, Ms. Tarkoff was associate general counsel at Thomas Weisel Partners and was responsible for
legal matters regarding its asset management and fund activities. Ms. Tarkoff was also a corporate attorney with Winston & Strawn in Ch icago,
served as counsel to Montgomery Securit ies, now Banc of A merica Securit ies, and practiced as a litigation attorney. Ms. Tarko ff received a JD
degree fro m U.C. Hastings College of the Law and a BA degree fro m Pepperdine Un iversity.

                                                                          87
Table of Contents

       James F. Wilson joined us in December 1999 and is a managing director, director of research and senior research analyst. Previously,
Mr. Wilson was a managing director and senior research analyst at Jefferies & Co mpany, Inc. for four years. Fro m 1989 through 1996,
Mr. Wilson served as a senior research analyst in the real estate and building group at Montgomery Securities, now Banc of A meric a
Securities, most recently as managing director. M r. W ilson has also worked at Sutro & Co mpany as a research analyst covering companies in
the financial services, business services and real-estate industries. In 2003, 2004, 2005 and 2006, M r. W ilson was included in th e annual “Best
on the Street” analyst survey conducted by the Wall Street Journal , ranking as a top-five stock picker in the home construction category each
year. Mr. Wilson holds a BA degree fro m Whit man College.

Board Composition
     Upon the completion of this offering, our board of directors will consist of the following members: Messrs. Jolson, Johnson, Lehmann
and Mack, as well as two independent directors, Peter T. Paul and Ed ward J. Sebastian.

       Our board of d irectors has determined that Mr. Sebastian and Mr. Pau l are independent directors as defined by the SEC and NYSE ru les.
Therefore, upon comp letion of this offering, we will have a board of d irectors that will be co mpliant with the independence c riteria for boards
of directors during the transition periods provided to newly public co mpanies under the applicable rules of the NYSE and the SEC. Within th e
required time period following this offering, we will appoint additional directors who will meet the independence standards established by the
applicable rules of the SEC and the NYSE.

Director Compensation
      We do not intend to pay directors who are also our employees any additional compensation for serving as a director. For non -emp loyee
directors, we intend to reimburse customary expenses of the directors for attending board, committee and stockholder meetings . All
compensation of our non-employee directors will be established by our board of directors following this offering. We do not intend to offer
retirement benefits to non-emp loyee directors.

Board Commi ttees
     Our board of d irectors has the authority to appoint committees to perform certain management and administrative functions. Up on
complet ion of this offering, our board of d irectors will have an audit co mmittee, a co mpensation committee, a corporate governance and
nominating co mmittee and an executive co mmittee and may fro m time to time establish other committees to facilitate the manage ment of our
business.

 Audit Committee
       Upon complet ion of this offering, Mr. Sebastian and Mr. Pau l will serve on the audit committee as independent directors, in accordance
with the SEC and NYSE rules. We will appoint one additional independent director to our audit committee within the time pe riod permitted by
the applicable ru les of the SEC and NYSE. Mr. Sebastian is an audit co mmittee financial expert within the mean ing of the rules of the SEC.
The audit committee will be responsible for reviewing and reporting to the board of directors on th e internal accounting and financial controls
for us and on the accounting principles and auditing practices and procedures to be employed in preparation and review of our financial
statements. The audit committee will also be responsible for the engagement and oversight of our independent registered public accounting
firm, review the scope of the audit to be undertaken by such auditors and pre-approve of any audit and permitted non-audit services provided
by such auditors.

      Our board of d irectors will adopt a written charter fo r the audit co mmittee, wh ich will be availab le on our website upon comp letion of
this offering.

                                                                         88
Table of Contents

 Compensation Committee
       Mr. Sebastian and Mr. Pau l will serve as the independent directors on the compensation committee, in accordance with the NYSE ru les.
We will appoint one additional independent director to our compensation committee within the time period permitted by the app licable rules of
the NYSE. The co mpensation committee is responsible for reviewing and, as it deems appropriate, recommending to the board of directors
policies, pract ices and procedures relating to the compensation of the officers and other managerial emp lo yees, including the determination in
its discretion of the amount of annual bonuses, if any, for our managing directors and other professionals, and the establish ment and
administration of emp loyee benefit plans. The compensation committee will exercise al l authority under our employee equity in centive plans
and will advise and consult with our officers as may be requested regarding managerial personnel policies.

     Our board of d irectors will adopt a written charter fo r the co mpensation committee, which will be available on our website upon
consummation of this offering.

 Corporate Governance and Nominating Committee
      Mr. Sebastian and Mr. Pau l will serve as the independent directors on the corporate governance and nominating co mmittee, in accordance
with the NYSE ru les. We plan to appoint one additional independent director to our corporate governance and committee within the time
period permitted by and in compliance with the applicable rules of the NYSE. The corporate governance and nominating co mmitte e will be
responsible for identifying and reco mmending no minees to our board of directors and overseeing compliance with our corporate governance
guidelines.

     Our board of d irectors will adopt a written charter fo r the corporate governance and nominating co mmittee, wh ich will be available on
our website upon completion of this offering.

 Executive Committee
      The executive committee is comprised of Messrs. Jolson, Johnson, Lehmann and Mack. The executive co mmittee exercises the authority
of our board of directors between meetings of the full board of directors (other than such authority as is reserved to the audit committee, the
compensation committee, the corporate governance and nominating committee or the fu ll board of directors).

Compensati on Committee Interlocks and Insi der Partici pation
     None of our executive officers serves as a member of the board of directors or compensation committee of any entity that has one or more
executive officers serving as a member of our board of directors or co mpensation committee.

                                                                       89
Table of Contents

                                                        EXECUTIV E COMPENS ATION

Compensati on Discussion and Analysis
 Overview
     Our executive compensation program is designed to provide strong incentives to our executive officers to effectively lead and manage our
business to achieve our growth strategy. Because the compensation of our executive officers plays an integral ro le in our success, our
compensation programs are designed to attract, retain, and motivate top quality, effective executives and professionals. We r efer to our chief
executive officer, our chief financial officer and our three other most highly co mpensated executive officers during 2006 as our named
executive officers.

      A substantial portion of each named executive officer ’s total compensation is variable and delivered on a pay-for-performance basis. We
believe this model provides the greatest incentive to motivate management to achieve our business objectives. The executive co mpensation
program provides compensation opportunities, contingent upon performance, that are co mpetitive with practices of other simila r investment
banking firms. We are co mmitted to utilizing the executive co mpensation program to maintain our o wnership culture and to broa den executive
ownership over time. We strongly believe that the cash and equity components of our compensation plans will align the interests of our named
executive officers with our stockholders and will pro mote long -term stockholder value creation.

 Determination of Compensation
      In allocating compensation to our named executive officers, the primary emphasis, in addition to our performance, is on each in dividual’s
contribution, business unit performance and co mpensation recommendations of the executive co mmittee. Our board of d ire ctors has delegated
to our executive co mmittee the primary authority to determine and reco mmend co mpensation of our named executive officers. Aft er the
complet ion of this offering, our board of d irectors will delegate to our compensation committee the primary authority to determine and
recommend executive co mpensation, with the advice of the executive co mmittee. We may utilize third -party co mpensation surveys to provide
industry data to better support our determination of the key elements of our named execu tive officer co mpensation program. In 2006, the
executive committee utilized data fro m the McLagan Survey in order to determine co mpetitive co mpensation levels. This industr y data consists
of salaries and other compensation paid by 56 investment banking firms to executives in positions comparable to those held by our named
executive officers.

 Compensation Components
      In 2006, we operated as a limited liability co mpany that was substantially owned by our managing directors. The key co mponent s of the
named executive officer co mpensation program for 2006 were base salary, potential bonus, profit allocations on membership in terests, a nd
interest paid on member’s capital. Upon comp letion of this offering, we will operate as a corporation, and we anticipate that th e key
components of our named executive officer co mpensation program will be base salary, cash bonus and equity -based awards. We expect that
our annual total compensation and benefits, including that payable to our named executive officers, but excluding e quity award s granted prior
to and in connection with this offering, will be appro ximately 60% of revenues each year. However, we retain the discretion t o change this
percentage in the future.

 Base Salary
     Consistent with industry practice, the base salaries for our named executive officers accounts for a relat ively small portion of th eir overall
compensation. We believe that such salaries are accepted in the industry and the potential for substantial bonus compensation is seen by such
persons as the more important component. Further, we believe in a model of low fixed costs and the potential for substantial upside to
productive employees

                                                                         90
Table of Contents

and view this compensation structure as promoting our business objectives. Named executive officer base salaries and subsequent adjustments,
if any, are expected to be determined by the compensation committee annually, based on a review of relevant market data and each executive’s
performance for the prior year, as well as each executive’s experience, expert ise and position.

 Cash Bonus
      Cash bonus compensation has been a key component of our executive co mpensation program. Our executive co mmittee has in the past
awarded, and our co mpensation committee will in the future award, discretionary cash bonuses based on a number of variables t hat are lin ked
to our overall and their indiv idual perfo rmance. Such variables consist of (i) our operating performance, and ( ii) each individual’s contribution
to our revenue, to the performance of the individual’s particu lar business unit and to our business development. We did not pay cash bonuses to
our named executive officers, other than Mr. Leh mann and Mr. Kilian, because our historical practice was to award bonuses to the members of
the executive co mmittee only if: (i) there was a residual amount available in the co mpensation bonus pool after award ing bonuses to other
emp loyees, and (ii) pay ment of bonuses to the members of the executive co mmittee would enable us to remain within our target ed
compensation ratio. In 2006, there was no such residual amount available. Ho wever, we awarded cash bonuses to Mr. Kilian an d Mr. Leh mann
on the basis of their contribution to our business and revenue production.

       In addition, we may make cash payments to our named executive officers pursuant to future grants of profit interests in JMP G roup LLC
or its operating subsidiaries under a profit interest plan. Any distributions under such profit interests to managing directors under the plan will
be included in the aggregate compensation to revenues calculation, wh ich will be appro ximately 60% fo llo wing co mplet ion of t h is offering.
The 60% co mpensation to revenues ratio will exclude non-cash compensation expenses relating to equity awards made prio r to and in
connection with this offering. We will retain the right to change the terms and conditions of grants of profit interests at a ny time.

       We will establish a compensation plan prior to this offering that provides for the payment of cash bonuses to our emp loyees, including
our named executive officers. Such cash bonuses may be awarded with reference to performance benchmarks in a manner similar t o that which
would be required under Section 162(m) of the Internal Revenue Code, or the Code, as deductible compensation expenses for a public
company. Ho wever, we intend to rely on an exemption fro m Sect ion 162(m) of the Code for a plan adopted prior to the time such company
becomes a public co mpany. This pre-IPO exempt ion will no longer be available to us after the date of our annual meeting that occurs after the
third calendar year following the year of our init ial public offering, or if we materially modify the plan. Assuming that we consummate this
offering in 2007, the pre-IPO exemption will exp ire on the date of our 2011 annual meet ing. Subsequent to the expirat ion of this pre -IPO plan
exemption, we intend to pay cash bonuses in a manner that qualifies for a performance based compensation exemption un der Section 162(m).

 Equity Awards
      Historically, equity awards have not comprised a significant portion of our named executive officers ’ total co mpensation. In 2006, we did
not grant any equity-based awards to our named executive officers because we had already awarded significant option grants to our named
executive officers in 2005 and most of our named executive officers already held a significant equity ownership interest in u s. Upon our
corporate reorganization, however, we expect that equity-based awards will play an increasing role in the co mpensation of certain of our named
executive officers in order to ensure that they have a large ownership stake. Under our 2007 Equity Incentive Plan, our co mpe nsation
committee will have the discretion to grant stock options, restricted stock, restricted stock units, stock appreciation rights and dividend
equivalent rights.

                                                                        91
Table of Contents

 Interest on Capital and Profit Distributions on Membership Interests
       Prior to the comp letion of this offering, we operated as a limited liability co mpany, and our managing directors, wh ich inclu de our named
executive officers, received interest on capital and certain pro -rata d istributions of profit. Managing directors received interest payments equal
to the Prime rate plus 100 basis points on their net capital contributions. In addition, we paid a portion of our named execu tive officers’
compensation in the form of p rofit allocations and distributions on their membership interests. The payment of profit allocations and
distributions was made on a pro rata basis in relation to the ownership interest of each named executive officers. Upon our c orporate
reorganizat ion, we will no longer pay interest on capital. In addit ion, after the corporate reorganization, any dividends we declare on our
common stock paid to our named executive officers in their capacity of stockholders will not be considered compensation.

 Other Compensation
      All of our executives are eligible to participate in our employee benefit p lans, including medical, dental, life insurance and 401(k) p lans.
These plans are availab le to all salaried emp loyees and do not discriminate in favor o f executive officers. It is gen erally our policy to not extend
significant perquisites to our executives that are not available to our emp loyees generally. We have no current plans to make changes to levels
of benefits and perquisites provided to executives.

Summary Compensati on Table
      The informat ion below describes the components of the total compensation of the Chief Executive Officer, Chief Financial Offi cer, and
our three other most highly co mpensated executive officers, based on tot al compensation for the year ended December 31, 2006.


(Dollars as shown)                                                                                    Opti on         All Other
                                                                                                      Awards        Compensati on
                                                             Year         Salary        Bonus          (1)                (2)                Total

Joseph A. Jolson                                             2006     $     36,000              —    $ 10,400      $      2,208,476     $    2,254,876
  Chairman and Ch ief Executive Officer
Thomas B. Kilian                                             2006     $ 100,000      $ 500,000       $    1,040    $        147,734     $      748,774
  Chief Financial Officer
Craig R. Johnson                                             2006     $ 100,000                 —    $    6,656    $        851,432     $      958,088
  President
Mark L. Leh mann                                             2006     $ 100,000      $ 250,000       $    4,160    $        624,982     $      979,142
 Director of Equit ies and
 Co-President of JMP Securit ies
Carter D. Mack                                               2006     $ 100,000                 —    $    8,320    $      1,061,260     $    1,169,580
  Director of Investment Banking and
  Co-President of JMP Securit ies

(1)   Reflects the compensation expense related to prior option awards recognized for the year ended December 31, 2006. The method of and
      assumptions used to calculate the value of the options granted to our named executive officers is discussed in note 11 to our fin ancial
      statements included elsewhere in this prospectus.

(2)   Includes medical, dental and vision plan premiu ms; term life insurance premiu m; tax preparation expense reimbursement; interest paid
      on member’s capital and income allocation of the operating profits of JMP Group LLC of: Mr. Jolson—$12,304, $2,252, $4,050,
      $121,519 and $2,068,350; Mr. Kilian—$9,817, $2,252, $4,500, $16,106 and $115,058; Mr. Johnson—$12,304, $2,252, $5,000, $73,203
      and $758,672; Mr. Leh mann—$12,304, $2,252, $5,000, $128,651 and $476,775; and Mr. Mack—$12,304, $2,252, $3,885, $64,433 and
      $978,385.

                                                                           92
Table of Contents

Outstandi ng Equity Awards as of December 31, 2006
    The following table provides information regarding each unexercised stock option held by each of our named executive officers as of
December 31, 2006.


(Dollars as shown)                                                                                  Opti on Awards(1)
                                                                                                                    Opti on
                                                                        Number of Securities Underlying            Exercise                                     Opti on Expiration
                                                                            Unexercised Opti ons                    Price                                              Date
Name                                                                 Exercisable                       Unexercisable

Joseph A. Jolson                                                                 37,000                              111,000           $       10.00                          12/ 21/ 2015
Thomas B. Kilian                                                                  3,700                               11,100           $       10.00                          12/ 21/ 2015
Craig R. Johnson                                                                 23,680                               71,040           $       10.00                          12/ 21/ 2015
Mark L. Leh mann                                                                 14,800                               44,400           $       10.00                          12/ 21/ 2015
Carter D. Mack                                                                   29,600                               88,800           $       10.00                          12/ 21/ 2015

(1)   The options vest over four years with 1/4 of the shares of underlying common stock vesting on each anniversary of the grant d ate of 12/21/2005.


Potential Payments Upon Change of Control
      The following table and summary set forth potential payments payable to our current executive officers upon a change of contr ol. There
are no potential payments to our named executive officers upon termination. The table below reflects amounts payable to o ur executive officers
assuming a change of control occurred on December 31, 2006:


(Dollars in thousands)                                                                                                                                                         Option
                                                                                                                                                                           Acceleration(1)
Name

Joseph A. Jolson                                                                                                                                                       $             9,543
Thomas B. Kilian                                                                                                                                                                       954
Craig R. Johnson                                                                                                                                                                     6,108
Mark L. Leh mann                                                                                                                                                                     3,817
Carter D. Mack                                                                                                                                                                       7,634

(1)   Refl ects compensation expens e related to prior option awards to be recognized in connection with accelerated vesting upon a change of control. The method and assumptions used to
      calculat e the value of the options granted to our named executive officers is discussed in note 11 to our financial statement s included elsewhere in this prospectus.


Compensati on of Directors
      Mr. Sebastian and Mr. Pau l served as non-employee directors during the year ended December 31, 2006. They received no compensation
in connection with their service on the board of directors for the year ended December 31, 2006. M r. Paul has received an aggregate of 25,000
stock options and Mr. Sebastian has received an aggregate of 25,000 stock options from previous option awards.

Empl oyment At Will
     We will not enter into an employ ment agreement with any of our managing directors (including each of our named executive officers).
We believe we benefit more by the emp loyment-at-will approach we have maintained historically with the further protections we have in the
Exchange Agreement described below.

       Our typical employ ment arrangements with managing directors are as follows:
      Base Salary. Upon the completion of this offering, each managing director will be paid an annual base salary of $125,000, payable in
semi-monthly installments. The amount of each managing director’s annual salary is subject to annual review by the co mpensation committee.
In addition, a managing director may be awarded

                                                                                             93
Table of Contents

cash or equity as bonus in an amount determined in the sole discretion of the compensation committee. Institutional sales per sons are
compensated primarily by salaries plus quarterly commissions subject to a holdback.

     Benefits. Each managing director will be entit led to participate in our group health, dental and life insurance plans, 401(k) savin gs plan
and equity incentive plan.

     Termination of Employment. In the event of any termination of emp loyment by either that managing director o r us, the noncompetit ion,
nonsolicitation, liquidated damages, transfer of client relationships and confidentiality provisions contained in the managin g directors’
exchange agreement described below shall survive as described therein.

Managing Directors’ Exchange Agreement
 Persons and Shares Covered
      We are entering into a managing directors ’ exchange agreement with all of our managing directors (includ ing each of our named
executive officers). The shares covered by the managing directors ’ exchange agreement include all shares of our common stock received by a
managing director in exchange for his or her Redeemab le Class A member interests as of the completion of this offering (including through
indirect ownership and ownership through affiliated entities) and shares received by that managing director (directly or indirectly) in exchange
for or in respect of his or her shares of our co mmon stock by reason of stock dividends, stock splits, reverse stock splits, spin-offs, split-ups,
recapitalizations, combinations or exchanges of those shares. This agreement does not include shares of our common stock received upon the
exercise of options granted under our JMP Group 2004 Equ ity Incentive Plan o r any equity award to that managing director unde r the 2007
Equity Incentive Plan described below. The shares of our common stock covered by the managing directors ’ exchange agreement are referred
to as covered shares.

       When a managing director ceases to be our employee for any reason other than death, the managing director will continue to be bound by
all the provisions of the managing directors ’ exchange agreement until the managing director holds (d irectly or indirectly) all covered shares
free fro m the transfer restrict ions described below and thereafter he or she will no longer be bound, in general, by the provisions of the
managing directors’ exchange agreement other than its continuing provisions.

 Transfer Restrictions
      Each managing director will agree, among other things, to:

        •      except as described below, not transfer, and to maintain sole beneficial ownership of, his or her covered shares for a period of
               four years after the comp letion of this offering; provided, however, that each managing director who, in the reasonable judgment
               of our executive co mmittee described below, continues to be actively engaged in our business, or who has resigned his or her
               emp loyment and remains in co mpliance with the managing directors ’ exchange agreement, may transfer up to 25%, 35% and
               40%, respectively, of his or her covered shares following each of the second, third and fourth anniversaries of the completion of
               this offering (which balance shall be adjusted ratably to account for any shares sold in underwritten public offerings during the
               relevant period);
        •      comply with the transfer restrictions relating to the covered shares imposed by the lock-up provisions of the underwrit ing
               agreement with respect to this offering; and
        •      comply with other transfer restrictions relating to our shares of common stock when requested to do so by us and comply with our
               insider trading policies.

Transfers include, among other things, any disposition of the economic risks of ownership of covered shares, including short sales, option
transactions and use of derivative financial instruments or other hedging arrangements with respect to our securities.

                                                                        94
Table of Contents

 Sales Through Underwritten Public Offerings
       Our executive committee may approve one or more underwritten public offerings to sell covered shares during the four year tra nsfer
restrictions period, subject to the restrictions described below. Each managing d irector who, in the reasonable judgment of our executive
committee, continues to be actively engaged in our business or has suffered a termination of emp loyment resulting fro m a d isa bility, or the heir
or estate of any managing director who has died, will be entitled to part icipate in such an underwritten public offering on a pro rata basis with
the covered shares of all other managing directors so participating, or on a lesser basis at his or her request or at the rea sonable discretion of the
underwriter. Approval of an underwritten offering will require the majority approval of the members of the executive co mmittee. Approval o f
an underwritten public offering by the executive co mmittee is subject to the further limitations contained in the managing di rectors’ exchange
agreement. These underwritten public offerings will be subject to any other registration rights that we have granted or may in the future grant.
Covered shares will also be subject to any underwriters ’ lock-up then in effect.

      In addition, subject to the approval of the executive co mmittee, our managing directors will have the right to participate in underwritten
offerings effected by the firm for other purposes, subject to the limitations described above and certain other limitations.

      The executive committee may approve requests by a managing director to transfer covered shares to certain permitted transferees such as
family members or family trusts, provided that these transferees will be subject to the same transfer restrict ions applicable to the managing
directors under the managing directors ’ exchange agreement.

 Sales in Compliance With Rule 144 Under the Securities Act
      Consistent with the transfer restrictions described above, and other than in comp liance with the exceptions described above, managing
directors generally will not be permitted to transfer covered shares during the four year restriction period following the complet ion of this
offering through sales effected in comp liance with Ru le 144 or otherwise. However, upon a termination of a managing director’s employ ment
due to his or her death or disability, such managing director or his or her heirs or estate will b e permitted to sell covered shares in co mpliance
with Rule 144, regardless of when such termination of emp loy ment occurred.

 Compliance with Securities Laws
      In addition to the restrictions above, managing directors will need to comp ly with applicab le securities laws in connection with any
transfer of our co mmon stock and may need to deliver an opinion of counsel in connection with any transfer.

     All t ransfer restrictions applicable to a managing director under the managing directors ’ exchange agreement terminate upon the death of
such managing director or upon a change of control involving us.

 Dividends
    To the extent dividends are paid on covered shares while the managing director remains subject to the transfer restrictions o f the
managing directors’ exchange agreement, the managing director will be entitled to such dividends.

 Voting
      Each managing director will be entitled to fu ll voting rights with respect to his or her covered shares.

                                                                          95
Table of Contents

 Confidentiality
      Each managing director is required to protect and use “confidential information” in accordance with the restrictions placed by us on its
use and disclosure.

 Noncompetition
      Each managing director will agree that during the period ending 12 months after the date the managing director ceases to be employed by
us, he or she may not:

        •      form, or acquire a 5% or g reater ownership, voting or profit participation interest in, a ny co mpetitive enterprise; or
        •      associate with any competit ive enterprise and in connection with such association engage in, or direct ly or indirect ly manage or
               supervise personnel engaged in, any activity (i) wh ich is similar or substantially related to any activity in which that managing
               director was engaged, in whole or in part, at our firm, (ii) for which that managing director had direct or indirect managerial or
               supervisory responsibility at our firm or (iii) wh ich calls for the application of the same or similar specialized knowledge or skills
               as those utilized by that managing director in his or her act ivit ies at our firm.

      When we refer to a “competit ive enterprise,” we are referring to any business enterprise that engages in, or owns a significant interest in
any entity that engages in, financial services such as investment banking, public or private finance, financial advisory serv ices, private
investing, merchant banking, asset or hedge fund management, securities brokerage, sales, lending, custody, clearance, settlement or trading.

 Nonsolicitation
      During the period ending 12 months after the date a managing director ceases to be employed by us, that managing director may not,
directly or indirectly, in any manner:
        •      solicit any client with who m that managing director worked, or whose identity became known to him o r her in connection with
               his or her employ ment with our firm, to transact business with a co mpetitive enterprise or reduce or refrain fro m doing any
               business with our firm;

        •      interfere with or damage any relat ionship between our firm and any client or prospective client; or
        •      solicit any of our emp loyees to apply for, o r accept employ ment with, any competit ive enterprise.

 Transfer of Client Relationships
      Each managing director is required, upon termination of h is or her emp loyment, to take all act ions and do all th ings reasonab ly requested
by us during a 90-day cooperation period to maintain for us the business, goodwill and business relationship s with our clients with which he or
she worked. To ensure the full focus and attention by such managing director during the 90-day period, the executive co mmittee may determine
to continue to pay such managing director his or her salary and require that th ey not accept other employ ment or consulting engagement during
such time.

 Liquidated Damages
      In the case of any breach of the confidentiality, noncompetition, nonsolicitation, transfer of client relationships or other provisions of the
managing directors’ exchange agreement prior to the fourth anniversary of this offering, the breaching managing director will b e liable for
liquidated damages. The liquidated damages obligation of each managing director is secured by the covered shares owned by tha t managing
director (including through indirect ownership and ownership through affiliated entities) at the time of the co mpletion of th is offering.

                                                                           96
Table of Contents

 Compensation
      The managing directors ’ exchange agreement includes a provision in wh ich each managing director acknowledges our intention to
maintain total co mpensation and benefits, including that payable to managing directors, but excluding equity awards made prio r to and in
connection with this offering, will be appro ximately 60% of revenues each year, however we retain the discretion to change this percentage in
the future.

 Term and Amendment
      The managing directors ’ exchange agreement will be in effect for four years fro m the date of the co mplet ion of this offering or until it is
earlier terminated by us. A managing director seeking a waiver fro m, or amend ment to, the managing directors ’ exchange agreement generally
requires our executive co mmittee’s consent.

Pledge Agreements
       Each of our managing directors will enter into a pledge agreement with us that will secure the liquidated damages provisions in the
managing directors’ exchange agreement by a pledge of the covered shares (including through indirect ownership and ownership through
affiliated entities) at the time o f the comp letion of this offering. These pledges of our common stock will terminate on the earliest to occur of:

        •      the death of the relevant managing director; or
        •      proportionately with the lock-up expiration of 25%, 35% and 40%, respectively, on the second, third and fourth anniversaries of
               the date of the completion of this offering.

      The liqu idated damages provisions in the managing directors ’ exchange agreement are in addit ion to the forfeiture o f any future
equity-based awards that may occur as a result of the breach of any provisions contained in those awards. The liquidated damag es and pledge
arrangements do not preclude us fro m seeking any in junctive relief to wh ich we may be entitled for a brea ch of the relevant provisions.

The Initi al Public Offering Awards
       We plan to grant           shares of restricted stock units (none of which will be vested at the time of co mp letion of this offerin g) to
certain of our emp loyees effective upon the completion of this offering. These restricted stock units will vest 25% on the se cond anniversary of
the completion of th is offering; 35% on the third anniversary; and the remaining 40% on the fourth anniversary. Vesting would accelerate on a
change of control or upon the death or permanent disability of the emp loyees. Any unvested awards would be forfeit ed on any other
termination of emp loy ment, including voluntary termination, termination with or without “cause” (as defined in the relevant award agreement)
or retirement.

      The restricted stock units awarded to emp loyees in connection with this offering and in the future will be granted under the 2007 Equity
Incentive Plan described below. Any expense associated with the grants of options prior to, and the initial grant of restrict ed stock units to our
emp loyees under the JMP Group 2004 Equity Incentive Plan or the 2007 Equity Incentive Plan in connection with, this offering will not be
included within the scope of our expectation to maintain a co mpensation expense at a ratio of appro ximately 60% of revenues.

     The restricted stock units will provide that, if a change of control occurs, the outstanding unvested awards shall beco me fu lly vested and
payable. “Change of control” is defined in the same manner as for the 2007 Equity Incentive Plan described below.

                                                                         97
Table of Contents

2007 Equity Incenti ve Plan
       Immediately prior to the comp letion of this offering, we will adopt our 2007 Equ ity Incentive Plan. We expect to reserve 4.0 million
shares of our common stock for issuance under our 2007 Equity Incentive Plan, p lus (i) any shares of our common stock we purchase on the
open market or through any share repurchase or share exchange program init iated by us unless the plan admin istrator determine s otherwise, and
(ii) any shares of our common stock that would otherwise return to the JMP Group 2004 Equity Incentive Plan as a result of fo rfeiture,
termination or expiration of awards previously granted under the 2004 Equity Incentive Plan; provided, however, that such maximu m aggregate
number of shares will be reduced by the number of units subject to awards made pu rsuant to the 2004 Equity Incentive Plan to the extent such
awards exceed an aggregate of 2,960,000 shares. Notwithstanding the foregoing, the maximu m aggregate number o f shares of our common
stock that may be issued pursuant to incentive stock options is 4.0 million shares. The number of shares reserved under our 2007 Equity
Incentive Plan is subject to adjustments for stock splits, stock dividends or other similar changes in our common stock or ou r capital structure.
The number of shares initially reserved for issuance or transfer pursuant to awards under the 2007 Equity Incentive Plan will be increased by
the number of shares represented by awards that are forfeited, cancelled, satisfied by other consideration, or that exp ire or terminate, or are
otherwise not issued, retained, held or obtained again by us, including any shares that are forfeited by the award recipient or rep ur chased by us
pursuant to the terms of the relevant award agreement.

      Our 2007 Equity Incentive Plan will provide for the grant of stock options, restricted stock, restricted stock units, stock a ppreciation
rights and dividend equivalent rights, collectively referred to as “awards.” Stock options granted under the 2007 Equity Incentive Plan may be
either incentive stock options under the provisions of Section 422 o f the Internal Revenue Code, or non-qualified stock options. We may grant
incentive stock options only to employees. Awards other than incentive stock options may b e granted to employees, directors, consultants and
other permitted recip ients.

      We expect to grant restricted stock units to participants in connection with this offering once the 2007 Equity Incentive Pla n is adopted
and approved by our stockholders prior to this offering. An award of restricted stock units consists of contractual rights denominated in shares
of our co mmon stock and represents a right to receive the value of a share of our co mmon stock (or a percentage of such value , which
percentage may be higher than 100%). Restricted stock units underlying such awards are subject to restrictions and such other terms and
conditions as the plan administrator may determine, which restrict ions and such other terms and conditions may, subject to th e vesting schedule
described above, lapse separately or in co mb ination at such time or times, in such installments or otherwise, as the plan admin istrator may
deem appropriate. We do not plan to pay dividends on unvested shares of restricted stock units that we may grant fro m t ime to t ime.

     The board of directors or a co mmittee designated by the board of directors, referred to as the “plan administrator,” will ad minister our
2007 Equity Incentive Plan, including selecting the award recip ients, determining the number of shares to be subject to each award,
determining the exercise or purchase price of each award and determining the vesting and exercise periods of each award.

      The exercise price of all incentive stock options granted under our 2007 Equity Incentive Plan must be at least equal to 100% o f the fair
market value of the co mmon stock on the date of grant. If, however, incentive stock options are granted to an employee who o w ns stock
possessing more than 10% of the voting power of all classes of our stock or the sto ck of any parent or subsidiary of us, the exercise price of any
incentive stock option granted must equal at least 110% of the fair market value on the grant date and the maximu m term of th ese incentive
stock options must not exceed five years. The maximu m term of an incentive stock option granted to any other participant must not exceed ten
years. The plan administrator will determine the term and exercise or purchase price of all other awards granted under our 20 07 Equ ity
Incentive Plan.

       Under the 2007 Equ ity Incentive Plan, incentive stock options may not be sold, pledged, assigned, hypothecated, transferred or disposed
of in any manner other than by will or by the laws of descent or

                                                                        98
Table of Contents

distribution and may be exercised during the lifetime of the part icipant only by the participant. Other awards shall be trans ferable by will or by
the laws of descent or distribution and to the extent provided in the award agreement. The 2007 Equity Incentive Plan permits the designation
of beneficiaries by holders of awards, including incentive stock options.

       In the event a participant in our 2007 Equity Incentive Plan terminates employ ment or is terminated by us “without cause” (as defined in
the option agreement), any options which have become exercisable prior to the time of termination will remain exercisable for t hre e months
fro m the date of termination (unless a shorter or longer period of t ime is determined by the plan administrator). In the e vent a participant in our
2007 Equity Incentive Plan is terminated by us for cause, any options which have become exercisable prior to the time of term ination will
immed iately terminate. If termination was caused by death or disability, any options which h ave become exercisable prior to the time of
termination will remain exercisable for twelve months fro m the date of termination (unless a shorter or longer period of t ime is determined by
the plan administrator).

      With respect to both equity and cash awards under our plans, we expect to avail ourselves of the exempt ion fro m the performan ce -based
compensation provisions of Section 162(m) of the Code for co mpensation awarded under plans approved prior to a co mpany becoming a
reporting company under the Securities Exchange Act of 1934, as amended. Otherwise, under Section 162(m) o f the Code, no d eduction is
allo wed in any of our taxable years for co mpensation in excess of $1 million paid to our “covered employees.”

      Under the current version of Section 162(m) o f the Code, a “covered emp loyee” is a co mpany’s chief executive officer and the four other
most highly co mpensated officers of a co mpany. The Internal Revenue Service, or the IRS, is expected to release guidance shor tly that may
expand the definition of a “covered emp loyee” to be consistent with recent changes under the reporting and disclosure rules of t he Securities
Exchange Act of 1934. The new report ing rules require disclosure for the chief executive officer, the chief financial officer (regardless of
compensation) and the next three highest paid officers. Therefore, once the IRS issues the expected guidance, we will apply s uch guidance to
its covered employees for the purposes of Section 162(m).

      After the time the pre-IPO exemption fro m Sect ion 162(m) of the Code no longer applies to us, the maximu m nu mber of shares of our
common stock with respect to which options and stock appreciation rights may be granted to a participant during a calendar ye ar is 4.0 million
shares. The foregoing limitation will be adjusted proportionately by the plan admin istrator in connection with any change in our capitalization
due to a stock split, stock dividend or similar event affecting our co mmon stock.

       After the time the pre-IPO exemption fro m Sect ion 162(m) of the Code no longer applies to us, for awards of restricted stock and
restricted stock units that are intended to be performance-based compensation under Section 162(m) of the Code, the maximu m number o f
shares subject to such awards that may be granted to a participant during a calendar year is 4.0 million shares. The foregoing limitation will be
adjusted proportionately by the plan administrator in connection with any change in our capitalization due to a stock split, stock dividend or
similar event affect ing our common stock. In order for restricted stock and restricted stock units to qualify as performance -based compensation,
the plan administrator must establish a performance goal with respect to such award in writing not later than 90 days after t he commencement
of the services to which it relates and while the outcome is substantially uncertain. In addit ion, the performance goal must be stated in terms of
an objective formula or standard.

      While not bound to such metrics due to the pre-IPO exemption fro m Section 162(m) of the Code, our 2007 Equity Incentive Plan includes
the following performance criteria that may be considered by the plan administrator when granting performance -based awards: (i) increase in
share price, (ii) earnings per share, (iii) total stockholder return, (iv) operating margin, (v) gross margin, (vi) return on equity, (vii) return on
assets, (viii) return on investment, (ix) operat ing inco me, (x) net operating inco me, (xi) pre-tax profit, (xii) cash flow, (xiii) revenue,
(xiv) expenses, (xv) earnings before interest, taxes and depreciation, (xv i) economic value added, (xv ii) market share, (xviii) co rporate
overhead costs, (xix) liquid ity management, (xx) net interest income,

                                                                          99
Table of Contents

(xxi) net interest income margin, (xxii) return on capital invested, (xxiii) stockholders’ equity, (xxiv ) inco me (before inco me tax expense),
(xxv ) residual earnings after reduction for certain co mpensation expenses, (xxv i) net income, (xxvii) profitability of an identifiable business
unit or product, and (xxv iii) our perfo rmance relative to a peer group of co mpanies on any of the foregoing measures or other measures as set
forth in (i) to (xxv iii) above with regard to a line of business, services or products, including but not limited to corporate finance underwrit ing
or advisory activities, institutional sales and research products and services, and private or public investment funds, partn erships or accounts. In
addition, the plan administrator will have the authority to make appropriate adjustments in performance goal(s) to reflect the impact of
extraordinary items not reflected in such goals. For purposes of the Bonus Plan as described below, extraord inary items are d efined as (1) any
profit or loss attributable to acquisitions or dispositions of stock or assets, (2) any changes in accounting standards or treatments that may be
required or permitted by the Financial Accounting Standards Board or adopted by us after the goal is established, (3) all items o f gain, loss or
expense for the year related to restructuring charges for us, (4) all items of gain, loss or expense related to the disposal of a segment of a
business, (5) all items of gain, loss or expense for the year related to discontinued operations that do not qualify as a segment of a business as
defined in APB Opin ion No. 30 (o r successor literature), (6) adjustments to compensation expense as disclosed and described in our public
filings to exclude co mpensation expense attributable to equity-based awards granted prior to or in connection with this offering, and (7) such
other items as may be prescribed by Section 162(m) of the Code and the Treasury Regulations thereunder as may be in effect from t ime to t ime.

      In the event of a corporate transaction or a change of control, all outstanding awards under the 2007 Equity Incentive Plan will vest. In
the event of a corporate transaction or change of control, all of these awards become fully vested immediately prior to the c onsummat ion of the
corporate transaction or change of control. Under our 2007 Equity Incentive Plan, a corporate transaction is generally define d as:

        •      acquisition of 50% or more of our stock by any individual or entity including by tender offer or a reverse merger;
        •      a sale, transfer or other disposition of all or substantially all of the assets of our firm;
        •      a merger or consolidation in wh ich our firm is not the surviving entity; or

        •      a comp lete liquidation or dissolution of our firm.

      Under our 2007 Equity Incentive Plan, a change of control is generally defined as:
        •      acquisition of 50% or more of our stock by any individual or entity which a majo rity of our board of directors (who have serv ed
               on our board for at least 12 months) do not recommend our stockholders accept, or
        •      a pro xy contest or acquisition of our stock that results in the replacement of two -th irds of our board of directors over a period of
               24 months or less unless approved by a majority of incu mbent directors prior to commencement of the pro xy solicitat ion or
               closing of the acquisition.

       Unless terminated sooner, our 2007 Equ ity Incentive Plan will auto matically terminate in 2017. Our board of d irectors will ha v e authority
to amend or terminate our 2007 Equity Incentive Plan. To the extent necessary to comply with applicable provisions of federal securities laws,
state corporate and securities laws, the Internal Revenue Code, the ru les of any applicable stock exchange or national market system, and the
rules of any non-U.S. jurisdiction applicable to awards granted to residents therein, we shall obtain stockholder approval of any such
amend ment to the 2007 Equity Incentive Plan in such a manner and to such a degree as required.

JMP Group 2007 Senior Executi ve B onus Plan
      On                , 2007, our board of directors adopted, subject to the approval of our stockholders, the JMP Group 2007 Senior Executive
Bonus Plan (the “Bonus Plan”), for its key emp loyees. The Bonus Plan is ad min istered by a committee of our board of directors, wh ich
includes at least two independent members. We

                                                                            100
Table of Contents

expect to avail ourselves of the exemption fro m the performance-based compensation provisions of Section 162(m) of the Code for
compensation awarded under plans approved prior to a company becoming a reporting co mpany under the Securities Exchange Act o f 1934, as
amended.

       For each fiscal year beginning at the time we can no longer utilize the exempt ion, we expect that our compensation committee will, no
later than the 90th day of the year, establish performance goals for that year, the results of wh ich are substantially uncertain at t he time that they
are established and select our officers who will part icipate in the Bonus Plan.

      The performance goals upon which the payment or vesting of any cash award that is intended to so qualify depends may relate t o one or
more of the fo llo wing performance measures: (a) increase in share price, (b) earn ings per share, (c) total stockholder return, (d ) operating
margin, (e) gross margin, (f) return on equity, (g) return on assets, (h) return on investment, (i) operating inco me, (j) net operating income,
(k) pre-tax income, (l) cash flow, (m) revenue, (n) expenses, (o) earnings before interest, taxes and depreciation, (p) economic v alue added,
(q) market share, (r) corporate overhead costs, (s) liquidity management, (t) net interest income, (u) net interest income marg in, (v) return on
capital invested, (w) stockholders’ equity, (x) income (before inco me tax expense), (y) residual earn ings after reduction for cert ain
compensation expenses, (z) net income, (aa) profitability of an identifiable business unit or product, and (bb) our performance relative to a peer
group of companies on any of the foregoing measures or other measures as set forth in (a) to (bb) above with regard to a line of business,
services or products, including, but not limited to, corporate finance underwriting or advisory activit ies, institutional sales and research
products and services, and private or public investment funds, partnerships or accounts. In addition, the co mmittee will have the authority to
make appropriate ad justments in performance goal(s) to reflect the impact of ext raordinary items not reflected in such goals. For purposes of
the Bonus Plan, extraord inary items are defined as (1) any profit or loss attributable to acquisitions or dispositions of stock or assets, (2) any
changes in accounting standards or treatments that may be required or permitted by the Financial Accounting Standards Board o r the SEC, or
adopted by us after the goal is established, (3) all items of gain, loss or expense for the year related to restructuring charges for us, (4) all items
of gain, loss or expense related to the disposal of a segment of a business, (5) all items of gain, loss or expense for the year related to
discontinued operations that do not qualify as a segment of a business as defined in APB Opin ion No. 30 (or successor literature), (6)
adjustments to compensation expense as disclosed and described in our public filings to exclude compensation expense attribut able to
equity-based awards granted prior to or in connection with this offering, and (7) such other items as may be prescribed by Section 162(m) of
the Code and the Treasury Regulations thereunder as may be in effect fro m time to time. Awards will be paid in cash, but our compensation
committee has the discretion to pay awards in the form of stock bonuses (whether restricted or unrestricted) under our 2007 Eq uity Incentiv e
Plan.

      At the time that the performance goals for the fiscal year are established, our compensation committee will also establish an objective
formula for determin ing bonuses based on a specified percentage of annual base salary or an amount determined by the compensa tion
committee. This fo rmula will be based on the attainment, in whole or in part, of the performance goals for that year. The maxi mu m bonus
payable to any participant for any fiscal year shall not exceed $20 million. The formu la established for any fiscal year must preclude any
discretion by the committee to increase the amount of the bonus under the Bonus Plan. After t he end of each fiscal year, our co mpensation
committee must certify in writing whether the performance goals for that fiscal year have been attained, in whole or in part, and the bonus
payable to each participant for that fiscal year, if any, will be deter mined in accordance with that certification. In the event a participant
terminates emp loyment with us during any fiscal year for any reason, that participant may receive a reduced bonus under the p lan for that year,
as determined by the compensation committee. In the event a participant dies prior to a payment under the Bonus Plan, the bonus will be paid
to the participant’s beneficiary in full.

                                                                          101
Table of Contents

Profit Interest Plan
       In the future, we may grant profit interests in JMP Group LLC or its subsidiaries under a profit interest plan to certain of our managing
directors to align the interests of these senior officers with the interest of our stockholders. Any allocations and d istributions of JMP Group
LLC or its subsidiaries profits to managing directors under the profit interest plan will be included in the aggregate compen sation to revenues
calculation, which will be appro ximately 60% following this offering, excluding non -cash compensation expenses relating to awards made
prior to and in connection with this offering. We retain the right to change the terms and conditions of these grants or this percentage
calculation at any time.

                                                                       102
Table of Contents

                                                       PRINCIPAL AND S ELLING STOCKHOLDERS

       The following table shows as of the date of this prospectus information regarding the beneficial ownership of our co mmon stock:

         •      as of March 15, 2007, assuming the co mpletion of our corporate reorganization;
         •      as adjusted to reflect the sale of shares of our common stock if the option of the underwriters to purchase additional shares from
                us and the selling stockholders is not exercised; and
         •      as adjusted to reflect the sale of the shares of our common stock if the option of the underwriters to purchase additional shares is
                exercised in full by:

                -        each of the directors and named executive officers individually;
                -        all directors and executive officers as a group;
                -        each person who is known to us to be the beneficial owner of mo re than 5% of our co mmon stock; and

                -        each of our selling stockholders.

       In accordance with the rules of the SEC, “beneficial ownership” includes voting or investment power with respect to securities. The
percentage of beneficial o wnership for the fo llo wing table is based on 14,800,039 shares of common stock that were outstanding as of
March 15, 2007, after g iving effect to the corporate reorganization. The informat ion in this table does no t reflect the            shares of
restricted stock units that we intend to grant to our emp loyees in connection with this offering. Unless otherwise indicated, the address for each
person listed below is: c/o JMP Group, 600 Montgomery St., Suite 1100, San Francisco, Californ ia 94111. To our knowledge, except as
indicated in the footnotes to this table, the persons named in the table have sole voting and investment power with respect t o all shares of
common stock beneficially owned by them.



                                                                               Shares to be   Shares to be
                                                                               Sold in This   Sold in This
                                                                                Offering        Offering
                                                                                Assuming       Assuming
                                                                               No Exercise    Full Exercise    Shares Beneficially     Shares Beneficially
                                                     Shares Beneficially         of Over-       of Over-        Owned After This        Owne d Afte r This
                                                     Owned Before This          Allotment      Allotment        Offering Without         Offe ring With
                                                         Offering                 Option         Option        Exercise of Option      Exe rcise of Option
Name of Beneficial Owner                             Number      Percent                                      Number        Percent   Numbe r       Pe rcent

Directors and Executive Officers:                                                                                                                              %
  Joseph A. Jolson (1)                               2,521,209       17.0 %
  Peter T. Paul (2)                                    319,097        2.2 %
  Edward J. Sebastian (3)                              276,605        1.9 %
  Craig R. Johnson (4)                                 830,462        5.6 %
  Mark L. Lehmann (5)                                  527,194        3.6 %
  Carter D. Mack (6)                                 1,016,410        6.9 %
  Thomas B. Kilian (7)                                 167,003        1.1 %
  All Directors and Executive Officers as a group
     (7 persons)                                     5,657,980       37.8 %
5% Shareholders:
  Stephanie L. Tuttle, T rustee, T uttle Trust (8)   1,016,410         6.9 %


                                                                                   103
Table of Contents

(1)   Includes (a) 20,245 shares of common stock held by the Jolson 2004 Trust FBO Samantha Rohan Jolson for the benefit of Mr. Jolson’s
      daughter, (b) 30,367 shares of common stock held by the Jolson 2005 Trust FBO Jolson Children for the benefit of Mr. Jolson’s children,
      (c) 200,000 shares of common stock held by the Joseph A. Jolson 1991 Trust, of wh ich Mr. Jolson is the trustee and (d) 37,000 shares of
      common stock underlying vested options. Mr. Jo lson disclaims beneficial ownership fo r the trusts identified in (a) and (b) above.

(2)   Includes (a) 259,202 shares of common stock held by the Peter T. Paul Living Trust, (b) 34,895 shares of common stock held by the
      2006 Pau l Partnership, LP, and (c) 25,000 shares of co mmon stock underlying vested options.
(3)   Includes 25,000 shares of common stock underlying vested options.
(4)   Includes (a) 30,000 shares of common stock held by the Johnson Revocable Trust, UAD 7/ 2/97 and (b) 23,680 shares of common stock
      underlying vested options.

(5)   Includes 14,800 shares of common stock underlying vested options.
(6)   Includes (a) 986,810 shares of common stock held by the Mack Trust, and (b) 29,600 shares of common stock underlying vested options.
(7)   Includes 3,700 shares of common stock underlying vested options.

(8)   Includes 29,600 shares of common stock underlying vested options.

                                                                     104
Table of Contents

                                     CERTAIN RELATIONS HIPS AND RELAT ED TRANS ACTIONS

      The following are descriptions of the material provisions of the agreements and other documents dis cussed below. You should refer to the
exhibits that are a part of the reg istration statement of which this prospectus is a part for a copy of each agreement and do cument. See “Where
You Can Find More Informat ion.”

Reorganization Transactions and Corporate Structure
      Prior to this offering, we conducted our business through a limited liab ility co mpany, JMP Group LLC. Members in JMP Group LL C
included all emp loyee members, or managing directors holding Redeemable Class A member interests, and non-emp loyee members holding
Class A common interests and Class B co mmon interests of JMP Group LLC membership interests. Prior to the complet ion of this offering, we
will co mplete the fo llo wing transactions to arrange for JMP Group Inc. to succeed to the business of JMP Group LLC and to have the members
of JMP Group LLC beco me stockholders of JMP Group Inc.

      In connection with this offering and pursuant to our corporate reorganization, we will effect an exchange of all of the outst anding
membership interests of JMP Group LLC for shares of common stock of JM P Holdings Inc., subject to the execution by the holders of required
documentation. We will exchange 2,300,000 outstanding units of Class B co mmon interests at a one -for-one exchange ratio into shares of our
common stock. Class A common interests and Redeemable Class A member interests will be exchanged into 12,500,039 shares of our co mmon
stock by applying a one-for-one exchange ratio to their respective imp lied nu mber of membership units. The imp lied nu mber of membership
units for Class A common interests and Redeemab le Class A member interests is determined by calculat ing their respective memb ership
percentages in JMP Group LLC relative to the membership percentage represented by the Class B common interests. In addition, 2,674,940
outstanding options to purchase Class B co mmon interests of JMP Group LLC will be exchanged at a one-for-one exchange ratio for options to
purchase shares of common stock of JMP Ho ldings Inc. with the same terms and conditions as under the pre -existing options agreements. JMP
Holdings Inc. is a Delaware corporation formed in connection with our August 2004 Rule 144A private offering, and is a member of JMP
Group LLC. JM P Holdings Inc. will change its name to JM P Group Inc. prior to the co mpletion of the exchange.

      After the exchange, all members of JMP Group LLC will beco me our stockholders with:

        •      members holding Redeemable Class A member interests, representing 11,065,306 shares of our common stock or 74.8% of the
               total shares of common stock outstanding immediately prior to the complet ion of this offering (these shares will be subject t o
               transfer restrictions described in “Execut ive Co mpensation—Managing Directors’ Exchange Agreement”);
        •      members holding Class A common interests representing 1,434,733 shares of our co mmon stock or 9.7% of the total shares of
               common stock outstanding immed iately prior to the co mpletion of th is offering; and
        •      members holding Class B co mmon interests representing 2,300,000 shares of our common stock or 15.5% of the total shares of
               common stock outstanding immed iately prior to the co mpletion of this offering.

      Vesting of 1,269,940 unvested options granted in December 2005 and July 2006 will not accelerate upon complet ion of this offering, and
vesting of 1,405,000 unvested options granted in December 2006 will accelerate upon comp letion of this offering.

      This exchange will be effected subject to the condition that we receive an opin ion of counsel that such exchange will be treated for U.S.
federal inco me tax purposes as part of a tax-free exchange in accordance with Section 351 of the Internal Revenue Code. For th e exchange to
proceed on a tax-free basis, the value of the interests in JMP Group LLC held by us may not exceed 20% of JM P Group LLC’s total value at
the time of the exchange.

     As a result of the exchange, and assuming all ho lders participate in the exchange, JMP Group LLC will beco me our wholly -o wned
subsidiary and will be disregarded for tax purposes. JMP Group LLC will be

                                                                       105
Table of Contents

consolidated with our financial statements and, accordingly, JMP Holdings Inc. will succeed to all of the assets and liabilit ies held by JMP
Group LLC.

      Co mplet ion of the transactions described above and contemplated in the corporat e reorganizat ion is a condition to the complet ion of this
offering. In addition, we have agreed to indemnify our members, d irectors, officers and their representatives with respect to any action, existing
or occurring at or prior to the closing of this offering which may be brought against them and which arises out of or pertains to our plan of
reorganizat ion, the exchange agreement, the limited liab ility co mpany agreement of JMP Group LLC or our corporate reorganizat ion
transactions, subject to applicable limitations.

Director and Officer Indemnification
     We will enter into agreements that provide indemnificat ion to our directors, officers and other persons requested or authorized by our
board of directors to take actions on behalf of us for all losses, damages, costs and expenses incurred by the indemnified person arising out of
such person’s service in such capacity, subject to the limitations imposed by Delaware law. This agreement is in addit ion to our
indemn ification obligations under our bylaws as described under “Description of Capital Stock—Limitation of Liab ility and In demnificat ion
Matters.”

Tax Indemnification Agreement and Related Matters
      Since our operating entity, JMP Group LLC, has operated in limited liability co mpany form p rior to this offering, its members , rather than
us, generally will be liable for ad justments to taxes (including U.S. federal and state income taxes) attributable to its operations prior to this
offering. In connection with this offering, we will enter into a tax indemnification agreement to indemnify the members of JM P Group LLC
against certain increases in taxes that relate to activities of JMP Group LLC and its aff iliates prior to this offering. We do not intend to agree to
indemn ify any member for any tax matters identified by us which would require the recording of a loss contingency upon the co mplet ion of
this offering.

     The tax indemnification agreement will include provisions that permit us to control any tax proceeding or contest which might result in
being required to make a pay ment under the tax indemnification agreement.

Relati onshi ps with Our Directors and Executi ve Officers
      Through JMP Asset Management, we manage a number o f hedge funds and other investment vehicles. Certain of our officers, emp loyees
and related persons have invested in these funds. Such investors may, and often do, invest on terms and conditions more favor able than the
other investors in these funds.

      The portfolio managers of our funds do not pay the management fees and incentive fees attributable to any of their personal investments
in the funds that they manage that ordinarily would have been charged to an outside investor. Because our ch ief executive officer is the
portfolio manager of one of our funds during the year ended December 31, 2006, he did not pay $775,727 in fees wh ich he other wise would
have been charged had he been an outside investor in the fund during that period.

Policies and Procedures for Related Party Transactions
       Prior to the comp letion of this offering, we will adopt a code of business conduct and ethics, or Code of Conduct, pursuant t o which our
executive officers, directors, and principal stockholders, including their immediate family members and affiliates, will not be permitted to ente r
into a related party transaction with us without the prior consent of our audit committee, or other independent committee of our board of
directors in the case where it is inappropriate fo r our audit co mmittee to review such transaction due to a conflict of interest. Any request for us
to enter into a transaction with an executive officer, director, principal stockholder, or any of such persons’ immediate family members or
affiliates, in which the amount involved exceeds $120,000 must first be

                                                                         106
Table of Contents

presented to our audit committee for rev iew, consideration and approval. All of our directors, executive officers and employe es will be required
to report to our audit committee any such related party transaction. In approving or rejecting the proposed agreement, our audit committee shall
consider the relevant facts and circu mstances available and deemed relevant to the audit committee, including, but not limite d t o the risks, costs
and benefits to us, the terms of the transaction, the availability of other sources for co mparable services or products, and, if applicable, the
impact on a director’s independence. Our audit co mmittee shall approve only those agreements that, in light of known circumstances, are in, or
are not inconsistent with, our best interes ts, as our audit committee determines in the good faith exercise of its discretion. All of the transactions
described above were entered into prior to the adoption of our Code of Conduct and were approved by our board of directors.

                                                                         107
Table of Contents

                                                     DESCRIPTION OF CAPITAL STOCK

General Matters
     The following description of our common stock and preferred stock and the relevant provisions of our certificate of incorporation and
bylaws are summaries thereof and are qualified in their entirety by reference to our cert ificate of incorporation and bylaws, copies of which
have been filed with the SEC as exh ibits to our registration statement, of which this prospectus forms a part, and applicable law.

      Our authorized capital stock consists of 100,000,000 shares of common stock, par value $0.001 per share, and 10,000,000 shares of
preferred stock, par value $0.001 per share.

Common Stock
      Immediately fo llo wing the co mpletion of this offering, there will be          shares of common stock outstanding, assuming no exercise
of the underwriters’ option to purchase additional shares.

       The holders of common stock are entit led to one vote per share on all matters to be voted upon by the stockholders and do not have
cumulat ive voting rights. Subject to preferences that may be applicable to any outstanding preferred stock, the holders of co mmon stock are
entitled to receive ratably such dividends, if any, as may be declared fro m t ime to t ime by the board of directors out of fun ds legally available
therefor. See “Dividend Policy.” In the event of our liquidation, d issolution or winding up, th e holders of common stock are entitled to share
ratably in all assets remaining after pay ment of liabilit ies, subject to prior distribution rights of preferred stock, if any , then outstanding. The
common stock has no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions
applicable to the common stock. All outstanding shares of common stock are fully paid and non -assessable, and the shares of common stock to
be issued upon completion of th is offering will be fully paid and non-assessable. Immediately p rior to the complet ion of this offering, but after
giving effect to the reorganization transactions that are described under “Certain Relationships and Related Transactions —Reorganization
Transactions and Corporate Structure,” there will be appro ximately 138 holders of record o f our co mmon stock.

Preferred Stock
      The board of directors has the authority to issue preferred stock in one or more classes or series and to fix the designation s, powers,
preferences and rights, and the qualificat ions, limitations or restrict ions thereof including dividend rights, dividend rates, convers ion rights,
voting rights, terms of redemption, redemption prices, liquidation preferences and the number of shares constituting an y class or series, without
further vote or action by the stockholders. The issuance of preferred stock may have the effect of delay ing, deferring or pre venting a change of
control of us without further action by the stockholders and may adversely affect th e voting and other rights of the holders of common stock. At
present, we have no plans to issue any preferred stock.

Registration Rights
      The holders of 2,300,000 shares of our common stock are entit led to rights with respect to the registration of their sh ares under the
Securities Act obtained in connection with our Ru le 144A private offering consummated in August 2004. The registration rights under these
agreements will generally exp ire when an individual holder ’s shares subject to an agreement are d isposed of pursuant to effective registration
statements or become elig ible for sale under Rule 144(k) under the Securities Act, wh ichever is earlier.

                                                                          108
Table of Contents

 Piggyback Registration Rights
      If we register any securities for public sale solely for cash and excluding in an in itial public offering, the stockholders with pigg yback
registration rights under or our registration rights agreement have the right to include their shares in the registra tion, subject to specified
exceptions. The underwriters of any underwritten offering have the right to limit the nu mber of shares registered by these st ockholders due to
market ing reasons. We will pay expenses, except for underwriters ’ discounts and commissions, incurred in connection with these piggyback
registration rights.

 Registration on Form S-3
       In addition, the stockholders with registration rights under our registration rights agreement have the right to require us t o effect
registrations on Form S-3 or an equivalent short-form of registration statement. Any such stockholder may exercise this short -form reg istration
right following the time we first qualify for the use of this form of registration with the SEC, provided that shares of common stock proposed to
be registered on such form have an aggregate market value of at least $5.0 million. We will pay expenses, except for underwrit ers ’ discounts
and commissions, incurred in connection with these registration rights.

JMP Group LLC Limi ted Liability Agreement
 Membership Interests
      Upon the completion of the corporate reorganization, JMP Group Inc. will beco me the sole member of JM P Group LLC, o wnin g all of
the outstanding member interests in JMP Group LLC. Accordingly, a single member limited liab ility c o mpany agreement, or operating
agreement, will be adopted prior to the comp letion of this offering to reflect our sole ownership of JMP Group LLC.

 Purpose
     Under the operating agreement, JM P Group LLC is permitted to engage in any lawful act or activity for wh ich limited liab ility companies
may be organized under Delaware law.

 Powers of Member
      The operating agreement provides that our board of directors will be the manager of JMP Group LLC. Under the operating agreement,
and except as prohibited by Delaware law, our board of directors will have the power to act on behalf of JMP Group LLC and to contractually
bind it. Each of our board of directors and our chief legal officer is granted the authority to execute, deliver and file any documents required for
JMP Group LLC’s qualification to do business in a jurisdiction in wh ich JMP Group LLC may wish to conduct business.

 Duties of Officers and Manager
     Our board of d irectors has the full, exclusive and comp lete discretion to manage and control the business and affairs of JMP Group LLC,
to make all decisions affecting its business and affairs and to take all such actions as it deems necessary or appropriate to accomp lish the
purposes of JMP Group LLC.

      Our board of d irectors will also have the power to appoint and remove the officers of JM P Group LLC. The authority and function of the
officers shall be identical to the authority and functions of officers of a corporat ion organized under the Delaware General Co rporation Law,
except as expressly modified by the terms of the operating agreement.

 Admission of Additional Members
      Admission of additional members requires the consent of our board of directors.

                                                                        109
Table of Contents

 Limited Liability
       The Delaware Limited Liability Co mpany Act, or Delaware LLC Act, provides that a member who receives a distribution fro m a
Delaware limited liability company and knew at the time of the distribution that the distribution was in violat ion of the Delaware LLC Act shall
be liab le to the company for the amount of the distribution for three years. Under the Delaware LLC Act, a limited liability company may not
make a d istribution to a member if, after the distribution, all liabilities of the company, other than liab ilit ies to members on account of their
shares and liabilit ies for which the recourse of creditors is limited to specific property of the company, would exceed the fair value of the assets
of the company. For the purpose of determining the fair value of the assets of a company, the Delaware LLC Act provides that the fair value of
property subject to liability for which recourse of cred itors is limited shall be included in the assets of the company only to the extent that the
fair value of that property exceeds the nonrecourse liability. Under the Delaware LLC Act, an assignee who becomes a substituted member of a
company is liable for the obligations of his assignor to make contributions to the company, except the assignee is not obliga ted for liab ilities
unknown to him at the time the assignee became a member and that could not be ascertained from the operating agreement.

 Limitations on Liability and Indemnification of Member, Manager and Officers
       Pursuant to the operating agreement, JMP Group LLC agreed to indemnify us, our board of directors, or any of our affiliates, officers,
directors, partners or emp loyees or any of their respective affiliates, and any officer, emp loyee or expressly authorized age nt of JMP Group
LLC or its affiliates to the fullest e xtent permitted by law, against all expenses and liab ilities arising fro m the performance of any of our and
their obligations or duties in good faith (except by reason of gross negligence or willful misconduct) in connection with our and their service to
JMP Group LLC reasonably believed to be within the scope of authority conferred upon us or such person by the operating agreement. To the
fullest extent permitted by applicable law, our board of directors (irrespective of the capacity in wh ich it acts) shall be entit led to
indemn ification fro m JM P Group LLC for any loss, damage, or claim incurred by member by reason of any act or omission performed or
omitted by us in good faith on behalf of JM P Group LLC.

 Amendment of Operating Agreement
      The operating agreement can only be amended or modified by written consent of our board of directors.

 Merger or Consolidation
    JMP Group LLC is prohib ited, without our prior approval, fro m merg ing with, or consolidating into, another Delaware limited l iability
company or other entity.

 Termination and Dissolution
      JMP Group LLC will continue as a limited liab ility co mpany until terminated under the operating agreement. JMP Group LLC will
dissolve upon the first to occur of the following: (a) written consent or (b) the entry of a decree of judicial dissolution under Section 18-802 of
the Delaware LLC Act. If at any time there is no member of JMP Group LLC, JMP Group LLC will not dissolve but the personal
representative of the member shall agree in writ ing to continue JMP Group LLC and to the admission of the personal representative of the
member or its nominee or designee to JMP Group LLC as a member.

 Books and Reports
      Unless otherwise required by a mandatory provision of law, neither we, JMP Group LLC, or our board of d irectors shall have an y
obligation to maintain any books or records of JMP Group LLC.

                                                                        110
Table of Contents

Section 203 of the Del aware General Corporation Law
     Following comp letion of this offering, we will be subject to the “business combination” provisions of Section 203 of the Delaware
General Co rporation Law. In general, such provisions prohibit a publicly held Delaware corporat ion fro m engaging in various “business
combination” transactions with any interested stockholder for a period of three years after the date of the transaction in which t he person
became an interested stockholder, unless

        •      the transaction is approved by the board of directors prior to the date the interested stockholder obtained such status;
        •      upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the stockholder
               owned at least 85% o f the voting stock of the corporation outstanding at the time the transaction commenced; or
        •      on or subsequent to such date, the business combination is approved by the board of directors and authorized at an annual or
               special meeting of stockholders by the affirmat ive vote of at least 66 / 3 % of the outstanding voting stock which is not owned
                                                                                      2


               by the interested stockholder.

       A “business combination” is defined to include mergers, asset sales and other transactions resulting in financial benefit to a stockholder.
In general, an “interested stockholder” is a person who, together with affiliates and associates, owns (or within three years, d id own) 15% or
more of a corporat ion’s voting stock. The statute could prohibit or delay mergers or other takeover or change of control attempts with respect to
us and, accordingly, may discourage attempts to acquire us even though such a transaction may offer our stockholders the opportunity to sell
their stock at a price above the prevailing market price.

Certain Anti-Takeover Matters
      Our charter and bylaws include a nu mber of provisions that may have the effect of encouraging persons considering unsolicited tender
offers or other unilateral takeover proposals to negotiate with our board of d irectors rather than pursue non -negotiated takeover attempts. These
provisions include:

 Advance Notice Requirements
      Our bylaws establish advance notice procedures with regard to stockholder proposals relating to the nomination of candidates for election
as directors or new business to be brought before meet ings of our stockholders. These procedures provide that notice of such stockholder
proposals must be timely and given in writ ing to our Secretary prior to the meeting at wh ich the action is to be taken. Gener ally , to be timely,
notice must be received at our principal executive offices not less than 90 days or more than 120 days prior to the anniversary date of the
annual meet ing for the preceding year. The notice must contain certain in formation specified in the bylaws.

 No Written Consent of Stockholders
      Our charter requires all stockholder actions to be taken by a vote of the stockholders at an annual or special meeting, and does not permit
our stockholders to act by written consent without a meeting.

 Preferred Stock
       Our charter p rovides for 10,000,000 authorized shares of preferred stock. The existence of authorized but unissued shares of preferred
stock may enable the board of directors to render more difficult or to discourage an attempt to obtain control of us by means of a merger, tender
offer, pro xy contest or otherwise. For example, if in the due exercise of its fiduciary obligations, the board of directors were to determine that a
takeover proposal is not in our best interests, the board of directors could cause shares of preferred stock to be issued without

                                                                         111
Table of Contents

stockholder approval in one or mo re private offerings or other transactions that might dilute the voting or other rights of t he proposed acquiror
or insurgent stockholder or stockholder group. In this regard, the charter grants our board of directors broad power to establish the rights and
preferences of authorized and unissued shares of preferred stock. The issuance of shares of preferred stock could decrease th e amount of
earnings and assets available fo r distribution to holders of shares of common stock. The issuance may also adversely affect the rights and
powers, including voting rights, of such holders and may have the effect of delaying, deterring or preventing a change of con trol of us.

Li mitation of Li ability and Indemnification Matters
      Our cert ificate of incorporation provides that a director of ours will not be liable to us or our stockholders for monetary damages for
breach of fiduciary duty as a director, except in certain cases where liability is mandated by the Delaware General Corporation Law. Our
bylaws also provide for indemn ification, to the fullest extent permitted by law, by us of any person made or threatened to be made a party to, or
who is involved in, any threatened, pending or comp leted action, suit or proceeding, whether civ il, criminal, ad ministrative or investigative, by
reason of the fact that such person is or was our director or officer, or at our request, serves or served as a director or o fficer of any other
enterprise, against all expenses, liab ilities, losses and claims actually incurred or suffered by such person in connection with the action, suit or
proceeding. Our bylaws also provide that, to the extent authorized fro m time to time by our board of directors, we may provid e indemn ification
to any one or more emp loyees and other agents of ours to the extent and effect determined by the board of directors to be appropriate and
authorized by the Delaware General Corporation Law. Our bylaws also permit us to purchase and maintain insurance for the fo re going and we
expect to maintain such insurance.

Listing
      We will apply to have our common stock listed on the New Yo rk Stock Exchange under the symbol “JMP.”

Transfer Agent and Registrar
      The transfer agent and registrar for our co mmon stock will be A merican Stock Transfer & Trust Co mpany.

                                                                        112
Table of Contents

                                                   SHARES ELIGIB LE FOR FUT URE S ALE

       Prior to this offering, there has been no public market for our co mmon stock. Future sales of substantial amounts of common s tock in the
public market, or the perception that such sales may occur, could adversely affect the prevailing market price of the c o mmon stock.
Furthermore, because only a limited number o f shares will be availab le fo r sale shortly after this offering due to existing c ontractual and legal
restrictions on resale as described below, there may be sales of substantial amounts of our commo n stock in the public market after the
restrictions lapse. This could adversely affect the prevailing market price and our ability to raise equity capital in the fu ture. Upon completion
of this offering, there will be          shares of common stock outstanding, including shares of common stock underlying the restricted stock
units granted in connection with this offering. Of these shares,            shares of common stock sold in this offering will be freely transferable
without restriction or fu rther registration under the Securit ies Act of 1933.

      Of the remain ing shares of common stock outstanding              shares will be held by our managing directors, which will be transferable
beginning two years after the date of the completion of this offering, unless we effect an underwritten public offering to sell these shares as
described in “Executive Co mpensation—Managing Directors’ Exchange Agreements.” Each managing director may transfer 25%, 35% and
40% of h is or her covered shares, respectively, as of the second, third and fourth anniversaries of the completion of this offering. Furthermore,
upon a termination of a managing director’s emp loy ment due to his or her death or disability, such managing director or h is or her heirs or
estate will be permitted to sell covered shares in compliance with Ru le 144, regard less of when such termination of emp loymen t occurred. All
shares held by our managing directors will also be subject to the underwriters ’ lock-up described in “Underwrit ing.” Shares of common stock
underlying the restricted stock units expected to be granted in connection with this offering, generally shall vest 25%, 35% and 40%,
respectively, on the second, third and fourth anniversaries of the complet ion of this offering, although vesting will acc elerate in the event of a
change of control, as described in “Executive Co mpensation—The Initial Public Offering Awards.”

      The shares of common stock received by the persons who were members of JMP Group LLC (other than shares sold by the selling
stockholders in this offering) will constitute “restricted securities” for purposes of the Securities Act of 1933. As a result, absent registration
under the Securities Act of 1933 or co mpliance with Rule 144 thereunder or an exemption fro m registration, these shares of common stock will
not be freely transferable to the public.

      In general, under Rule 144 as currently in effect, a person (or persons whose shares are aggregated), including an affiliate, who
beneficially o wns “restricted securities” may not sell those securities until they have been beneficially o wned for at least one year. Thereafter,
the person would be entitled to sell within any three-month period a nu mber of shares that does not exceed the greater of:

        •      1% of the number of shares of common stock then outstanding (which will equal appro ximately shares immed iately after this
               offering); or
        •      the average weekly trad ing volu me of the co mmon stock on the New Yo rk Stock Exchange during the four calendar weeks
               preceding the filing with the SEC of a notice on the SEC’s Form 144 with respect to such sale.

      Sales under Rule 144 are also subject to certain other requirements regarding the manner of sale, notice and availab ility of current public
informat ion about JMP Group Inc.

       Under Rule 144(k), a person who is not, and has not been at any time during the 90 days preceding a sale, an affiliate of JM P Group Inc.
and who has beneficially o wned the shares proposed to be sold for at least two years (including the h olding period of any prior owner except an
affiliate) is entitled to sell such shares without complying with the manner of sale, public informat ion, volu me limitation o r notice provisions of
Rule 144.

                                                                         113
Table of Contents

                                                                  UNDERWRITING

       The underwriters named below, JMP Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Keefe, Bruyette & Woods,
Inc., acting through their representatives, have severally agreed with us and the selling stockholders, subject to the terms and conditions of the
underwrit ing agreement, to purchase fro m us the number of shares of common stock provided below opposite their respective names. The
underwriters are co mmitted to purchase and pay for all shares if any are purchased.


                                                                                                                                           Number of
Underwriter                                                                                                                                 Shares

JMP Securities LLC
Merrill Lynch, Pierce, Fenner & Smith
            Incorporated
Keefe, Bruyette & Woods, Inc.

      Total

      Prior to this offering, there has been no public market for our co mmon stock. Consequently, the public offering price for the common
stock offered by this prospectus has been determined through negotiations among the representatives and us. Among the factors considered in
such negotiations were prevailing market conditions, certain of our financial information, market valuations of other companies that we and the
representatives believe to be comparable to us, estimates of our business potential and earnings prospects and an assessment of our
management, the present state of our development and other factors deemed relevant.

Commissions and Discounts
      The representatives have advised us that the underwriters propose to offer the shares of common stock to the public at the public offering
price provided on the cover page of this prospectus and to certain dealers at that price less a concession of not in excess o f $               per share,
of which $          may be reallo wed to other dealers. After this offering, the public o ffering price, concession and reallo wance to dealers may
be reduced by the representatives. No such reduction shall change the amount of proceeds to be received by us as provided on the cover page of
this prospectus. The common stock is offered by the underwriters as stated in this prospectus, subject to receipt and acceptance by th em and
subject to their right to reject any order in whole or in part. If all the shares are not sold at the initial public offerin g price, the representatives
may change the offering price and the other selling terms.

      The underwriters have advised us that they do not expect sales to discretionary accounts to exceed five percent of the total number of
shares offered.

Overallotment Option
       We have granted to the underwriters an option, exercisable during the 30-day period after the date of this prospectus, to purchase up
to          additional shares of common stock and the selling stockholders listed in the “Principal and Selling Stockholders” table have granted
to the underwriters an option, on similar terms, to purchase up to           addit ional shares of common stock, to cover overallotments, if any,
at the public offering price less the underwriting discount provided on the cover page of this prospectus. If the underwriters exercise their
overallot ment option to purchase any of the additional          shares of common stock, the underwriters have severally agreed, subject to
certain conditions, to purchase approximately the same percentage thereof as the number of shares to be purchased by each of them bears to the
total number of shares of common stock offered in this offering. If purchased, these additional shares will be sold by the un derwriters on the
same terms as those on which the shares offered hereby are being sold. We and the overallotment selling stockholders will be obligated,
pursuant to the overallotment option, to sell shares to the underwriters to the extent the overallot ment option is exercised. The underwriters may
exercise the overallotment option only to cover overallot ments made in connection with the sale of the shares of common stock offered in this
offering.

                                                                          114
Table of Contents

     The following table summarizes the per share and total discounts and commissions to be paid to the underwriters by us and the selling
stockholders who have granted the underwriters this option:


                                                                                                                         Total

                                                                               Per                       Without                          With
                                                                              Share                    Overallotment                  Overallotment

Underwrit ing discounts and commissions payable by us                  $                        $                                $
Underwrit ing discounts and commissions payable by the
  selling stockholders


     We estimate that expenses payable by us and the selling stockholders in connection with this offering, other than the underwr iting
discounts and commissions referred to above, will be appro ximately $       .

Indemni ficati on
        The underwrit ing agreement contains covenants of indemn ity among the underwriters, us and the selling stockholders against ce rtain civ il
liab ilit ies, including liab ilit ies under the Securities Act, and liab ilities arising fro m breaches of repres entations and warranties contained in the
underwrit ing agreement.

Reserved Shares
      At our request, the underwriters have reserved for sale, at the init ial public o ffering price, appro ximately 5.0% of the shares offered by
this prospectus for sale to our employees. If these persons purchase reserved shares, this will reduce the number of shares available for sale to
the general public. Any reserved shares that are not orally confirmed for purchase within one day of the pricing of this offe ring will be offered
by the underwriters to the general public on the same terms as the other shares offered by this prospectus.

Lock-Up Agreements
      Each of our executive officers and directors and substantially all of our other stockholders have agreed, subject to specifie d exceptions,
not to offer to sell, contract to sell, o r otherwise sell, d ispose of, loan, pledge or g rant any rights with respect to any s hares of common stock or
any options or warrants to purchase any shares of common stock, or any securities convertible into or exchangeable for shares of co mmon
stock owned as of the date of this prospectus or thereafter acquired directly by those holders or with respect to which they have the power of
disposition, without the prior written consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated. This restrict ion terminates after the close
of trading of the shares on the 180th day of (and including) the day the shares commenced trading on the NYSE. Ho wever, Merri ll Lynch,
Pierce, Fenner & Smith Incorporated may, in its sole discretion and at any time or fro m time to time before the termination of t he 180-day
period, without notice, release all or any portion of the securities subject to lock-up agreements. There are no existing agreements between the
representatives and any of our stockholders who have executed a lock-up agreement providing consent to the sale of shares prior to the
expirat ion of the lock-up period.

      The 180-day restricted period described in the preceding paragraph will be automat ically extended if: (1) during the last 17 days of the
180-day restricted period we issue an earnings release or announce material news or a material event; or (2) prior to the expiration of the
180-day restricted period, we announce that we will release earnings results during t he 15-day period fo llowing the last day of the 180-day
period, in which case the restrictions described in the preceding paragraph will continue to apply until the exp irat ion of th e 18-d ay period
beginning on the issuance of the earnings release or the announcement of the material news or material event.

       In addition, we have agreed that during the lock-up period we will not, without the prior written consent of Merrill Lynch, Pierce, Fenner
& Smith Incorporated, subject to certain exceptions, consent to the disposition of any shares held by stockholders subject to lock-up agreements
prior to the exp iration of the lock-up period, or issue, sell, contract to sell, or otherwise dispose of, any shares of common stock, any options or
warrants to purchase any shares of common stock or any securities convertible into, exercisable for or exchangeable for shares of common
stock other than our sale of shares in this offering, the issuance of our common stock upon the exercise of outstanding optio ns or

                                                                            115
Table of Contents

warrants, and the issuance of options under existing stock option, restricted stock and incentive plans provided that those o ptions do not vest
prior to the exp iration of the lock-up period. See “Shares Eligib le for Future Sale.”

Syndicate Short Sales
       The representatives have advised us that, on behalf of the underwriters, they may make short sales of our common stock in con nection
with this offering, resulting in the sale by the underwriters of a g reater nu mber of shares than they are required to purchase pursuant to the
underwrit ing agreement. The short position resulting fro m those short sales will be deemed a “covered” short position to the extent that it does
not exceed the            shares subject to the underwriters ’ overallot ment option and will be deemed a “naked” short position to the extent that
it exceeds that number. A naked short position is more likely to be created if the underwriters are concerned that there may be d ownward
pressure on the trading price of the common stock in the open market that could adversely affect investors who purchased shares in the
offering. The underwriters may reduce or close out their covered short position either by exercising the overallot ment option or by purchasing
shares in the open market. In determin ing which of these alternatives to pursue, the underwriters will consider the price at wh ich shares are
available for purchase in the open market as co mpared to the price at wh ich they may purchase shares through the overallot men t option. Any
“naked” short position will be closed out by purchasing shares in the open market. Similar to the other stabilizing transactions desc ribed below,
open market purchases made by the underwriters to cover all or a portion of their short position may have the effect of preventing or retarding a
decline in the market price of our co mmon stock following this offering. As a result, our co mmon stock may trade at a price t hat is higher than
the price that otherwise might prevail in the open market.

Stabilization
       The representatives have advised us that, pursuant to Regulation M under the Securities Act, they may engage in transactions, includin g
stabilization bids or the imposition of penalty bids, that may have the effect of stabilizing or maintaining the market price of the shares of
common stock at a level above that which might otherwise prevail in the open market. A “stabilizat ion bid” is a bid for or the purchase of
shares of common stock on behalf of the underwriters for the purpose of fixing or maintaining the price of the co mmon stock. A “penalty bid”
is an arrangement permitting the representatives to claim the selling concession otherwise accruing to an underwriter or synd icate member in
connection with the offering if the co mmon stock orig inally sold by that unde rwriter or syndicate member is purchased by the representatives
in the open market pursuant to a stabilizing b id or to cover all or part of a syndicate short position. The representatives h ave advised us that
stabilizing bids and open market purchases may be effected on the NYSE or otherwise and, if co mmenced, may be discontinued at any time.

Other Relationships
      Because the shares are being offered by JMP Group Inc., whose wholly -o wned subsidiary JMP Securit ies LLC is an NASD member and
an underwriter in the offering, the underwriters may be deemed to have a “conflict of interest” under Rule 2710(c)(8) of the Co nduct Rules of
the NASD. Accordingly, this offering will be made in co mpliance with the applicable p rovisions of Rule 2720 of the Conduct Ru les. Rule 2720
requires that the initial public o ffering price can be no higher than that recommended by a “qualified independent underwriter,” as defined by
the NASD. Merrill Lynch, Pierce, Fenner & Smith Incorporated is expected to serve in that capacity and to perform due diligen ce
investigations and review and participate in the preparation of the registration stateme nt of which this prospectus forms a part. JMP Securities
LLC currently does not intend on engaging in market making transactions for the common stock of JMP Group Inc. in the after -market.

      The underwriters will not execute sales in discretionary accounts without the prior written specific approval of the customers.

       Certain of the underwriters and their respective affiliates may in the future perform various financial advisory, investment banking or
other services for us or our affiliates, for which they will receive customary fees and expenses. We or our affiliates may also in the future
perform various financial advisory, investment banking or other services for certain of the underwriters in this offering or their respective
affiliates, for which we will receive customary fees and expenses.

                                                                       116
Table of Contents

                                                      VALIDITY OF COMMON STOCK

      The validity of the shares of common stock offered hereby will be passed upon for us by Morrison & Foerster LLP, San Francisco,
California. Certain legal matters in connection with this offering will be passed upon for the underwriters by O ’Melveny & My ers LLP, San
Francisco, Californ ia. Each of these firms has in the past represented, and continues to represent, us on a regular basis and in a variety of
matters other than this offering.


                                                                    EXPERTS

      The consolidated financial statements for JMP Group LLC as of December 31, 2005 and 2006, and for each of the three years in the
period ended December 31, 2006 included in this prospectus have been so included in reliance on the report, which contains an explanatory
paragraph relating to the restatement of our financial statements as described in Note 3 to the consolidated financial statements, of
PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and
accounting.

      The financial statements for JMP Hold ings Inc. as of December 31, 2005 and 2006, and fo r each of the two years in the period ended
December 31, 2006 and the period fro m August 12, 2004 (co mmencement of operations) to December 31, 2004 included in this prospectus
have been so included in reliance on the report, wh ich contains an explanatory paragraph relat ing to the restatement of our f inancial statements
as described in Note 3 to the financial statements, of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on
the authority of said firm as experts in auditing and accounting.


                                             WHER E YOU CAN FIND MORE INFORMATION

      We have filed with the SEC a reg istration statement on Form S-1 under the Securities Act of 1933, as amended with respect to the
common stock offered hereby. Th is prospectus does not contain all of the informat ion set forth in the registration stat ement and the exhibits and
schedules thereto. For further information with respect to JMP Group Inc. and its common stock, reference is made to the registration statement
and the exhib its and any schedules filed therewith. Statements contained in this pros pectus as to the contents of any contract or other document
referred to are not necessarily co mplete and in each instance, if such contract or document is filed as an exh ibit, reference is made to the copy
of such contract or other document filed as an exh ibit to the registration statement, each statement being qualified in all respects by such
reference. A copy of the registration statement, includ ing the exh ibits and schedules thereto, may be read and copied at the SEC’s Public
Reference Roo m at 100 F Street, N.E., Washington, DC 20549. Informat ion on the operation of the Public Reference Roo m may be obtained
by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet website at http://www.sec.gov, fro m which interested
persons can electronically access the registration statement, including the exhibits and any schedules thereto.

      As a result of this offering, we will beco me subject to the informational requirements of the Securit ies Exchange Act of 1934, as
amended. We plan to fulfill our obligations with respect to these requirements by filing periodic reports and other information with the SEC.
We intend to furnish our stockholders with annual reports containing consolidated financial statements certified by an indepe ndent registered
public accounting firm. We also maintain an Internet website at http://www.jmpsecurities.com. The informat ion on our website s hall not be
deemed to be incorporated into this prospectus or the registration statement of which it fo rms a part.

                                                                        117
Table of Contents

                                                INDEX TO FINANCIAL STATEMENTS

                                                                                Page
                                                             JMP GROUP LLC
Report of Independent Registered Public Accounting Firm                          F-2
Consolidated Statements of Financial Condition as of
  December 31, 2006 and 2005                                                     F-3
Consolidated Statements of Income for the years ended
  December 31, 2006, 2005 and 2004                                               F-4
Consolidated Statements of Changes in Members’ Equity for the years ended
  December 31, 2006, 2005 and 2004                                               F-5
Consolidated Statements of Cash Flows fo r the years ended
  December 31, 2006, 2005 and 2004                                               F-6
Notes to Consolidated Financial Statements                                       F-7

                                                          JMP HOLDINGS INC.
Report of Independent Registered Public Accounting Firm                         F-29
Balance Sheets as of
  December 31, 2006 and 2005                                                    F-30
Income Statements for the years ended
  December 31, 2006 and 2005 and Period fro m
  August 12, 2004 to December 31, 2004                                          F-31
Statements of Changes in Stockholders’ Equity for the years ended
  December 31, 2006 and 2005 and Period fro m
  August 12, 2004 to December 31, 2004                                          F-32
Statements of Cash Flo ws for the years ended
  December 31, 2006 and 2005 and Period fro m
  August 12, 2004 to December 31, 2004                                          F-33
Notes to Financial Statements                                                   F-34

                                                                    F-1
Table of Contents

                             REPORT OF INDEPENDENT REGIS TER ED PUB LIC ACCOUNTING FIRM

To the Members of
JMP Group LLC

In our opinion, the accompanying consolidated statements of financial condition and the related consolidated statements of income, changes in
members’ equity and cash flows present fairly, in all material respects, the financial position of JMP Group LLC and its subsidiaries (the
“Co mpany”) at December 31, 2006 and 2005 and the results of their operations and their cash flows for each of the three years in the period
ended December 31, 2006 in conformity with accounting principles generally accepted in the Un ited States of America. These financial
statements are the responsibility of the Co mpany’s management. Our responsibility is to express an opinion on these financial s tatements based
on our audits. We conducted our audits of these statements in accordance with the standards of the Public Co mpany Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whethe r the financial
statements are free of material misstatement. An audit includes examining, on a tes t basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 3 to the consolidated financial statements, the Company has restated its financial statements at Decembe r 31, 2005 and for
each of the two years in the period ended December 31, 2005.

/s/ PricewaterhouseCoopers LLP

San Francisco, CA
March 12, 2007

                                                                      F-2
Table of Contents

                                                  J MP GROUP LLC AND S UBS IDIARIES
                                    CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                                             AS OF DECEMB ER 31, 2006 AND 2005


                                                                                                            2006                  2005

                                                                                                                                (restated)
Assets
Cash and cash equivalents                                                                             $     52,328,804      $    61,724,672
Restricted cash and deposits                                                                                 8,894,303            1,429,079
Receivable fro m clearing bro ker                                                                            1,519,623            1,188,956
Investment banking fees receivable, net of allowance for doubtful accounts of $294,905 and
  $69,416, respectively                                                                                      7,962,260            4,382,483
Marketable securities owned, at market value (Note 5)                                                       12,440,912            3,781,371
Other investments (Note 5)                                                                                  14,752,798           13,305,457
Fixed assets, net (Note 6)                                                                                   2,625,402            3,922,192
Other assets                                                                                                 3,174,901            2,188,903

     Total assets                                                                                     $    103,699,003      $    91,923,113

Liabilities and Members’ Equity
Liabilities
  Marketable securities sold, but not yet purchased, at market value                                  $      7,480,889      $       105,540
  Accrued compensation                                                                                      26,446,917           29,034,086
  Other liabilities                                                                                          4,366,157            4,619,114
  Redeemable Class A member interests (Note 9)                                                              12,913,769           11,516,753

     Total liabilities                                                                                      51,207,732           45,275,493

Co mmit ments and contingencies (Note 14 and 17)
Minority interest                                                                                               5,739,458                    —

Members’ Equity (Note 11)
 Class A common interests                                                                                   11,861,848           11,861,848
 Class B common interests                                                                                   31,650,177           31,650,177
 Additional paid in cap ital—stock options                                                                     268,635               90,727
 Retained earnings                                                                                           2,971,153            3,044,868

     Total members’ equity                                                                                  46,751,813           46,647,620

     Total liabilities and members ’ equity                                                           $    103,699,003      $    91,923,113




                                 The accompanying notes are an i ntegral part of these financi al statements.

                                                                       F-3
Table of Contents

                                                  J MP GROUP LLC AND S UBS IDIARIES
                                            CONSOLIDATED STATEMENTS OF INCOME
                                          YEARS ENDED DEC EMB ER 31, 2006, 2005 AND 2004


                                                                               2006                2005                2004

                                                                                                 (restated)          (restated)
Revenues
Investment banking                                                         $   44,059,972    $    62,880,033     $    37,413,405
Bro kerage                                                                     30,185,278         23,536,105          22,578,755
Asset management fees                                                           4,530,580          8,537,904          12,504,900
Principal t ransactions                                                         4,288,324         (2,005,842 )         1,774,693
Interest and dividends                                                          3,368,647          1,379,028             517,231
Other inco me                                                                     373,058            333,911              27,584

     Total revenues                                                            86,805,859         94,661,139          74,816,568

Expenses
Co mpensation and benefits                                                     50,136,224         60,144,836          46,968,602
Income allocation and accretion—Redeemable Class A member interests            10,663,934         12,983,213           9,755,082
Admin istration                                                                 3,977,082          3,362,466           2,640,381
Bro kerage, clearing and exchange fees                                          4,132,874          3,169,779           2,847,921
Travel and business development                                                 4,027,947          3,252,607           2,809,711
Co mmunicat ions and technology                                                 3,372,337          2,642,983           2,054,246
Occupancy                                                                       1,845,005          1,290,814           1,119,798
Professional fees                                                               1,011,291          1,293,700           1,005,789
Depreciat ion                                                                   1,486,401          1,500,061           1,108,402
Interest and dividend expense                                                   1,685,814            932,928           1,008,626
Other                                                                             651,705            165,418                  —

     Total expenses                                                            82,990,614         90,738,805          71,318,558

     Income before minority interest                                            3,815,245          3,922,334            3,498,010
     Minority interest                                                            427,598                —                    —

     Net inco me                                                                3,387,647          3,922,334            3,498,010
     Increase in redemption value of Series B p referred units                        —                  —               (512,689 )
     Distribution to Series A convertible preferred units                             —                  —               (468,814 )

     Net inco me attributable to Class A and Class B co mmon interests     $    3,387,647    $     3,922,334     $      2,516,507

Net inco me per unit—Class A common interests
  Basic                                                                    $          0.91   $            1.04   $            2.12
  Diluted                                                                             0.89                1.04                1.92
Weighted average units outstanding—Class A common interests
  Basic                                                                         1,434,968          1,473,874            1,184,830
  Diluted                                                                       1,468,117          1,473,874            1,552,881
Net inco me per unit—Class B co mmon interests
  Basic                                                                    $          0.91   $            1.04   $            0.73
  Diluted                                                                             0.89                1.04                0.73
Weighted average units outstanding—Class B co mmon interests
  Basic                                                                         2,300,000          2,300,000             958,333
  Diluted                                                                       2,353,132          2,300,000             958,333
Pro Forma Consolidated Statement of Income Informati on—
  C-Corp after reorg anization (unaudi ted) (Note 21)
     Total revenues                                                        $   86,805,859
     Pro forma total expenses                                                  70,790,488
     Minority interest                                                            427,598

     Pro forma income before tax                                               15,587,773
    Pro forma taxes (42.0% assumed tax rate)                                          6,546,865

    Pro forma net inco me                                                       $     9,040,908

Pro forma basic net inco me per share                                           $          0.61
Pro forma basic weighted average shares of common stock outstanding                  14,800,039              .


                              The accompanying notes are an i ntegral part of these financi al statements.

                                                                  F-4
Table of Contents

                                                   J MP GROUP LLC AND S UBS IDIARIES
                               CONSOLIDATED STATEMENTS OF CHANGES IN MEMB ERS ’ EQUIT Y
                                      YEARS ENDED DEC EMB ER 31, 2006, 2005 AND 2004


                                                                                         Addi tional
                            Series A                                                      Pai d in
                          Converti ble            Class A             Class B             Capi tal
                           Preferred             Common              Common                Stock            Retained
                             Units               Interests           Interests            Opti ons          Earnings        Total Equi ty

Balances at
  December 31,
  2003 (restated)     $      11,484,588      $     1,027,260     $               —   $             —    $       365,300     $   12,877,148
Net inco me                          —                    —                      —                 —          3,498,010          3,498,010
Conversion of
  Series A preferred
  units to Class A
  common interests           (11,484,588 )        11,484,588                     —                 —                   —                —
Increase in
  redemption value
  of Series B
  preferred units                        —                   —                   —                 —           (512,689 )         (512,689 )
Contributions of
  Class B common
  interests
  (2,300,000 units)                      —                   —        31,650,177                   —                   —        31,650,177
Additional paid in
  capital—stock
  options                                —                   —                   —             88,500                  —            88,500
Redemptions of
  Class A common
  interests                              —          (650,000 )                   —                 —           (458,690 )       (1,108,690 )
Distributions paid to
  Class A and
  Class B common
  interests                              —                   —                   —                 —           (604,228 )         (604,228 )
Distributions paid to
  Series A preferred
  units                                  —                   —                   —                 —           (468,814 )         (468,814 )

Balances at
  December 31,
  2004 (restated)                        —        11,861,848          31,650,177               88,500         1,818,889         45,419,414
Net inco me                              —                —                   —                    —          3,922,334          3,922,334
Additional paid in
  capital—stock
  options                                —                   —                   —              2,227                  —             2,227
Distributions paid to
  Class A and
  Class B common
  interests                              —                   —                   —                 —         (2,696,355 )       (2,696,355 )

Balances at
  December 31,
  2005 (restated)                        —        11,861,848          31,650,177               90,727         3,044,868         46,647,620
Net inco me                              —                —                   —                    —          3,387,647          3,387,647
Additional paid in
  capital—stock                          —                   —                   —           177,908                   —          177,908
  options
Distributions paid to
  Class A and
  Class B common
  interests                      —                  —                   —                 —           (3,461,362 )       (3,461,362 )

Balances at
  December 31,
  2006                  $        —      $   11,861,848     $   31,650,177      $     268,635     $     2,971,153     $   46,751,813




                            The accompanying notes are an i ntegral part of these financi al statements.

                                                                F-5
Table of Contents

                                                  J MP GROUP LLC AND S UBS IDIARIES
                                          CONSOLIDATED STATEMENTS OF CAS H FLOWS
                                          YEARS ENDED DEC EMB ER 31, 2006, 2005 AND 2004


                                                                                   2006                  2005                 2004

                                                                                                       (restated)           (restated)
Cash flows from operating acti vities
Net inco me                                                                    $     3,387,647     $      3,922,334     $       3,498,010
Adjustments to reconcile net inco me to net cash (used in) provided by
  operating activities
Provision for doubtful accounts                                                        324,504               69,416                    —
  Change in fair value of other investments                                         (3,240,870 )          3,019,905            (6,743,525 )
  Depreciat ion and amort ization of fixed assets                                    1,486,401            1,500,061             1,108,402
  Write-off of fixed assets                                                            132,359                   —                     —
  Minority interest                                                                    427,598                   —                     —
  Stock based compensation expense                                                     177,908                2,227                88,500
Net change in operating assets and liabilit ies
  (Increase) decrease in receivables                                                (4,234,948 )          3,436,034            (2,036,209 )
  (Increase) decrease in marketable securities owned                                (8,659,541 )          9,246,619             1,770,811
  (Increase) decrease in restricted cash and deposits and other assets              (8,451,222 )            746,797            (3,770,886 )
  Increase (decrease) in marketable securities sold, but not yet
     purchased                                                                       7,375,349              105,540            (2,943,264 )
  (Decrease) increase in accrued co mpensation and other liabilities                (2,840,126 )          1,476,849             7,380,041
  Increase (decrease) in Redeemab le Class A member interests                        1,397,016            5,619,852            (5,644,573 )

     Net cash (used in) provided by operating activities                           (12,717,925 )        29,145,634             (7,292,693 )

Cash flows from investing acti vi ties
Purchases of fixed assets                                                             (321,970 )        (1,816,117 )           (3,618,879 )
Purchases of other investments                                                      (2,374,055 )        (7,176,000 )          (11,224,336 )
Sales of other investments                                                           4,167,584          10,959,231              4,074,336

     Net cash provided by (used in) investing activities                             1,471,559            1,967,114           (10,768,879 )

Cash flows from financing acti vities
(Decrease) increase in notes payable                                                        —            (2,500,000 )          2,500,000
Contributions of Class B co mmon interests                                                  —                    —            31,650,177
Redemptions of Class A common interests                                                     —                    —            (1,108,690 )
Distributions paid to Series A convertible units                                            —                    —              (468,814 )
Redemptions of Series B preferred units                                                     —                    —            (6,500,000 )
Distributions paid to Class A and Class B co mmon interests                         (3,461,362 )         (2,696,355 )           (604,228 )
Div idends paid to minority interest shareholders                                     (140,140 )                 —                    —
Capital contributions of minority interest members                                   5,452,000                   —                    —

     Net cash provided by (used in) financing activities                             1,850,498           (5,196,355 )         25,468,445

    Net (decrease) increase in cash and cash equivalents                           (9,395,868 )         25,916,393             7,406,873
Cash and cash equivalents, beginning of year                                       61,724,672           35,808,279            28,401,406

Cash and cash equivalents, end of year                                         $   52,328,804      $    61,724,672      $     35,808,279

Supplemental disclosures of cash flow information
Cash paid during the period for interest                                       $     1,403,652     $       885,464      $        850,908


                                The accompanying notes are an i ntegral part of these financi al statements.

                                                                         F-6
Table of Contents

                                                  J MP GROUP LLC AND S UBS IDIARIES
                                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                 December 31, 2006, 2005 and 2004

1. Organizati on and Descripti on of Business
      JMP Group LLC, a Delaware limited liab ility co mpany (the “Co mpany”), was formed on April 12, 1999. The Co mpany’s original name,
Jolson Merchant Partners LLC, was changed to Jolson Merchant Partners Group LLC, effect ive January 1, 2000, and in June 2004, it was
changed to JMP Group LLC. The Co mpany operates pursuant to it s Third A mended and Restated Limited Liability Co mpany Operating
Agreement dated as of August 18, 2004, as amended (the “Operating Agreement”). The Co mpany shall dissolve on September 30, 2034 unless
terminated earlier by approval of two-thirds, by percentage interest, of the common members or any other event as provided by the Operating
Agreement.

       The Co mpany conducts its brokerage business through its wholly owned subsidiary, JMP Securities LLC (the “Bro ker-Dealer”) and its
asset management business through its wholly owned subsidiary, JMP Asset Management LLC (“JMPAM”). The Broker-Dealer is a U.S.
registered broker-dealer under the Securities Exchange Act of 1934 and is a member o f the Nat ional Association of Securities Dealers, Inc. The
Bro ker-Dealer operates as an introducing broker and does not hold funds or securities for, or owe any money or securities to customers, and
does not carry accounts for customers. All customer transactions are cleared through another broker-dealer on a fu lly d isclosed basis . JMPAM
is a registered investment advisor under the Investment Advisers Act of 1940 and provides investment management services for sophisticated
investors in investment partnerships managed by JMPAM.

      The Co mpany has historically conducted its business through a mult i-member limited liability co mpany. Members in JM P Gro up LLC
included all emp loyee members or managing directors and outside holders of JMP Group LLC interests. In connection with the Co mpany’s
intended initial public o ffering, it will co mplete the fo llo wing transactions to have JMP Group Inc. succeed to the business of JMP Group LLC
and to have its members beco me stockholders of JMP Group Inc. The Co mpany will affect an exchange of all of the outstanding membership
interests of JMP Group LLC fo r shares of common stock of JMP Ho ldings Inc. In addit ion, outstanding options to purchase Class B co mmon
interests of JMP Group LLC will be exchanged for options to purchase shares of common stock of JMP Hold ings Inc. with the same terms and
conditions as under the pre-existing options agreements. JMP Ho ldings Inc., is a Delaware corporation formed in connection with its August
2004 private offering in anticipation of the corporate conversion, and is a member of JM P Group LLC. JMP Hold ings Inc. will c hange its name
to JMP Group Inc. As a result of the exchange, JMP Group LLC will beco me JMP Group Inc.’s wholly-owned subsidiary. JM P Group LLC
will be consolidated with JMP Group Inc.’s financial statements.

2. Summary of Significant Accounting Policies
 Basis of Presentation
      The consolidated financial statements include the accounts of JMP Group LLC, its wholly -owned subsidiaries Bro ker-Dealer and
JMPAM, and its and partially-owned subsidiaries JMP Realty Trust (“JMPRT”), Harvest Consumer Partners (“HCP”) and Harvest Technology
Partners (“HTP”). All material intercompany accounts and transactions have been eliminated.

      Minority interest relates to the interest of third parties in JM PRT and in the two asset management funds HCP and HTP.

     JMPRT is a real estate investment trust that was formed in June 2006. As of December 31, 2006, the Co mpany owned 50.6% o f JMPRT
and certain employee members owned 24.7%. JMPRT is managed by JMP Realty Advisors, an affiliate of JMPAM. Because of the curr ent
ownership and external management position,

                                                                      F-7
Table of Contents

                                                   JMP GROUP LLC AND S UBS IDIARIES
                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
                                              December 31, 2006, 2005 and 2004

the Co mpany consolidates JMPRT and records minority interest. The Co mpany has committed $10,260,000 in capital to JMPRT, of w hich, as
of December 31, 2006, a total of $2,052,000 had been drawn.

     In addition, JMPAM is the general partner of HCP and HTP and as of December 31, 2006, the Co mpany and its affiliates, officers, and
immed iate family members provided 94.6% and 95.3%, respectively, of the invested capital in these funds. Due to this ownership and resulting
control of the Co mpany and related parties, HCP and HTP are consolidated in the Co mpany’s financial statements.

      In addition to HCP and HTP, JMPAM currently manages several other asset management limited partnerships and is a general part ner of
each. The partnership agreements for these asset management funds provide for the right of the limited partners to remove the general partners
by a simp le majority of the unaffiliated limited partners. This right is not subject to financial penalties or significant op erational barriers to
dissolution or liquidation of the funds. As a result, consolidation of these asset management funds is not required pursuant to Emerging Issues
Task Force Issue No. 04-5 (“EITF 04-5”), Determining whether a General Partner, or the General Partners as a Group, Controls a Limited
Partnership or Similar Entity When the Limited Partners Have Certain Rights .

 Use of Estimates
      The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of
America requires the use of estimates and assumptions that affect both the reported amounts of assets and liabilit ies and the disclosure of
contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting
period. Actual results may differ fro m those estimates.

 Revenue Recognition
       Investment banking revenues, which include underwriting revenues, strategic advisory revenues and private placement fees, are recorded
when the underlying transaction is completed under the terms of the relevant agreement. Underwriting revenues arise fro m securit ies offerings
in wh ich the Co mpany acts as an underwriter and include management fees, selling concessions and underwriting fees, net of related syndicate
expenses. Management fees and selling concessions are recorded on the trade date, and underwriting fees, net of related syndicate expenses, at
the time the underwrit ing is co mpleted and the related inco me is reasonably determinable. For these transactions, management estima tes the
Co mpany’s share of the transaction-related expenses incurred by the syndicate, and recognizes revenues net of such expense. On final
settlement, typically 90 days fro m the trade date of the transaction, these amounts are adjusted to reflect the actual transa ction-related expenses
and the resulting underwrit ing fee. Expenses associated with such transactions are deferred until the related revenue is recognized or the
engagement is otherwise concluded. If management determines that a transaction is likely not to be completed, deferred expens es related to that
transaction are expensed at that time. Strategic advisory revenues primarily include success fees on closed merger and acquisition transactions,
as well as retainer fees, earned in connection with advising on both buyers and sellers transactions. Fees are also earned fo r related advisory
work and other services such as providing fairness and valuation opinions. Strategic advisory revenues are recorded when the transactions or
the services (or, if applicab le, separate components thereof) to be performed are substantially co mp lete, the fees are determ inable and collection
is reasonably assured. Private placement fees are recorded on the closing date of the transaction. Unreimbursed expenses associated with
strategic advisory and private placement transactions, net of client reimbu rsements, are recorded as noncompensation expense.

                                                                         F-8
Table of Contents

                                                  JMP GROUP LLC AND S UBS IDIARIES
                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
                                              December 31, 2006, 2005 and 2004

       Bro kerage revenues primarily consist of commissions and related expenses resulting fro m equity securities transactions execut ed as agent
or principal and are recorded on a trade date basis. Brokerage revenues also include related net trading gains and loss es as substantially all of
the trading operations are conducted in facilitation of customer orders. For the years ended December 31, 2006, 2005 and 2004, net trading
losses were $3,499,832, $1,140,388 and $293,202, respectively. In addit ion, brokerage reve nues include fees paid to the Company for equity
research, which are recorded at the time a specific amount is earned and invoiced. These fees are paid either direct ly by the client or sometimes
by a third party based on a commission sharing or tri-party arrangement.

      Principal t ransactions revenue includes realized and unrealized net gains and losses resulting fro m our principal investments in equity
securities for the Co mpany’s account, in equity linked warrants received fro m certain investment banking ass ignments, and in investment
partnerships managed by JMPAM.

      The Co mpany’s principal transactions revenue for these categories, at December 31, 2006, 2005 and 2004 are the fo llowing:


                                                                                     2006                  2005                  2004

      Equity securities                                                         $    1,820,559        $        62,809       $     (780,457 )
      Warrants                                                                         (95,754 )           (1,478,046 )          1,814,200
      Investment partnerships                                                        2,563,519               (590,605 )            740,950

         Principal t ransactions revenue                                        $    4,288,324        $    (2,005,842 )     $    1,774,693



       Asset management fees include management fees and incentive fees. The Co mpany recognizes management fees on a monthly basis o ver
the period the investment services are performed. Management fees earned by the Co mpany are generally based on the fair value of assets
under management and the fee schedule for each fund and account. Management fees are calculated at the investor level using t heir quarter
beginning capital balance adjusted for any contributions or withdrawals. S ince management fees are based on assets under management,
significant changes in the fair value of these assets will have an impact on the fees earned by the Company in future periods . The Co mpany also
earns incentive fees that are based upon the performance of investment funds and accounts. Such fees are either a specified percentage of the
total investment return of a fund or account or a percentage of the excess of an investment return over a specified highwater mark o r hurdle rate
over a defined performance period. For most funds, the highwater mark is calcu lated using the greatest value of a partner’s capital account as of
the end of any performance period, adjusted for contributions and withdrawals. Incentive fees are recognized as revenue at th e end of the
specified performance period. The performance period used to determine the incentive fee is quarterly for the five hedge fund s and annually for
the two funds of hedge funds managed by JMPAM. The incentive fees are not subject to any contingent repay ments to investors or any other
clawback arrangements.

 Cash and Cash Equivalents
      The Co mpany considers highly liquid investments with original maturities or remain ing maturit ies upon purchase of three month s or less
to be cash equivalents.

 Restricted Cash and Deposits
    Restricted cash consists of proceeds from short sales on deposit with brokers that cannot be removed unless the securities are delivered.
Deposits consist of cash on deposit for operating leases as well as cash on deposit with the Broker-Dealer’s clearing broker.

                                                                       F-9
Table of Contents

                                                    JMP GROUP LLC AND S UBS IDIARIES
                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
                                               December 31, 2006, 2005 and 2004

 Receivable from Clearing Broker
      The Co mpany clears customer transactions through another broker-dealer on a fully disclosed basis. At December 31, 2006 and 2005, the
receivable fro m clearing broker consisted solely of commissions related to securities transactions.

 Investment Banking Fees Receivable
     Investment banking fees receivable include receivables relating to the Co mpany ’s investment banking or advisory engagements. The
Co mpany records an allowance for doubtful accounts on these receivables on a specific identification basis.

 Securities and Other Investments
      Marketable securities owned and securities sold, but not yet purchased, consist of equity securities. These securities are ca rried at market
value, wh ich is based on quoted market prices, with unrealized gains and losses in cluded in revenues as principal transactions. Such amounts
are determined on a trade date basis.

       Also included in marketable securities owned are warrants on public co mmon stock that are received as a result of investment banking
transactions and are valued at estimated fair value as determined by management. Warrants owned are valued at the date of issuance and
marked-to-market as unrealized gains and losses until realized. Estimated fair value is determined using the Black -Scholes Option Valuation
methodology adjusted for active market and other considerations on a case by case basis. Gains and losses on these investments are included in
revenues as principal transactions. Because of the inherent uncertainty of valuations of warrants, estimated fair values may d iffer significantly
fro m the value that would have been used had a ready market for the investments existed, and these differences could be mater ial.

        Other investments consist principally of investments in private investment funds managed by the Comp any or its affiliates as well as cash
paid for a subscription in a private investment fund that was subsequently purchased in 2007. Such investments are carried at estimated fair
value based upon the Co mpany’s proportionate share of its ownership interest in the private investment fund. The financial position and
operating results of the private investment funds are generally determined on an estimated fair value basis. Generally, secur ities are valued
(i) at their last published sale price if they are listed on an established exchange or on Nasdaq, or (ii) if last sales prices are not published, at the
highest closing “bid” price (for securit ies held “long”) and the lowest closing “asked” price (for “short” positions) as recorded by the composite
tape system or such principal exchange, as the case may be. Where the general partner determines that market prices or quotations do no t fairly
represent the value of a security in the investment fund’s portfolio (for examp le, if a security is a restricted security of a class that is publicly
traded) the general partner may assign a different value. The general partner will determine the estimated fair value of any assets that are not
publicly traded.

 Fair Value of Financial Instruments
      Substantially all of the Co mpany’s financial instruments are recorded at fair value or contractual amounts that approximate fair value.
The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction be tween willing
parties, other than in a forced or liquidating sale. Securities owned, other investments and securities sold, not yet purchased, are sta ted at fair
value, with related changes in unrealized appreciat ion or depreciation reflected in the accompanying consolidated state ments of inco me.

                                                                         F-10
Table of Contents

                                                   JMP GROUP LLC AND S UBS IDIARIES
                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
                                              December 31, 2006, 2005 and 2004

      Management believes that the net fair value of the fo llo wing instruments recognized on the Consolidated Statement of Financia l
Condition: receivable fro m clearing bro ker, investment banking fees receivable, and accrued compensation approximate their ca rrying value,
because such instruments are short-term in nature, bear interest at current market rates, or are subject to frequent repricing. The fair value of the
Redeemable Class A member interests recognized on the Consolidated Statement of Financial Condit ion is based on the amounts that the
Co mpany expects to be required to pay to an employee member upon resignation to redeem their Redeemable Class A member interests and is
equal to the capital account of such employee member as maintained by the Co mpany.

      Fair value of the Co mpany’s financial instruments is generally obtained fro m quoted market prices, broker or dealer price quotations, or
alternative pricing methodologies that the Co mpany believes offer reasonable levels of price t ransparency. To the exten t certain financial
instruments trade infrequently or are non-marketable securities and, therefore, do not have readily determinable fair values, the Co mpany
estimates the fair value of these instruments using various pricing models and the information ava ilable to the Co mpany that it deems most
relevant. A mong the factors considered by the Co mpany in determin ing the fair value of financial instruments are discounted anticipated cash
flows, the cost, terms and liquid ity of the instrument, the financial cond ition, operating results and credit ratings of the issuer or underlying
company, the quoted market price of publicly traded securities with similar duration and yield, the Black-Scholes Option Valuation
methodology adjusted for active market and other cons iderations on a case by case basis and other factors generally pertinent to the valuation
of financial instruments.

 Fixed Assets
      Fixed assets represent furniture and fixtures, computer and office equip ment and leasehold improvements, which are stated at cost less
accumulated depreciation and amortizat ion. Depreciation is computed on the straight -line basis over the estimated useful lives of the respective
assets, ranging fro m three to five years.

     Leasehold improvements are capitalized and amo rtized over the shorter of the respective lease terms or the estimated useful liv es of the
improvements.

      The Co mpany capitalizes certain costs of computer software developed or obtained for internal use and amortizes the amount ov er the
estimated useful life o f the software, generally not exceeding three years.

 Income Taxes
      No provision is made in the financial statements for inco me taxes. All inco me and losses of the Company are reportable by the members
of the Co mpany in accordance with the relevant provisions of the Internal Revenue Code.

 Stock Based Compensation
      Effective January 1, 2006, the Co mpany adopted SFAS 123R, Share-Based Payment , using the modified prospective method. Under that
method of adoption, the provisions of SFAS 123R are generally only applied to share -based awards granted subsequent to adoption. Prior to
January 1, 2006, the Co mpany accounted for stock-based compensation under SFAS 123, Accounting for Stock -Based Compensation . SFAS
123R requires measurement of co mpensation cost for equity classified stock-based awards at fair value on the date of grant and recognition of
compensation expense over the service period for awards expected to vest. Such grants are recognized as expenses over the service period, net
of estimated forfeitures.

                                                                        F-11
Table of Contents

                                                    JMP GROUP LLC AND S UBS IDIARIES
                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
                                               December 31, 2006, 2005 and 2004

        Stock-based compensation includes stock options granted under the Company ’s 2004 Equ ity Incentive Plan as well as changes in
Redeemable Class A member interests, which are membership interests issued to the Company ’s emp loyee members and recorded as a
liab ility. The Co mpany uses the Black-Scholes option-pricing model to calcu late the fair value of the options, even though such models were
developed to estimate the fair value of freely tradable, fu lly t ransferable options without vesting restrictions, which significantly differ fro m the
Co mpany’s options. These models also require subjective assumptions including future stock price volatility, dividend yield and expected time
to exercise, which greatly affects the calculated values.

 Reclassification
     Certain 2005 and 2004 balances have been reclassified in order to conform to the fiscal 2006 presentation, without impact on the
Co mpany’s financial position, inco me or cash flows.

3. Restatement
        Prior to January 1, 2006, the Co mpany recorded its Class A common membership interests that were purchased by and issued to
emp loyee members as equity. This treatment did not comp ly with SFAS 123 due to a repurchase feature in the Operat ing Agreement that
permits employee members to redeem all of their Class A membership interests to the Co mpany upon resignation. The Co mpany sho uld have
recorded these instruments as liabilities and valued them at their redemption value at each balance sheet date. To correct this error, the
Co mpany has reclassified these membership interests from members ’ equity to Redeemab le Class A member interests and recorded them as a
liab ility at their redemption value which was equal to the capital account of each employee member on the Consolidated Statem ents of
Financial Condition.

      The Co mpany also recorded performance-based bonus distributions to employee members as compen sation and benefits expense as well
as interest distributions based on employee members ’ cap ital as interest expense in the Consolidated Statements of Income. Prior to January 1,
2006, these distributions to employee members were accounted for as distribut ions paid to common members in the Consolidated Statements of
Changes in Members’ Equity.

      Prior to January 1, 2006, the Co mpany also recorded the pro rata share of the Company ’s inco me allocated to Redeemable Class A
member interests and changes in the redemption amount of Redeemable Class A member interests as “Income allocation and
accretion—Redeemable Class A member interests” in the Consolidated Statements of Income.

      Additionally, the Co mpany has restated its Consolidated Statements of Cash Flows for th e years ended December 31, 2005 and 2004 to
correct a co mputational error in the determination of investing and operating cash flows. These items are included under purc hases and sales of
other investments and the change in fair value of other investments in the table below.

      As a result of the corrections described above, the consolidated financial statements as of December 31, 2005 and 2004 and for each of
the two years in the period ended December 31, 2005 have been restated from the amounts previously reported. These corrections had no
impact on the Co mpany’s historical total assets, revenues or net change in cash and cash equivalents.

      The cumulat ive effect of the restatement as of December 31, 2004 was an increase in retained earnings of $8,437,380 and a decrease in
total members’ equity of $6,145,196.

                                                                         F-12
Table of Contents

                                                  JMP GROUP LLC AND S UBS IDIARIES
                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
                                             December 31, 2006, 2005 and 2004

      A summary of the significant effects of the restatements is as follows:


                                                                                                 As of December 31, 2005
                                                                                As previously
                                                                                  reported                Adjustment            As restated

Consolidated Statements of Financi al Condition
Redeemable Class A members interests                                            $           —         $      11,516,753     $     11,516,753
Accrued compensation                                                                29,034,086                       —            29,034,086
Total liabilities                                                                   33,758,740               11,516,753           45,275,493
Class A common interests—employee members                                           18,305,237              (18,305,237 )                 —
Retained earnings / (Distributions in excess of accumulated earnings)               (3,315,362 )              6,360,230            3,044,868
Total members' equity                                                               58,164,373              (11,516,753 )         46,647,620

                                                                                            Year ended December 31, 2005
                                                                                As previously
                                                                                  reported            Adjustment                As restated

Consolidated Statements of Income
Co mpensation and benefits                                                      $   25,503,796        $      34,641,040     $     60,144,836
Income allocation and accretion—Redeemable Class A member
   interests                                                                                —                12,983,213           12,983,213
Interest and dividend expense                                                           45,230                  887,698              932,928
Total expenses                                                                      42,226,854               48,511,951           90,738,805
Net inco me                                                                         52,434,285              (48,511,951 )          3,922,334

                                                                                            Year ended December 31, 2005
                                                                                As previously
                                                                                  reported            Adjustment                As restated

Consolidated Statements of Cash Fl ows
Net inco me attributable to Class A and Class B co mmon interests               $    52,434,285       $     (48,511,951 )   $      3,922,334
Change in fair value of other investments                                             7,253,136              (4,233,231 )          3,019,905
Increase (decrease) in Redeemab le Class A member interests                                  —                5,619,852            5,619,852
Net cash provided by (used in) operating activities                                  76,519,259             (47,373,625 )         29,145,634
Purchases of other investments                                                        6,176,000             (13,352,000 )         (7,176,000 )
Sales of other investments                                                           (6,626,000 )            17,585,231           10,959,231
Net cash provided by (used in) investing activities                                  (2,266,117 )             4,233,231            1,967,114
Contributions of Class A common interests                                             4,347,957              (4,347,957 )                 —
Redemptions of common members                                                        (4,259,040 )             4,259,040                   —
Distributions paid to common members                                                (45,925,667 )            45,925,667                   —
Distributions paid to Class A and Class B co mmon interests                                  —               (2,696,355 )         (2,696,355 )
Net cash (used in) provided by financing activities                                 (48,336,749 )            43,140,394           (5,196,355 )


                                                                        F-13
Table of Contents

                                                 JMP GROUP LLC AND S UBS IDIARIES
                              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
                                            December 31, 2006, 2005 and 2004


                                                                                       Year ended December 31, 2004
                                                                           As previously
                                                                             reported            Adjustment         As restated

Consolidated Statements of Income
Co mpensation and benefits                                                 $   18,355,193      $    28,613,409     $   46,968,602
Income allocation and accretion—Redeemable Class A member
   interests                                                                           —             9,755,082          9,755,082
Interest and dividend expense                                                      88,742              919,884          1,008,626
Total expenses                                                                 32,030,180           39,288,378         71,318,558
Net inco me                                                                    42,786,385          (39,288,378 )        3,498,007

                                                                                       Year ended December 31, 2004
                                                                           As previously
                                                                             reported            Adjustment         As restated

Consolidated Statements of Cash Fl ows
Net inco me attributable to Class A and Class B co mmon interests          $    42,786,385     $   (39,288,375 )   $     3,498,010
Change in fair value of other investments                                      (18,043,525 )        11,300,000          (6,743,525 )
Increase (decrease) in Redeemab le Class A member interests                             —           (5,644,573 )        (5,644,573 )
Net cash provided by (used in) operating activities                             21,972,334         (29,265,027 )        (7,292,693 )
Purchases of other investments                                                  11,224,336         (22,448,672 )       (11,224,336 )
Sales of other investments                                                      (7,074,336 )        11,148,672           4,074,336
Net cash provided by (used in) investing activities                                531,121         (11,300,000 )       (10,768,879 )
Contributions of Class A common interests                                        4,521,409          (4,521,409 )                —
Redemptions of common members                                                   (3,253,982 )         3,253,982                  —
Redemptions of Class A common interests                                                 —           (1,108,690 )        (1,108,690 )
Distributions paid to common members                                           (43,151,424 )        43,151,424                  —
Distributions paid to Class A and Class B co mmon interests                             —             (604,228 )          (604,228 )
Net cash (used in) provided by financing activities                            (15,096,582 )        40,565,027          25,468,445


                                                                    F-14
Table of Contents

                                                  JMP GROUP LLC AND S UBS IDIARIES
                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
                                              December 31, 2006, 2005 and 2004

4. Recent Accounting Pronouncements
       SFAS No. 157, Fair Value Measurements (“SFAS 157”). In September 2006, the Financial Accounting Standards Board (“FASB”) issued
SFAS 157, which will become effective for the Co mpany on January 1, 2008. This standard establishes a consistent framework for measuring
fair value in accordance with GAAP, and expands disclosures with respect to fair value measurements. The Co mpany is asses sing SFAS 157 to
determine the financial impact, if any, on the Co mpany’s consolidated financial statements.

      Interpretation No. 48, Accounting for Uncertainty in Income Taxes—an Interpretation of FASB Statement No. 109 ( “FIN 48”). The
FASB issued FIN 48 in June 2006. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition
and measurement of a tax position taken, or expected to be taken in a tax return, and provides guidance on derecognition, cla ssification, interest
and penalties, accounting in interim periods, disclosure and transition. FIN No. 48 is effective for fiscal years beginning a fter December 15,
2006. The Co mpany is currently evaluating the impact, if any, that the adoption of FIN No. 48 will hav e on the Co mpany’s consolidated
financial statements.

5. Securities and Other Investments
     Marketable securities consist primarily of U.S. listed and over-the-counter equities, which are carried at market value. At December 31,
2006 and 2005, the cost basis of these securities were $11,592,593 and $4,339,007, respectively. Marketable securities also include warrants
which were carried at fair value of $491,725 and $548,464 at December 31, 2006 and December 31, 2005, respectively. Related to these
warrants, the Co mpany recognized unrealized losses of $95,754 and $1,478,046 for the years ended December 31, 2006 and 2005, respectively,
and unrealized gains of $1,814,200 for the year ended December 31, 2004.

      Securities sold, but not yet purchased, represent obligations of the Co mpany to deliver a specific security at a contracted price and thereby
create a liability to repurchase the security in the market at prevailing prices. Accordingly, these transactions involve, to varying degrees,
elements of market risk, as the Co mpany’s ultimate obligation to satisfy the sale of securities sold, but not yet purchased, may exceed the
amount recognized in the consolidated statements of financial condition. At December 31, 2006 and 2005, proce eds fro m securities sold, but
not yet purchased were $7,193,997 and $57,028, respectively.

      Included in other investments are investments in partnerships in which one of the Co mpany ’s subsidiaries is the investment manager and
general partner and an investment in an outside fund with an estimated fair value of $12,498,763 and $13,305,457 at December 31, 2006 and
2005, respectively. Also included in other investments at December 31, 2006 is cash totaling $2,254,055 paid for a subscription in a private
investment fund that was acquired in January 2007. As of December 31, 2006, the Co mpany had a remain ing outstanding capital co mmit ment
of $245,945 related to this investment.

                                                                       F-15
Table of Contents

                                                   JMP GROUP LLC AND S UBS IDIARIES
                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
                                              December 31, 2006, 2005 and 2004

6. Fi xed Assets
      At December 31, 2006 and 2005, fixed assets consisted of the following:


                                                                                                                 2006                    2005

Furniture and fixtures                                                                                      $     1,247,728         $     1,589,139
Co mputer and office equip ment                                                                                   2,664,425               2,613,551
Leasehold improvements                                                                                            2,268,978               2,820,656
Software                                                                                                            438,931                 474,387

                                                                                                                  6,620,062               7,497,733
Less: accumu lated depreciation                                                                                  (3,994,660 )            (3,575,541 )

  Total fixed assets, net                                                                                   $     2,625,402         $     3,922,192




     Depreciat ion expense for the years ended December 31, 2006, 2005 and 2004 totaled $1,486,401, $1,500,061 and $1,108,402,
respectively.

7. Subordi nated Borrowings
      The Bro ker-Dealer had a revolving subordinated loan agreement with the clearing bro ker for $3 million that matured annually and bore
interest at the prime rate plus 2%. Th is agreement was terminated in Ju ly 2006. There were no outstanding borrowings on this agreement
during the years ended December 31, 2006 and 2005.

8. Note Payable
      On February 23, 2004, the Co mpany entered into a revolving note with City National Bank for up to $10 million. Each draw bears
interest at the prime rate less 0.50% annually or at LIBOR p lus 1.75% annually, at the choice of the Co mpany. The loan fee is 0.50% of the
original principal amount. There are no principal payments or collateral required for this note. The outstanding amount of $2,500,000 was
repaid in February 2005. Interest expense for 2005 was $15,554 and $68,460 for 2004 and the effective rate was 4.83% for 2005 and 3.61% for
2004.

      On August 3, 2006, the Co mpany entered into a revolving note with City National Ban k for up to $30 million, replacing the prior $10
million annual revolv ing note. Each draw bears interest at the prime rate less 1.0% annually or at LIBOR plus 1.25% annually, at the election
of the Co mpany, and the note expires on June 30, 2008. The Co mpany paid a closing fee of $75,000 and pays an annual unused commit ment
fee of 0.25% payable quarterly in arrears. The Co mpany has the option to extend the term of the revolving note by one year or convert the
outstanding balance to a three-year term loan. There are no periodic principal pay ments required for this facility until maturity. This facility is
collateralized by a pledge of the Co mpany’s assets, including its interests in each of the Broker-Dealer and JMPAM. There is n o outstanding
note balance at December 31, 2006.

9. Redeemable Member Interests
 Redeemable Class A Member Interests
     Redeemable Class A member interests are issued to employees of the Co mpany or its subsidiaries, and are entit led to share in the
operating profits of the Co mpany. Redeemab le Class A member interests are identical in

                                                                        F-16
Table of Contents

                                                   JMP GROUP LLC AND S UBS IDIARIES
                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
                                              December 31, 2006, 2005 and 2004

nature to Class A common interests issued to non-employee Class A common members, except that Class A common members are not subject
to insider rules, as defined in the Operating Agreement. These insider rules provide, among other items, that the Co mpany may redeem the
emp loyee member’s interest in the Co mpany at any time, in whole or in part. In addition, the employee member may redeem his or her
Redeemable Class A member interests in whole upon his or her resignation fro m providing services to the Company. In either such case (and
excluding terminations for cause or upon events of default), the redemption price will be either of the fo llo wing at the Co mpan y’s election: (i)
the capital account balance of the employee member or (ii) the percent of “liquidation value” represented by such interest based on a valuation
formula. Redeemable Class A member interests represented 74.8% and 74.4% of the Co mpany’s membership interests as of December 31,
2006 and 2005, respectively.

        Redeemable Class A member interests were accounted for as stock-based compensation under SFAS 123 until December 31, 2005 and
SFAS 123R thereafter. Each holder of Redeemable Class A member interests is a party to the Operating Agreement which prov ides that an
emp loyee member may elect to redeem all, but not less than all, of their Redeemable Class A member interests without the Company’s consent
in connection with such person’s resignation from the Co mpany. Because the repurchase feature permits the emp loyee to avoid bearing the
risks and rewards normally associated with equity share ownership for a reasonable period of time and gives the Co mpany no discretion to
avoid transferring its cash or assets to the employee if the emp loyee elects redemption, the Redeemable Class A Interests are classified as a
liab ility. The liability amount for the Redeemable Class A member interests is measured at each balance sheet date based on the redemption
amounts for the Class A member interests. The redemption amount for an employee member is the amount the Co mpany is required to pay to
an emp loyee member upon resignation to redeem all his Redeemab le Class A member interests as provided by the Operating Agreement.
Management has determined that member interests would be redeemed at an amount equal to the capital account of such employee member as
maintained by the Co mpany. The pro rata share of the Co mpany’s inco me allocated to Redeemable Class A member interests and any
additional changes in the redemption amount of Redeemable Class A member interests are recorded as “Income allocation and
accretion—Redeemable Class A member interests” in the Consolidated Statements of Income.

                                                                        F-17
Table of Contents

                                                 JMP GROUP LLC AND S UBS IDIARIES
                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
                                             December 31, 2006, 2005 and 2004

     The following table summarizes the activity for the Redeemable Class A member interests for the years ended December 31, 2006, 2005
and 2004:

                                                                                                                                 Redeemable
                                                                                                                                   Class A
                                                                                                                                  Member
                                                                                                                                  Interests

Balance at December 31, 2003                                                                                                 $      11,541,474
Contributions                                                                                                                        3,888,482
Redemptions                                                                                                                         (2,171,161 )
Income allocation and accretion                                                                                                      9,755,082
Distributions                                                                                                                      (17,116,976 )

Balance at December 31, 2004                                                                                                         5,896,901
Contributions                                                                                                                        4,498,502
Redemptions                                                                                                                         (4,258,995 )
Income allocation and accretion                                                                                                     12,983,213
Distributions                                                                                                                       (7,602,868 )

Balance at December 31, 2005                                                                                                        11,516,753
Contributions                                                                                                                        4,643,527
Redemptions                                                                                                                         (2,508,681 )
Income allocation and accretion                                                                                                     10,663,934
Distributions                                                                                                                      (11,401,764 )

Balance at December 31, 2006                                                                                                 $      12,913,769




 Series B Redeemable Preferred Capital
       During 2002, the Co mpany issued 13.76 Series B redeemable preferred units (“Series B Units”) at an offering price of $25,000 per unit in
exchange for 25.0% of the Co mpany’s common interests which were o wned by the managing member o f the Co mpany. The Series B member
was entitled to cause the Co mpany to redeem the Series B Units upon a change of control, five years after issuance or upon mu tual agreement
between the parties. The Series B Units were redeemable at the greater of $25,000 or the net book value of the common membership interests
received by the Co mpany fully diluted through the redemption date. Series B Un its were not convertible into any other classes of membership
interests. Series B Units were entitled to receive distributions before any distrib utions were made to co mmon members and received
distributions at an annual rate equal to prime rate plus 100 basis points of the offering price.
       Due to the mandatory redemption feature, Series B redeemab le preferred units were classified as temporary equit y on the consolidated
statement of financial condition and the related periodic change in the redemption value and the cumu lative div idends were re corded as charges
to retained earnings. On September 3, 2004, the Co mpany redeemed all issued, authorized and outstanding Series B redeemable preferred units
for an aggregate amount of $6,500,000.

10. Empl oyee Benefits
     All salaried emp loyees and members of the Co mpany are eligible to participate in the JMP Group 401(k) Plan (the “Plan”) after three
months of emp loyment. Part icipants may contribute up to the limits set by the

                                                                      F-18
Table of Contents

                                                 JMP GROUP LLC AND S UBS IDIARIES
                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
                                             December 31, 2006, 2005 and 2004

United States Internal Revenue Service. There were no contributions by the Co mpany during the years ended December 31, 2006, 2005 and
2004.

11. Members’ Equi ty
 Capital Accounts
      A capital account is maintained for each member. The account is increased by capital contributions, allocable share of net profit and any
items of inco me or gain, and decreased by distributions, allocable share of net loss and any items of expense or loss.

 Membership Classes
      The Co mpany is authorized to issue Class A common and Class B co mmon interests. Subject to provisions in accordance with the
Operating Agreement, the Co mpany may issue additional units of certain classes of membership and may designate additional cla sses and
series of interests. The amount of shares outstanding, distribution preferences, redemption provision, and voting rights for each class of
membership are summarized below.

 Class A Common Interests
      Class A common interests are issued to non-employee members, some of who m converted their Series A Convertib le Preferred Units into
Class A common interests in April 2004, and are entitled to share in the operating profits of the Co mpany. Class A common interests are
identical in nature to the Redeemable Class A member interests issued to employee members, except that the outside Class A common
members (i) do not have a redemption feature and (ii) are not subject to insider rules, as defined in the Operating Agreement an d discussed in
Note 9. Class A common interests represented 9.7% and 10.0% of the Co mpany’s membership interests as of December 31, 2006 and 2005,
respectively.

 Class B Common Interests
      On August 18, 2004, the Co mpany issued Class B co mmon interests in a private offering to qualified institutional buyers and accredited
investors. The Class B common interests outstanding were equal to 15.5% of the total outstanding common interests of the Comp any at the
closing of the private offering. Class B common interests are identical in nature to Class A common interests, except for (i) the anti-dilution
provision described under “Membership Classes” above and (ii) demand reg istration rights giving the holders of Class B co mmon interests an
annual vote to cause a corporate conversion of the Co mpany, which would result in registration of the converted common interests with the
SEC with subsequent listing on a national exchange or the over-the-counter market. Class B co mmon interests represented 15.5% of the
Co mpany’s membership interests as of December 31, 2006 and 2005.

      Class B common interests in the aggregate are subject to anti-dilution protection and represent a stated percentage of the memb ership
interests of the Co mpany that will not be reduced by additional issuances of Class A common interests or Redeemable Class A member
interests. Similarly, repurchases or redemptions of outstanding Class A common interests and Redeemable Class A member int ere sts will not
be accretive or increase the aggregate membership percentage represented by Class B co mmon interests.

       Issuance of additional Class B co mmon interests, including the exercise of outstanding options to purchase Class B co mmon interests,
will increase the stated percentage of the membership interests of the Company

                                                                      F-19
Table of Contents

                                                  JMP GROUP LLC AND S UBS IDIARIES
                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
                                             December 31, 2006, 2005 and 2004

represented by the Class B co mmon interests and will dilute the membership percentage of all other classes of membership interests, including
Class A common interests and Redeemab le Class A member interests.

 Series A Convertible Preferred Capital
      The Co mpany issued Series A convertible preferred units (“Series A Units”) in private placements to accredited investors. Series A Units
were entit led to receive d istributions before any distributions were made to common members and distributions were payable qu arterly at an
annual rate of 8% of the offering price. The Series A Units were not red eemable but were convertible into Class A common int erests. Effective
April 1, 2004, upon election by holders of a majority of the Series A Units, all Series A Units were converted to Class A com mon interests.

12. Equity Incenti ve Plan
      In December 2004, the Co mpany adopted the 2004 Equity Incentive Plan (the “2004 Equity Incentive Plan”). Under the 2004 Equity
Incentive Plan, the Co mpany may grant options to purchase Class B membership interests in the Company to the Co mpany ’s and its affiliates’
officers, employees, consultants and other persons to whom the Co mpany determines to make such grants.

      On December 31, 2004, a total o f 50,000 options were granted to the two independent directors of JMP Ho ldings, Inc. (25,000 options to
each independent director) as director co mpensation. The options have an exercise price of $15.00 per share with an exercise period o f 5 years
and were fu lly vested and exercisable at the grant date. Because JMP Ho ldings, Inc. is not consolidated into the Company, the Co mpany
accounted for these options granted in 2004 under SFAS 123 and in accordance with EITF Issue No. 96-18, Accounting for Equity Instruments
That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services . The fair value of t he options was
estimated using the Black-Scholes Option Valuation methodology under the following assumptions: option term of 5 years, risk -free interest
rate of 3.7%, d ividend yield of 6.8% and volatility of 25.3%. The Co mpany estimat ed the volatility by comparison to comparable public
companies.

      On December 21, 2005, a total o f 1,192,140 options were granted to several employees who are emp loyee members of the Co mpany. The
options have an exercise price of $10.00 per share, an exercis e period of 10 years and will vest and become exercisable 25% at each of the four
subsequent anniversaries of the grant date. As permitted for non -public co mpanies under SFAS 123, the Co mpany used the min imu m-value
method to determine the fair value of the 2005 option grants. The fair value of the employee option grants has been estimated on the date of
grant using the Black-Scholes Option Valuation methodology using the following assumptions: expected life of options of 5.83 years, risk -free
interest rate of 4.45%, d ividend yield of 4.1% and volatility of 0.0%. The d ividend estimate was based on the recurring base dividend and
special dividend estimated for 2005 and deemed to be representative for future periods. The fair value of the options granted in 2005 was
$0.137 fo r each option or $163,204 for all options granted.

      On July 11, 2006, a total of 50,000 options were granted to two employees, who are not members of the Co mpany. The Co mpany
accounted for the options granted to employees in 2006 under SFAS 1 23R. The options have an exercise price of $12.50 per share, an exercise
period of seven years and will vest and become exercisable 25% at each of the four subsequent anniversaries of the grant date . The fair value of
the employee option grants has been es timated on the date of grant using the Black-Scholes Option Valuation methodology using the following
assumptions: expected life of options of 4.70 years, risk-free interest rate of 5.10%, div idend yield of 4.4% and volatility of 28.0%. The
dividend estimate was based on the recurring base dividend and special d ividend estimated for 2006 and deemed to be representative for futur e
periods. The Co mpany used the

                                                                      F-20
Table of Contents

                                                       JMP GROUP LLC AND S UBS IDIARIES
                                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
                                               December 31, 2006, 2005 and 2004

volatility of co mparable public co mpanies to estimate the volatility. The fair value of the options granted in July 2006 is $ 2.03 for each option
or $101,500 for all options granted.

      On December 19, 2006, a total o f 1,405,000 options were granted to several employees, who are emp loyee members and non-member
emp loyees of the Company. The Co mpany accounted for the options granted to employees in 2006 under SFAS 123R. The options hav e an
exercise price of $12.50 per share, an exercise period of seven years and will vest and become exercisable 25% at each of the fo ur subsequent
anniversaries of the grant date. The fair value of the employee option grants has been estimated on the date of grant using t he Black-Scholes
Option Valuation methodology using the following assumptions: expected life of options of 4.75 years, risk-free interest rate of 4.67%,
dividend yield of 4.0% and volatility of 31.2%. The d ividend estimate was based on the recurring base dividend and special div idend estimated
for 2006 and deemed to be representative for future periods. The Co mpany used the volatility of co mparable public co mpanies to estimate the
volatility. The fair value of the options granted in December 2006 is $3.01 for each option or $4,072,822 for all options gra nted.

      In connection with these grants, the Company records compensation expense over the graded vesting period of the options using the
accelerated attribution method under FIN 28, Accounting for Stock Appreciation Rights and Other Variable Stock Option or Award Plans,
which resulted in co mpensation expense of $177,908, $2,227 and $88,500 for the years ended December 31, 2006, 2005 and 2004,
respectively. Additional compensation expense of $4,154,352 will be recognized in future periods.

        The following table summarizes the activity under the 2004 Equity Incentive Plan during the years ended December 31, 2006, 2005 and
2004:


                                                                         Year Ended December 31,
                                                    2006                              2005                                        2004
                                        Shares             Average          Shares         Average                    Shares             Average
                                       Subject to          Exercise        Subject to      Exercise                  Subject to          Exercise
                                        Opti on             Price           Opti on         Price                     Opti on             Price

Opti ons to Purchase Class B
 common interests
Balance outstanding at
  beginning of year                      1,242,140         $   10.20              50,000       $     15.00                    —                 —
Options granted                          1,455,000             12.50           1,192,140             10.00                50,000         $   15.00
Options exercised                               —                 —                   —                 —                     —                 —
Options forfeited                          (22,200 )           10.00                  —                 —                     —                 —
Options exp ired                                —                 —                   —                 —                     —                 —

Balance outstanding at end
  of year                                2,674,940         $   11.45           1,242,140       $     10.20                50,000         $   15.00

Options exercisable at year
  end                                      342,485         $   10.73              50,000       $     15.00                50,000         $   15.00
Weighted average fair value of
  options granted during the
  year                             $          2.98                        $         0.14                         $          1.77


                                                                        F-21
Table of Contents

                                                  JMP GROUP LLC AND S UBS IDIARIES
                               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
                                             December 31, 2006, 2005 and 2004

      The following table summarizes info rmation about options outstanding to purchase Class B co mmon interests at December 31, 200 6:


                                         Opti ons Outstanding                                        Opti ons Vested and Exercisable
                                                        Weighted Average                                                        Weighted
                                                            Remaini ng                             Number                       Average
 Exercise                    Number                        Contractual                            Vested and                    Exercise
  Price                     Outstandi ng                   Life in Years                          Exercisable                     Price

$10.00                          1,169,940                                     9.0                       292,485                    $     10.00
 12.50                          1,455,000                                     7.0                            —                              —
 15.00                             50,000                                     3.0                        50,000                          15.00

                                2,674,940                                     7.8                       342,485                    $     10.73




13. Net Income per Unit Attri butable to Class A and Cl ass B Common Interests
      The Co mpany calculates net income per unit attributable to Class A and Class B co mmon interests (“Net Inco me per Unit”) in accordance
with SFAS 128, Earnings per Share . Basic Net Inco me per Un it is calculated by dividing net inco me attributable to Class A and Class B
common interests by the weighted average number of units of Class A and Class B co mmon interests outstanding for the reporting period.
Diluted Net Inco me per Un it is co mputed similarly, except that it reflects the potential dilutive impact that would occur if dilutive securities
were exercised or converted into membership interests. To determine an average market price for applying the treasury stock m ethod, the
Co mpany estimated the fair market value of the Co mpany’s Class B co mmon interests based on trades of Class B common interests between
third parties and earnings mult iples for publicly t raded comparables.

      As described in Note 9, the Redeemab le Class A member interests are classified as liabilities due to the employee redemption rights,
which represents a mandatory redemption feature. Therefore, Redeemable Class A member interests are excluded fro m co mputations of Net
Income per Un it and any amounts attributed to holders of Redeemab le Class A member interests have been deducted to derive net income
attributable to common interests.

                                                                      F-22
Table of Contents

                                                      JMP GROUP LLC AND S UBS IDIARIES
                                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
                                                December 31, 2006, 2005 and 2004

      The computations for basic and diluted Net Inco me per Unit for the years ended December 31, 2006, 2005 and 2004 are set fort h below:


                                                                            Year Ended December 31,
                                                  2006                                  2005                                  2004
                                        Class A               Class B           Class A        Class B              Class A           Class B
                                       Common                Common            Common         Common               Common            Common

Nu merator for basic net
  income per unit
  attributable to Class A and
  Class B common interests         $    1,301,528        $     2,086,119     $     1,531,855   $   2,390,479   $    2,516,507        $ 698,818
Add-back: Distributions
  Series A convertible
  preferred units                                 —                     —                —               —            468,814                —

Nu merator for diluted net
  income per unit
  attributable to Class A and
  Class B common interests         $    1,301,528        $     2,086,119     $     1,531,855   $   2,390,479   $    2,985,321        $ 698,818

Denominator for basic net
  income per unit—weighted
  average number of Class A
  and Class B co mmon units
  outstanding                           1,434,968              2,300,000           1,473,874       2,300,000        1,184,830            958,333
Effect of potential d ilut ive
  securities:
     Series A convertible
        preferred units                           —                     —                —               —            368,051                —
     Options to purchase
        Class B common
        interests                          33,149                53,132                  —               —                    —              —

Denominator for dilutive net
  income per unit—weighted
  average number of Class A
  and Class B co mmon units
  outstanding and impact of
  potential dilutive securities         1,468,117              2,353,132           1,473,874       2,300,000        1,552,881            958,333

Net inco me per unit
  attributable to Class A and
  Class B common interests
     Basic                         $         0.91        $          0.91     $          1.04   $        1.04   $         2.12        $      0.73
     Diluted                       $         0.89        $          0.89     $          1.04   $        1.04   $         1.92        $      0.73


      For the years ended December 31, 2006 and 2005, there were no Series A convertible preferred units outstanding. For the years ended
December 31, 2005 and 2004, options to purchase Class B co mmon interests outstanding had no dilutive effect, because they wer e anti-dilutive
for the periods.

                                                                            F-23
Table of Contents

                                                    JMP GROUP LLC AND S UBS IDIARIES
                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
                                              December 31, 2006, 2005 and 2004

14. Commi tments and Contingencies
     The Co mpany leases office space in Californ ia, Illinois, Georg ia, Massachusetts and New Yo rk under various operating leases. Rental
expense for the years ended December 31, 2006, 2005 and 2004 was $1,845,005, $1,290,814 and $1,119,798, respectively. The California and
New York leases included a period of free rent at the start of the lease for seven months and three months, respectively. Rent expense is
recognized over the entire lease uniformly net of the free rent savings. The aggregate minimu m future co mmit ments of these le ases are:


            2007                                                                                                            $    1,953,143
            2008                                                                                                                 1,878,398
            2009                                                                                                                 2,168,228
            2010                                                                                                                 2,168,228
            2011                                                                                                                 1,558,526

                                                                                                                            $    9,726,523




       In connection with its underwrit ing activit ies, the Bro ker-Dealer enters into firm co mmit ments for the purchase of securities in return for
a fee. These commit ments require the Bro ker-Dealer to purchase securities at a specified price. Securities underwriting exposes the
Bro ker-Dealer to market and cred it risk, p rimarily in the event that, for any reason, securities purchased by t he Broker-Dealer cannot be
distributed at anticipated price levels. At December 31, 2006, the Broker-Dealer had no open underwriting co mmit ments.

      The securities owned and the restricted cash as well as the cash held by the clearing broker, may be used to maintain margin
requirements. Furthermore, the securities owned may be hypothecated or borrowed by the clearing bro ker.

      As discussed in Note 1, the Co mpany has committed $10,260,000 in capital to JMPRT, of which, as o f December 31, 2006, a t otal of
$2,052,000 had been drawn. As discussed in Note 5, the Co mpany has an additional capital co mmit ment of $245,965 related to its investment
in a private investment fund.

15. Regulatory Requirements
      The Bro ker-Dealer is subject to the SEC’s Un iform Net Cap ital Ru le (Ru le 15c3-1), which requires the maintenance of minimu m net
capital, as defined, and requires that the ratio of aggregate indebtedness to net capital, both as defined, shall not exceed 15 to 1. The
Bro ker-Dealer had net capital o f $33,936,970 and $52,433,957, which was $33,420,970 and $51,978,457 in excess of the required net capital of
$516,000 and $455,500 at December 31, 2006 and 2005, respectively. The Broker-Dealer’s ratio of aggregate indebtedness to net capital was
0.10 to 1 and 0.07 to 1 at December 31, 2006 and 2005, respectively.

     Since all customer transactions are cleared through another broker-dealer on a fully d isclosed basis, the Broker-Dealer is not required to
maintain a separate bank account for the exclusive benefit of customers in accordance with Rule 15c3-3 of the Securities and Exchange
Co mmission.

16. Related Party Transacti ons
      The Co mpany earns investment management and performance fees fro m serving as investment advisor for partnerships and offsh ore
investment companies in which it also owns an investment. Investment management fees fro m these activities were $2,834,271, $ 7,631,592
and $7,431,540 fo r the years ended December 31, 2006,

                                                                         F-24
Table of Contents

                                                   JMP GROUP LLC AND S UBS IDIARIES
                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
                                              December 31, 2006, 2005 and 2004

2005 and 2004, respectively. Also, perfo rmance fees of $2,094,520, $627,357 and $4,300,069 were earned by JMPAM fro m th ese pa rtnerships
and offshore investment companies for the years ended December 31, 2006, 2005 and 2004, respectively.

      On August 18, 2004, the Co mpany entered into a Serv ices Agreement with JMP Ho ldings Inc. whereby the Co mpany will provide JMP
Holdings Inc. with various corporate support services, which include certain tax, accounting, legal and admin istrative functions, and bear
certain e xpenses, which include professional fees, director’s fees, corporate franchise tax and certain filing fees. As of December 31, 2006,
JMP Ho ldings Inc. owned a 6.84% membership interest in the Co mpany. As of December 31, 2006, the Co mpany advanced $708,053 to JMP
Holdings, Inc to pay inco me taxes and other expenses. The expenses reimbursed by the Company to JMP Ho ldings for the years en ded
December 31, 2006, 2005 and 2004 were $62,233, $61,872, and $82,243, respectively.

17. Guarantees
      The Bro ker-Dealer has agreed to indemn ify its clearing broker for losses that the clearing bro ker may sustain fro m the accounts of
customers introduced by the Broker-Dealer. Should a customer not fu lfill their obligation on a transaction, the Broker-Dealer may be required
to buy or sell securities at prevailing market prices in the future on behalf of its customer. The Bro ker-Dealer’s obligation under the
indemn ification has no maximu m amount. All unsettled trades at December 31, 2006 had settled with no resulting liability to t he Co mpany.
During the years ended December 31, 2006, 2005 and 2004, the Co mpany did not have a loss due to counterparty failure, and has no
obligations outstanding under the indemnificat ion as of December 31, 2006.

      The Co mpany is engaged in various investment banking and brokerage activ ities whose counterparties primarily include broker -dealers,
banks and other financial institutions. In the event counterparties do not fulfill their obligations, the Co mpany may be expo sed to risk. The risk
of default depends on the creditworthiness of the counterparty or issuer of the instrument. It is the Co mpany ’s policy to rev iew, as necessary,
the credit standing of each counterparty with which it conducts business.

18. Litigation
      Due to the nature of its business, the Company is subject to various threatened or filed legal actions. For example, because we act as an
underwriter or a financial advisor in the ordinary course of our business, we may be subjected to class action claims that se ek substantial
damages. In addition, defending emp loyment claims against us could require the expenditure of substantial resources. Such litig ation is
inherently uncertain and the ultimate resolution of such litigation could be determined by factors outside of our control. Ma nagement, after
consultation with legal counsel, believes that the currently known actions or threats will not result in any material adverse effect on the
Co mpany’s financial condition, results of operations or cash flows.

19. Financi al Instruments with Off-balance Sheet Risk, Credit Risk or Market Risk
      The majority of the Co mpany’s transactions, and consequently the concentration of its credit exposure, is with its clearing broker. The
clearing broker is also the primary source of short-term financing for the Co mpany, which is collateralized by cash and securities owned by the
Co mpany and held by the clearing broker. The Co mpany ’s securities owned may be pledged by the clearing bro ker. In addition , as of
December 31, 2006 and 2005, the Co mpany held cash at the clearin g broker in the amount of $50,372,618 and $57,908,266, respectively. The
amount receivable fro m the clearing broker represents amounts receivable in connection with the trading of

                                                                        F-25
Table of Contents

                                                   JMP GROUP LLC AND S UBS IDIARIES
                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
                                              December 31, 2006, 2005 and 2004

proprietary positions. As of December 31, 2006 and 2005, the Co mpany’s cash on deposit with the clearing broker was not collateralizing any
liab ilit ies to the clearing broker.

     In addition to the clearing bro ker, the Co mpany is exposed to credit risk fro m other brokers, dealers and other financial ins titutions with
which it transacts business. In the event counterparties do not fulfill their obligations, the Co mpany may be exposed to credit risk.

      The Co mpany’s trading activities include providing securities brokerage services to institutional clients. To facilitate these customer
transactions, the Company purchases proprietary securities positions (“long positions”) in equity securities. The Co mpany also enters into
transactions to sell securities not yet purchased (“short positions”), which are recorded as liabilit ies on the statement of financial condition. The
Co mpany is exposed to market risk on these long and short securities positions as a result of decreases in market value of long posit ions and
increases in market value of short positions. Short positions create a liab ility to purchase the security in the market a t prevailing prices. Such
transactions result in off-balance sheet market risk as the Co mpany’s ultimate obligation to satisfy the sale of securities sold, not yet purchased
may exceed the amount recorded in the statement of financial condition. To mit igat e the risk of losses, these securities positions are marked to
market daily and are monitored by management to assure compliance with limits established by the Co mpany.

20. Business Segments
      The Co mpany’s business results are categorized into the follo wing two segments: Bro ker-Dealer and Asset Management. The
Bro ker-Dealer seg ment includes a broad range of services, such as underwrit ing and acting as a placement agent for public and privat e capital
raising transactions and financial advisory services in M&A, restructuring and other strategic transactions. The Bro ker-Dealer segment also
includes institutional brokerage services and equity research services to our institutional investor clients. The Asset Management segment
includes the management of a broad range of pooled investment vehicles, including the Co mpany ’s hedge funds and funds of funds as well as
the Co mpany’s principal investments in public and private securities.

      The accounting policies of the segments are consistent with those described in the Significant Accounting Policies in Note 2.

      Revenue generating activities between segments are eliminated fro m the segments results for reporting purposes. These activit ies include
fees paid by the Broker-Dealer segment to the Asset Management segment for the management of its investment portfolio.

     The Co mpany’s segment information fo r the years ended December 31, 2006, 2005 and 2004 is prepared using the following
methodology:
        •    Revenues and expenses directly associated with each segment are included in determin ing inco me.

        •    Revenues and expenses not directly associated with a specific segment are allocated based on the most relevant measures
             applicable, includ ing headcount, revenues and other factors.
        •    Each segment’s operating expenses include: a) co mpensation and benefits expenses that are incurred direct ly in support of the
             segments and b) other operating expenses, which include expenses for premises and occupancy, professional fees, travel and
             entertainment, co mmunicat ions and informat ion services, equipment and ind irect support costs (including co mpensation and other
             operating expenses related thereto) for admin istrative services.

                                                                        F-26
Table of Contents

                                                   JMP GROUP LLC AND S UBS IDIARIES
                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
                                              December 31, 2006, 2005 and 2004

        •    Corporate operating expenses include income allocation and accretion —Redeemable Class A member interests and interest
             expense payable on Redeemab le Class A member interests. These expenses are not allocated to the segments, because Redeemable
             Class A member interests are capital to the Co mpany as a whole and the income allocation is based on the Co mpany ’s consolidated
             results.

      The Co mpany evaluates segment results based on revenue and segment income.

 Segment Operating Results
     Management believes that the following informat ion provides a reasonable representation of each segment ’s contribution to revenues,
income and assets:


                                                                                                     Year Ended December 31,
                                                                                             2006               2005                   2004

Broker-Dealer                     Revenues                                             $     78,980,582      $    86,546,723      $    61,063,274
                                  Operating expenses                                         66,830,159           70,269,985           51,305,930

                                  Segment income                                       $     12,150,423      $    16,276,738      $     9,757,344

                                  Segment assets                                       $     74,544,932      $    76,478,375      $    62,089,643
Asset Management                  Revenues                                             $       7,825,277     $     8,114,416      $    13,753,294
                                  Operating expenses                                           4,387,927           6,597,909            9,337,662

                                  Segment income                                       $       3,437,350     $     1,516,507      $     4,415,632

                                  Segment assets                                       $     29,154,071      $    15,444,738      $    23,903,023
Corporate                         Operating expenses                                   $     12,200,126      $    13,870,911      $    10,674,966

Consolidated Entity               Revenues                                             $     86,805,859      $    94,661,139      $    74,816,568
                                  Operating expenses                                         83,418,212           90,738,805           71,318,558

                                  Net inco me                                          $       3,387,647     $     3,922,334      $     3,498,010

                                  Total assets                                         $    103,699,003      $    91,923,113      $    85,992,666



21. Pro Forma Information, C-Corp After Reorg anization (Unaudited)
      The unaudited pro forma financial information for the year ended December 31, 2006 presented on the face of the Co mpany’s
Consolidated Statement of Inco me is based upon the Co mpany ’s historical consolidated financial statements as adjusted to reflect the
reorganizat ion transactions contemplated in connection with its init ial pub lic offering (see Note 1), in part icular the exchange of Redeemab le
Class A member interests and Class A and Class B co mmon interests into common stock of the Co mpany, as though they had occurred on
January 1, 2006.

      The unaudited pro forma Consolidated Statement of Income information includes the add-back of the inco me allocation and accretion
expense related to Redeemab le Class A member interests which would not have been recorded if the Redeemable Class A member interests
were converted into common stock in connection with the reorganizat ion transactions. It also includes the add -back of interest expense related
to Redeemab le Class A member interests because as a corporation the Co mpany will not pay any interest on employee members ’ capital. Prior
to the reorganization transactions the Company was a limited liab ility co mpany and not subject to

                                                                        F-27
Table of Contents

                                                JMP GROUP LLC AND S UBS IDIARIES
                                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS —(Continued)
                                              December 31, 2006, 2005 and 2004

income taxes. The unaudited pro forma Consolidated Statement of Inco me informat ion therefore also includes adjustments for in come tax
expense as if the Co mpany had been a corporation at an assumed comb ined federal, state and local inco me tax rate of 42%. The pro forma
number of common shares outstanding is based on the assumed exchange of Redeemable Class A member interests and Class A and Class B
common interests into common stock of the Co mpany in accordance with the Op erating Agreement. The 2,300,000 basic units of Class B
common interests outstanding for the year ended December 31, 2006 represent 15.5% of the Co mpany’s ownership and are exchanged into
common shares at an exchange ratio of one-for-one. Class A common interests and Redeemab le Class A member interests will be exchanged
into common stock prio r to the comp letion of this offering by applying the same one -for-one exchange ratio to the respective ownership
percentages represented by such interests.


                                                                                                                           Year ended
                                                                                                                          December 31,
                                                                                                                              2006

Revenues
    Total revenues                                                                                                       $    86,805,859
Expenses
Co mpensation and benefits                                                                                                    50,136,224
Income allocation and accretion—Redeemable Class A member interests                                                           10,663,934
Other expenses                                                                                                                22,190,456

    Total expenses                                                                                                             82,990,614
Add back: Inco me allocation and accretion—Redeemab le Class A member interests                                               (10,663,934 )
Add back: Interest expense—Redeemable Class A member interests                                                                 (1,536,192 )

     Pro forma total expenses                                                                                                 70,790,488
     Minority Interest                                                                                                           427,598

     Pro forma income before tax                                                                                              15,587,773
     Pro forma taxes (42.0% assumed tax rate)                                                                                  6,546,865

     Pro forma net inco me                                                                                               $      9,040,908

Pro forma basic net inco me per share                                                                                    $          0.61
Pro forma basic weighted average shares of common stock outstanding                                                           14,800,039


                                                                   F-28
Table of Contents

                              REPORT OF INDEPENDENT REGIS TER ED PUB LIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
JMP Ho ldings Inc.

In our opinion, the accompanying balance sheets and the related statements of income, changes in stockholders ’ equity and cash flows present
fairly, in all material respects, the financial pos ition of JMP Ho ldings Inc. (the “Co mpany”) at December 31, 2006 and 2005, an d the results of
its operations and its cash flows for each of the two years in the period ended December 31, 2006 and the period fro m August 12, 2004
(commencement of operations) to December 31, 2004 in conformity with accounting principles generally accepted in the United States of
America. These financial statements are the responsibility of the Co mpany ’s management. Our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Co mpany
Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable a ssurance about
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence su pporting the
amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our op inion.

As discussed in Note 3 to the financial statements, the Co mpany has restated its financ ial statements at December 31, 2005, and for the year
ended December 31, 2005 and the period fro m August 12, 2004 (co mmencement of operations) to December 31, 2004.

/s/ PricewaterhouseCoopers LLP

San Francisco, CA
March 12, 2007

                                                                       F-29
Table of Contents

                                                            J MP HOLDINGS INC.
                                                           BALANCE S HEETS
                                                   AS OF DECEMB ER 31, 2006 AND 2005


                                                                                                            2006                  2005
                                                                                                                               (restated)

Assets
Cash and cash equivalents                                                                              $       71,347      $        37,720
Receivables and prepaids                                                                                       64,655                   —
Investment in JMP Group LLC (Note 6)                                                                       15,207,095           13,061,765
Deferred tax asset (Note 5)                                                                                   242,933              160,035

     Total assets                                                                                      $   15,586,030      $    13,259,520

Liabilities and Stockhol ders' Equity
Liabilities
  Other liabilities                                                                                    $          21,077   $        63,626
  Accrued income taxes                                                                                            46,889           395,094
  Due to JMP Group LLC                                                                                           708,053                —

     Total liabilities                                                                                           776,019           458,720

Stockholders’ equity
  Co mmon stock, $0.001 par value, 1,500,000 and 20,000,000 shares authorized at December 31,
     2006 and 2005; 1,012,999 and 879,666 shares issued and outstanding at December 31, 2006
     and 2005                                                                                                   1,013                  880
  Additional paid-in capital                                                                               14,227,555           12,305,460
  Retained earnings                                                                                           581,443              494,460

     Total stockholders’ equity                                                                            14,810,011           12,800,800

     Total liabilities and stockholders ’ equity                                                       $   15,586,030      $    13,259,520



                                  The accompanying notes are an i ntegral part of these financi al statements.

                                                                     F-30
Table of Contents

                                                         J MP HOLDINGS INC.
                                              INCOME S TATEMENTS
         YEARS ENDED DEC EMB ER 31, 2006 AND 2005 AND PERIOD FROM AUGUST 12, 2004 (COMMENCEMENT OF
                                       OPERATIONS) TO DEC EMB ER 31, 2004


                                                                                        2006                  2005                2004

                                                                                                           (restated)           (restated)
Revenues
Equity in earnings of JMP Group LLC                                                 $   1,010,753      $      1,008,881     $       328,800

     Total revenues                                                                     1,010,753             1,008,881             328,800

Expenses
Admin istration                                                                            18,253                48,378              30,497
Professional fees                                                                          14,000                25,537              10,500
Director’s fees                                                                               —                     —                88,500
Expenses reimbursed by JMP Group LLC (Note 4)                                             (30,045 )             (61,872 )           (83,243 )

     Total expenses                                                                         2,208               12,043               46,254

    Net inco me before provision for inco me taxes                                      1,008,545              996,838              282,546
Income tax provision (Note 5)                                                             449,729              369,479              121,043

     Net inco me                                                                    $     558,816      $       627,359      $       161,503

     Net inco me per co mmon share, basic and diluted                               $        0.55      $          0.71      $          0.18
     Shares used in computing basic and diluted net income per co mmon share            1,012,999              879,666              879,666


                               The accompanying notes are an i ntegral part of these financi al statements.

                                                                   F-31
Table of Contents

                                                         J MP HOLDINGS INC.
                            STATEMENTS OF CHANGES IN STOCKHOLDERS ’ EQUITY
         YEARS ENDED DEC EMB ER 31, 2006 AND 2005 AND PERIOD FROM AUGUST 12, 2004 (COMMENCEMENT OF
                                       OPERATIONS) TO DEC EMB ER 31, 2004


                                                            Commo
                                                               n
                                                             Stock              Addi tional                                  Total
                                                               at                Pai d-i n            Retained           Stockhol ders’
                                                              Par                Capi tal             Earnings              Equi ty

Balance at August 12, 2004                                  $     —         $             —       $          —       $                —
Issuance of common stock (879,666 shares)                        880              12,305,460                 —                12,306,340
Net inco me                                                       —                       —             161,503                  161,503
Div idends paid (Note 8)                                          —                       —             (20,180 )                (20,180 )

Balance at December 31, 2004 (Restated)                          880              12,305,460             141,323              12,447,663
Net inco me                                                       —                       —              627,359                 627,359
Div idends paid (Note 8)                                          —                       —             (274,222 )              (274,222 )

Balance at December 31, 2005 (Restated)                          880              12,305,460             494,460              12,800,800
Net inco me                                                       —                       —              558,816                 558,816
Issuance of common stock (133,333 shares)                        133               1,922,095                  —                1,922,228
Div idends paid (Note 8)                                          —                       —             (471,833 )              (471,833 )

Balance at December 31, 2006                                $ 1,013         $     14,227,555      $     581,443      $        14,810,011



                               The accompanying notes are an i ntegral part of these financi al statements.

                                                                  F-32
Table of Contents

                                                           J MP HOLDINGS INC.
                                          STATEMENTS OF CASH FLOWS
         YEARS ENDED DEC EMB ER 31, 2006 AND 2005 AND PERIOD FROM AUGUST 12, 2004 (COMMENCEMENT OF
                                       OPERATIONS) TO DEC EMB ER 31, 2004


                                                                             2006                     2005                 2004

                                                                                                    (restated)           (restated)
Cash flows from operating acti vities
Net inco me                                                             $      558,816          $       627,359      $        161,503
Adjustments to reconcile net inco me to net cash provided by
  operating activities
  Equity in earnings of JMP Group LLC                                        (1,010,753 )             (1,008,881 )            (328,800 )
  Net expenses paid by JMP Group LLC                                              2,208                    3,910                 5,257
  Deferred tax prov ision                                                       (82,898 )               (183,521 )              23,486
Distributions received fro m JMP Group LLC                                      785,443                  517,893                55,196
Net change in assets and liabilities
  (Decrease) increase in accrued inco me taxes                                (348,205 )                297,537                 97,557
  Increase in receivables and prepaids                                         (64,655 )                     —                      —
  Increase in other liabilit ies and due to affiliate                          665,504                   22,629                 40,997

     Net cash provided by operating activities                                 505,460                  276,926                 55,196

Cash flows from investing acti vi ties
Investment in JMP Group LLC                                                          —                           —         (12,306,340 )

     Net cash used in investing activities                                           —                           —         (12,306,340 )

Cash flows from financing acti vities
Issuance of common stock                                                            —                         —            12,306,340
Div idends paid to shareholders                                               (471,833 )                (274,222 )            (20,180 )

     Net cash (used in) provided by financing activities                      (471,833 )                (274,222 )         12,286,160

    Net increase in cash and cash equivalents                                   33,627                     2,704                35,016
Cash and cash equivalents at beginning of year                                  37,720                    35,016                    —

Cash and cash equivalents at end of year                                $       71,347          $         37,720     $          35,016


Supplementary disclosures of cash flow information
Cash paid during the period for taxes                                   $      939,934          $       258,683      $                —
Noncash financing acti vi ties
Issuance of common stock                                                     1,922,228                           —                    —
Noncash investing acti vities
Investment in JMP Group LLC                                                  (1,922,228 )                        —                    —


                                 The accompanying notes are an i ntegral part of these financi al statements.

                                                                    F-33
Table of Contents

                                                             J MP HOLDINGS INC.
                                                  NOTES TO FINANCIAL STATEMENTS
                                                   DECEMB ER 31, 2006, 2005 AND 2004

1. Organizati on
      JMP Ho ldings Inc. (the “Co mpany”) is a Delaware corporation established to enable investors to invest through a corporate entity in the
Class B Co mmon Interests of JMP Group LLC (“JMPG”) issued in a private offering in August 2004. The Co mpany commenced its operations
on August 12, 2004. The Co mpany’s only significant asset is an investment in JMPG, co mprised of the member interests of JMPG purchased
with the net proceeds from the Co mpany’s common stock offering in August 2004. As of December 31, 2006, the Co mpany owned 6.84% of
the member interests of JMPG.
      In connection with the Co mpany’s intended initial public offering, it will co mplete the following transactions to have JMP Gro up Inc.
succeed to the business of JMPG and to have its members become stockholders of JMP Group Inc. The Co mpany will affect an exch ange of all
of the outstanding membership interests of JMPG for shares of common stock of the Co mpany. In addit ion, outstanding options to purchase
Class B common interests of JMPG will be exchanged for options to purchase shares of common stock of the Co mpany with the same terms
and conditions as under the pre-existing options agreements. The Company will change its name to JMP Group Inc. As a result of the
exchange, JMPG will become JMP Group Inc.’s wholly-o wned subsidiary.

2. Summary of Significant Accounting Policies
 Use of Estimates
      The preparation of financial statements in conformity with accounting principles generally accepted in the Un ited States of A merica
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilit ies and disclos ure of contingent
assets and liabilit ies at the date of the financial statements and the reported amounts of revenues and expenses during the r eporting period.
Actual amounts could differ fro m those estimates.

 Cash Equivalents
      The Co mpany considers all highly liquid investments with orig inal maturit ies, or remain ing maturit ies upon purchase, of three months or
less to be cash equivalents.

 Financial Instruments
       The Co mpany does not enter into forwards, swaps, futures or other derivative product transactions that result in off-balance sheet risk.
The carrying amounts of other financial instruments recorded in the balance sheet (which include cash and investment in JMPG) appro ximate
fair value at December 31, 2006 and 2005.

 Revenue Recognition
     Equity income consists of allocated membership inco me fro m JM PG and is recognized under the equity method of accounting pursuant to
EITF Topic No. D-46.

 Income Taxes
     The Co mpany’s method of accounting for inco me taxes is an asset and liab ility approach. The asset and liabi lity approach requires the
recognition of deferred tax liab ilities and assets for the expected future tax consequences of temporary d ifferences between the carrying
amounts and the tax bases of assets and liabilit ies.

                                                                       F-34
Table of Contents

                                                            JMP HOLDINGS INC.
                                          NOTES TO FINANCIAL STATEMENTS —(Continued)
                                                  December 31, 2006, 2005 and 2004

3. Restatement
       The historical financial statements as of December 31, 2005, and for the year ended December 31, 2005 and for the period fro m August
12, 2004 (co mmencement of operations) to December 31, 2004, have been restated to reflect the impact on the Co mpany of the re statement of
the financial statements of JMPG for the same periods (see Note 7). As a result , the investment in JMPG prev iously reported in the balance
sheet at December 31, 2005 of $12,920,215 and the equity in earn ings of JMPG, previously reported in the inco me statements for the periods
ended December 31, 2005 and 2004 of $1,008,725 and $187,406 have been restated to the amounts presented in the accompanying financial
statements. The provision for inco me taxes previously reported in the inco me statement for the periods ended December 31, 2005 and 2004 of
$369,417 and $60,470, respectively, has been restated to the amount presented in the Co mpany’s income statement. Additionally, the deferred
tax asset reported in the December 31, 2005 balance sheet of $217,953 has been restated to the amount presented in the Co mpany ’s balance
sheet.

4. Related Party Transactions
     On August 18, 2004, the Co mpany entered into a Serv ices Agreement with JMPG whereby JMPG will provide the Co mpany with various
corporate support services, which include certain tax, accounting, legal and ad ministrative functions. In addit ion, JMPG bears certain expenses,
which include professional fees, director’s fees, corporate franchise tax and certain filing fees. The amounts are reflected as exp enses
reimbursed by JMPG on the inco me statements. As of December 31, 2006, $708,053 is due to JMPG wh ich represents amounts advanced to
the Co mpany to pay income taxes and other expenses.

       On December 31, 2004, JM PG granted the Company’s two independent directors 25,000 options each to purchase member interests in
JMPG. In connection with these grants, the Co mpany recorded director’s fees of $88,500 for the period ended December 31, 2004 based on the
fair value of $1.77 for each option. The fair value of the options was estimated using the Bloo mberg Black-Scholes Option Valuation
methodology under the following assumptions: option term o f 5 years, risk-free rate of 3.7%, dividend yield of 6.8% and volatility of 25.3%.
The options granted to the Company’s directors were fully vested as of the grant date.

     On January 1, 2006, an investor in JMPG exchanged 133,333 units of Class B co mmon interest in JMPG for 133,333 shares in the
Co mpany. The Co mpany acquired the 133,333 units of Class B co mmon interest in JMPG fro m the investor and issued 133,333 shares in the
Co mpany to the investor. The transaction increased the Company’s ownership percentage in JMPG and was recorded in Stockh olders ’ Equity.
The value of the additional shares issued by the Co mpany was based on the investor’s capital account value in JMPG at January 1, 2006.

                                                                      F-35
Table of Contents

                                                                 JMP HOLDINGS INC.
                                           NOTES TO FINANCIAL STATEMENTS —(Continued)
                                                   December 31, 2006, 2005 and 2004

5. Income Taxes
      The provision for inco me tax consists of the following for the periods ended December 31, 2006, 2005 and 2004, respectively:


                                                                                           2006                    2005                      2004
                                                                                         Expense                 Expense                   Expense
                                                                                         (benefit)               (benefit)                 (benefit)

                                                                                                                 (restated)                (restated)
Current
  Federal                                                                            $      408,305          $       440,744           $          77,108
  State                                                                                     124,322                  112,256                      20,449
Deferred
  Federal                                                                                    (63,300 )              (150,652 )                    18,957
  State                                                                                      (19,598 )               (32,869 )                     4,529

     Total inco me tax provision                                                     $      449,729          $       369,479           $       121,043



     The income tax provision co mputed at the U.S. federal statutory tax rate is different than the effective inco me tax rate for the periods
ended December 31, 2006, 2005 and 2004 primarily due to state and local taxes and permanent differences.


                                                                                                              2006                2005                  2004

U.S. federal statutory income tax/(benefit) rate                                                                 34.0 %            34.0 %                  34.0 %
State and local taxes, net of U.S. income tax effects                                                             6.0               5.2                     6.2
Passthrough non deductible expenses                                                                               2.7                —                       —
Other                                                                                                             1.9              (2.1 )                   2.6

Effective inco me tax rate                                                                                       44.6 %            37.1 %                  42.8 %




      Deferred inco me taxes relate to timing differences between the recognition of revenue and expense for financial reporting and income tax
reporting purposes. The principal d ifferences for the deferred tax assets are as follows:


                                                                     2006                                                     2005
                                                  Federal             State          Total                Federal              State              Total

Deferred tax assets/(liabilities)
  Book/tax basis difference in JMPG              $ 171,786          $ 47,937      $ 219,723           $     76,378        $ 20,978            $     97,356
  Capital losses                                                                                            28,318           7,363                  35,681
  State tax                                             23,210                —          23,210             26,998              —                   26,998

Gross deferred tax assets                               194,996       47,937          242,933              131,694             28,341              160,035
Valuation allo wance                                         —            —                —                    —                  —                    —

Net deferred tax asset                           $ 194,996          $ 47,937      $ 242,933           $ 131,694           $ 28,341            $ 160,035




                                                                        F-36
Table of Contents

                                                            JMP HOLDINGS INC.
                                          NOTES TO FINANCIAL STATEMENTS —(Continued)
                                                  December 31, 2006, 2005 and 2004

      No valuation allowance has been recognized since management believes these deferred tax assets will more likely than not be r ealized.

6. Investment i n J MPG
     The table below presents summary financial information of JM PG as of December 31, 2006 and 2005 and for the years ended
December 31, 2006, 2005 and 2004. At December 31, 2006 and 2005 the percentage of JMPG owned by the Co mpany was 6.84% and 5.94%,
respectively.


                                                                                            2006                  2005                   2004

                                                                                                                (restated)             (restated)
Total assets                                                                          $   103,699,003       $     91,923,113
Redeemable Class A member interests                                                        12,913,769             11,516,753
Total liabilities                                                                          51,207,732             45,275,493
Minority interest                                                                           5,739,458                      —
Total members’ equity                                                                      46,751,813             46,647,620
Net inco me                                                                                 3,387,647              3,922,334       $     3,498,010



7. Restatement of J MPG
        Prior to January 1, 2006, JM PG recorded its Class A common membership interests that were purchased by and issued to employee
members as equity. This treatment did not comp ly with FAS 123 due to a repurchase feature in the Operating Agreement that permits employee
members to redeem all of their Class A membership interests to JMPG upon resignation. JMPG should have recorded these instruments as
liab ilit ies and valued them at their redemption value at each balance sheet date. To correct this error, JMPG has reclassifie d these membership
interests fro m members’ equity to Redeemable Class A member interests and recorded them as a liability at their redemption value wh ich was
equal to the capital account of each employee member on its Consolidated Statements of Financial Condition.

      JMPG also recorded performance-based bonus distributions to employee members as compensation and benefits expense as well as
interest distributions based on employee members ’ capital as interest expense in its Consolidated Statements of Income. Prior t o January 1,
2006, these distributions to employee members have been accounted for as distributions paid to common members in JM PG ’s Consolidated
Statements of Changes in Members ’ Equ ity.

     Prior to January 1, 2006, JM PG also recorded the pro rata share of JMPG’s inco me allocated to Redeemable Class A member interests
and changes in the redemption amount of Redeemable Class A member interests as “Income allocation and accretion—Redeemable Class A
member interests” in its Consolidated Statements of Inco me.

      As a result of the corrections described above, JMPG’s consolidated financial statements as of December 31, 2005 and for the years
ended December 31, 2005 and 2004 have been restated fro m the amounts previously reported. These corrections had no impact on JMP G’s
historical total assets, revenues or net change in cash and cash equivalents. The cumulative effect of the restatement as of December 31, 2004,
was an increase in retained earn ings of $8,437,380 and a decrease in total members ’ equity of $6,145,196.

                                                                      F-37
Table of Contents

                                                           JMP HOLDINGS INC.
                                         NOTES TO FINANCIAL STATEMENTS —(Continued)
                                                 December 31, 2006, 2005 and 2004

      A summary of the significant effects of JMPG’s restatements is as follo ws:


                                                                                                    As of December 31, 2005
                                                                                       As
                                                                                   previously
                                                                                    reported                 Adjustment            As restated

Consolidated Statements of Financi al Condition
Redeemable Class A members interests                                           $             —           $      11,516,753     $     11,516,753
Accrued compensation                                                                 29,034,086                         —            29,034,086
Total liabilities                                                                    33,758,740                 11,516,753           45,275,493
Class A common interests—employee members                                            18,305,237                (18,305,237 )                 —
Retained earnings / (Distributions in excess of accumulated earnings)                (3,315,362 )                6,360,230            3,044,868
Total members’ equity                                                                58,164,373                (11,516,753 )         46,647,620

                                                                                                Year ended December 31, 2005
                                                                                       As
                                                                                   previously
                                                                                    reported                 Adjustment            As restated

Consolidated Statements of Income
Co mpensation and benefits                                                     $     25,503,796          $      34,641,040     $     60,144,836
Income allocation and accretion—Redeemable Class A member interests                          —                  12,983,213           12,983,213
Interest and dividend expense                                                            45,230                    887,698              932,928
Total expenses                                                                       42,226,854                 48,511,951           90,738,805
Net inco me                                                                          52,434,285                (48,511,951 )          3,922,334

                                                                                                Year ended December 31, 2004
                                                                                       As
                                                                                   previously
                                                                                    reported                 Adjustment            As restated
Consolidated Statements of Income
Co mpensation and benefits                                                     $     18,355,193          $      28,613,409     $     46,968,602
Income allocation and accretion—Redeemable Class A member interests                          —                   9,755,082            9,755,082
Interest and dividend expense                                                            88,742                    919,884            1,008,626
Total expenses                                                                       32,030,180                 39,288,378           71,318,558
Net inco me                                                                          42,786,385                (39,288,378 )          3,498,010



8. Di vi dends
     The Co mpany declared and paid dividends of $0.500, $0.312 and $0.023 per outstanding share during the periods ended December 31,
2006, 2005 and 2004, respectively.

                                                                        F-38
Table of Contents




Until               , 2007, all dealers that buy, sell or trade the common stock may be required to deliver a prospectus, regardless of whether
they are participating in this offering. This is in addition to the dealers ’ obligation to deliver a prospectus when acting as underwriters and with
respect to their unsold allot ments or subscriptions.
Table of Contents

                                                                    PART II
                                           INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13.       Other Expenses of Issuance and Distribution.
    The following table shows the estimated expenses payable in connection with this offering and the related transactions. Each of the
amounts below, other than the SEC registration fee, the NASD filing fee and the New York Stock Exchange listing fee, is an e stimate.


      SEC reg istration fee                                                                                                       $ 10,700
      NASD filing fee                                                                                                               10,500
      New York Stock Exchange listing fee                                                                                             *
      Accounting fees and expenses                                                                                                    *
      Legal fees and expenses                                                                                                         *
      Printing expenses                                                                                                               *
      Transfer agent’s fees and expenses                                                                                              *
      Blue sky fees and expenses                                                                                                      *
      Other                                                                                                                           *

             Total                                                                                                                $


*    To be provided by amendment.


Item 14.       Indemni ficati on of Directors and Officers.
      Section 102 of the Delaware General Corporation Law allows a corporation to eliminate the personal liability of directors of a corpor ation
to the corporation or its stockholders for monetary damages for a breach of fiduciary duty as a director, except where the direct or breached his
or her duty of loyalty, failed to act in good faith, engaged in intentional misconduct or knowingly violated a law, authorize d the payment of a
dividend or approved a stock repurchase in violation of the Delaware General Corporation Law or obtained an improper personal benefit. The
registrant’s certificate of incorporation provides for such limitation of liability to the fullest extent permitted by the Delaware Gene ral
Corporation Law.

      Section 145 of the Delaware General Corporation Law provides that a corporation may indemnify a director, officer, emp loyee or agent
of the corporation and certain other persons serving at the request of the corporation in related capacities again st amounts paid and expenses
incurred in connection with an action or proceeding to which he or she is, or is threatened to be made, a party by reason of such position, if
such person shall have acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the
corporation, and, in any criminal proceeding, if such person had no reasonable cause to believe his or her conduct was unlawf ul; provided that,
in the case of actions brought by or in the right of the corporation, no indemn ification shall be made with respect to any matter as to which such
person shall have been adjudged to be liable to the corporation unless and only to the extent that the adjudicating court det ermines that such
indemn ification is proper under the circu mstances. The registrant’s bylaws require indemnificat ion to the fullest extent permitted by Delaware
law.

     We will enter into agreements that provide indemnificat ion to our directors, officers and other persons requested or authorized by our
board of directors to take actions on behalf of us for all losses, damages, costs and expenses incurred by the indemnified pe rson arising out of
such person’s service in such capacity, subject to the limitations imposed by Delaware law. This agreement is in addit ion to our
indemn ification obligations under our bylaws. Our bylaws also permit us to purchase and maintain insurance for the foregoing and we expect to
maintain such insurance.

                                                                       II-1
Table of Contents

Item 15.       Recent Sales of Unregistered Securities.
     Set forth below are the sales of all securities of the reg istrant sold by the registrant within the past three ye ars which were not registered
under the Securities Act:

      On August 18, 2004, the registrant privately placed 879,666 shares of common stock, par value $0.001 to institutional and accredited
investors for net proceeds of $31.7 million. This transaction was exempt fro m registration under the Securit ies Act pursuant to Section 4(2) and
Rule 144A thereunder because the securities were sold to large institutional or individual accred ited investors or qualified institutional buyers.

       As of January 1, 2006, the registrant issued 133,333 shares of common stock, par value $0.001 to an accred ited investor in exchange for
the same number o f Class B common interests of JMP Group LLC in a t ransaction that was exempt fro m registration under the Securities A ct
pursuant to Section 4(2) because the purchaser was an accredited institutional investor. Accordingly, the registrant did not receive any proceeds
fro m the exchange and its total capitalizat ion was not affected.

      As part of our corporate reorganization, the reg istrant will exchange 13,787,040 shares of the registrant’s common stock, par value
$0.001 per share, for all outstanding membership interests held by the members of JMP Group LLC upon the merger of JMP Group LLC into
JMP Group Inc. The issuance of s hares of common stock to the members of JMP Group LLC will not be reg istered under the Securities Act of
1933, as amended (the “Securit ies Act”), because the shares will have been offered and sold in transactions involving large institutional or
individual accredited investors or qualified institutional buyers that are exempt fro m reg istration under the Securities Act pursuant to
Section 4(2) thereunder.

Item 16.       Exhi bits and Financial Statement Schedules.
(a)    Exh ib its.

       Reference is made to the attached exhibit index.

Item           17. Undertakings.
       (a) The undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwrit ing agreement
certificates in such denominations and registered in such names as required by the underwriter to permit pro mpt delivery to e ach purchaser.

      (b) Insofar as indemnificat ion for liabilit ies arising under the Securit ies Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securit ies
and Exchange Co mmission such indemnification is against public policy as expressed in the Securities Act and is, therefore, u nenforceable. In
the event that a claim for indemnification against such liabilit ies (other than the payment by the regis trant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is ass erted by such director,
officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate ju risdiction the question whether such indemnific atio n by it is against
public policy as exp ressed in the Securit ies Act and will be governed by the final ad judication of such issue.

       (c) The undersigned registrant hereby undertakes that:

       (1) For purposes of determining any liability under the Securities Act, the informat ion omitted fro m the form of p rospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Reg istrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securit ies Act shall be deemed to be part of this Reg istration Statement as of the time it was declared effective.

       (2) For the purpose of determin ing any liab ility under the Securities Act, each post -effective amendment that contains a form o f
prospectus shall be deemed to be a new Registration Statement relat ing to the securities offered therein, and this offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.

                                                                         II-2
Table of Contents

                                                                 SIGNATURES

     Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration stat ement to be
signed on its behalf by the undersigned, thereunto duly authorized, in San Francisco, California, on March 27, 2007.

                                                                                        JMP GROUP INC.

                                                                                        By:                  / S / J OSEPH A. J OLSON
                                                                                                                 Name: Joseph A. Jolson
                                                                                                       Title: Chairman and Chief Executive Officer

      Pursuant to the requirements of the Securities Act, this registration statement has been signed by the following persons in the capacities
indicated on March 27, 2007.

Signature                                                                                 Title                                         Date


                / S/        J OSEPH A. J OLSON                     Chief Executive Officer and Chairman of the                   March 27, 2007
                               Joseph A. Jolson                    Board of Directors (Principal Executive Officer)

               / S/         T HOMAS B. K ILIAN                     Chief Financial Officer (Principal Financial and              March 27, 2007
                               Thomas B. Kilian                    Accounting Officer)

               / S/         T HOMAS B. K ILIAN                     Director                                                      March 27, 2007
                               Craig R. Johnson


              / S/         T HOMAS B. K ILIAN                      Director                                                      March 27, 2007
                                Carter D. Mack


                / S/        T HOMAS B. K ILIAN                     Director                                                      March 27, 2007
                               Mark L. Lehmann


              / S/         T HOMAS B. K ILIAN                      Director                                                      March 27, 2007
                                 Peter T. Paul


                    / S/     T HOMAS B. K ILIAN                    Director                                                      March 27, 2007
                              Edward J. Sebastian

                                                                       II-3
Table of Contents

                                                                                     EXHIB IT INDEX


Exhi bit
Number                                                                                                 Descripti on

 1.1                      Form of Underwriting Agreement
 2.1                      Reorganization and Exchange Agreement
 3.1                      Form of Fourth A mended and Restated Certificate of Incorporation of JM P Group Inc.
 3.2                      Form of A mended and Restated Bylaws of JMP Group Inc.
 4.1                      Form of certificate representing shares of Co mmon Stock, $.001 par value per share
 5.1                      Opinion of Morrison & Foerster LLP
10.1                      JMP Group 2007 Equity Incentive Plan
10.2                      Form of Managing Directors ’ Exchange Agreement
10.3                      Cred it Agreement, dated as of August 3, 2006, between JM P Group LLC and City Nat ional Bank.**
10.5                      Form of Indemnificat ion Agreement**
10.7                      Form of Tax Indemnificat ion Agreement
10.8                      Lease Agreement, dated December 18, 2003, between Transamerica Pyramid Properties, LLC and Jolson Merchant Partners
                          Group LLC.*
10.8.1                    First Letter A mend ment to Lease, dated May 10, 2004, between Transamerica Pyramid Properties, LLC and Jolson
                          Merchant Partners Group LLC.
10.9                      Sublease, dated December 18, 2003, between Banc of A merica Securit ies LLC and Jolson Merchant Partners Gro up LLC.*
10.9.1                    Consent to Sublease, dated December 18, 2003, among Transamerica Pyramid Properties, LLC, Banc of A merica Securities
                          LLC and Jolson Merchant Partners Group LLC.*
10.9.2                    Letter A mend ment to Consent to Sublease, dated May 10, 2004, among Transamerica Pyramid Properties, LLC, Banc of
                          America Securit ies LLC and Jolson Merchant Partners Group LLC.*
10.10                     JMP Group Inc. 2007 Sen ior Executive Bonus Plan
21                        Subsidiaries of JMP Group Inc.
23.1                      Consent of Morrison & Foerster LLP (included in Exh ibit 5.1)
23.2                      Consent of PricewaterhouseCoopers LLP**
24.1                      Power o f Attorney (included on signature page)*

*      Previously filed.
**     Filed herewith. All exhibits not filed with this registration statement will be filed by amendment.
                             Exhi bit 10.3

CREDIT AGREEMENT

dated as of August 3, 2006

        between

   JMP GROUP LLC,

           and

CITY NATIONAL BANK
                                                             CREDIT AGREEMENT

    THIS CREDIT AGREEMENT, dated as of August 3, 2006, is entered into between JMP GROUP LLC, a Delaware limited liab ility
company (“Bo rrower”) and CITY NATIONAL BANK , a national banking association (“Lender”).

                                                                    ARTICLE I

                                                    DEFINITIONS AND CONS TRUCTION

      1.1 Definit ions . For purposes of this Agreement (as defined below), the fo llo wing init ially capitalized terms shall have the following
mean ings:
      “ Acquisition ” means (a) any Stock Acquisition, or (b) any Asset Acquisition.

       “ Affiliate ” means, as applied to any Person, any other Person directly or indirectly controlling, controlled by, or under co mmo n control
with, that Person. For purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled by,” and
“under common control with”), as applied to any Person, means the possession, directly or indirect ly, of the power to direct or cause the
direction of the management or policies of that Person, whether through the ownership of voting securities, by contract, or otherwise.

      “ Agreement ” means this Cred it Agreement between Borrower and Lender, together with all exhib its and schedules hereto, including the
Disclosure Statement.

      “ Asset ” means any interest of a Person in any kind of property or asset, whether real, personal, or mixed real and personal, or wheth er
tangible or intangible.

      “ Asset Acquisition ” means any purchase or other acquisition by Borrower or a Guarantor of all or a ma terial portion of the assets of any
other Person or of a business line of such Person.

      “ Availability ” means, as of any date of determination, the amount that Borro wer is entitled to borrow as Loans hereunder (after giv ing
effect to all then outstanding Obligations).

      “ Bankruptcy Code ” means Title 11 of the United States Code, as amended or supplemented fro m time to time, and any successor
statute, and all of the ru les and regulations issued or promulgated in connection therewith.

      “ Base LIBOR Rate ” means the British Banker’s Association definition of the London InterBank Offered Rates as made available by
Bloomberg LP, or such other information service available to Lender, for the applicable monthly period upon which the Interes t Period is based
for the LIBOR Rate Loan selected by Borrower and as quoted by

                                                                          1
Lender, in the case of an in itial LIBOR Rate Borro wing or a conversion of a Base Rate Loan to a LIBOR Rate Loan, on the Busin ess Day
Borro wer requests a LIBOR Rate Loan or, in the case of a continuation of an existing LIBOR Rate Loan, on the last Business Day of an
expiring Interest Period.

     “ Base Rate ” means the rate most recently announced by Lender at its principal office in Los Angeles, California as its “Prime Rate.”

      “ Base Rate Borrowing ” means any Borrowing designated by Borrower as a Base Rate Bor rowing or any Borrowing which, pursuant to
Section 2.7(a) , is deemed to be converted to a Base Rate Loan.

     “ Base Rate Loan ” means any Loan bearing interest at the Base Rate.

     “ Borrower ” shall have mean ing set forth in the introduction to this Agreement.

     “ Borrowing ” means a borrowing under the Revolving Credit Facility consisting of a Loan made by Lender to Borro wer.

     “ Business Day ” means a day when major co mmercial banks are open for business in Californ ia, other than Saturdays or Sundays.

      “ Capitalized Lease Ob ligations ” means the aggregate amount which, in accordance with GAAP, is required to be reported as a liability
on the balance sheet of Person at such time in respect of such Person ’s interest as lessee under a capitalized lease.

     “ Capital Expenditures ” means, with respect to any Person for any period, the aggregate of all expenditures by such Person and its
Subsidiaries during such period that are capital expenditures as determined in accordance with GAAP, whether such expenditure s are paid in
cash or financed.

      “ Cash Equivalents ” means (a) marketable direct obligations issued by, or unconditionally guaranteed by, the United States or issued by
any agency thereof and backed by the full faith and credit of the Un ited States, in each ca se maturing within 1 year fro m the date of acquisition
thereof, (b) marketable direct obligations issued by any state of the United States or any political subdivision of any such state or any public
instrumentality thereof maturing within 1 year fro m the date of acquisition thereof and, at the time of acquisit ion, having one of the two highest
ratings obtainable from either Standard & Poor’s Rating Group (“S&P”) or Moody’s Investors Service, Inc. (“Moody’s”), (c) commercial paper
maturing no more than 270 days from the date of creation thereof and, at the time of acquisition, having a rat ing of at least A -1 fro m S&P or at
least P-1 fro m Moody’s, (d) certificates of deposit or bankers ’ acceptances maturing within 1 year fro m the date of acquisition thereof issued
by any bank organized under the laws of the Un ited States or any state thereof having at the date of acquisition thereof comb ined capital and
surplus of not less than $250,000,000, (e) demand deposit accounts maintained with (i) Lender or (ii) any bank organized under the

                                                                         2
laws of the Un ited States or any state thereof having combined capital and surplus of not less than $1,000,000,000, and (f) Investments in
money market funds substantially all o f whose assets are invested in the types of assets described in clauses (a) through (e) above.

     “ Change of Control Event ” means the occurrence of any of the following: (a) Borrower ceases to own, directly or indirectly, and control
a majority of the aggregate voting power of the outstanding Securities of JM P Securities or JMPAM, or (b) a Change of Executive Event.

     “ Change of Executive Event ” means the failure of two or more of Joseph A. Jolson, Carter Mack, Jerry Tuttle, Craig Johnson and Mark
Leh mann to be involved actively on an ongoing basis in the management of Borro wer or any of its Subsidiaries.

      “ Closing Date ” means the first date when all of the conditions precedent set forth in Section 3.1 have been satisfied.

     “ Co llateral ” means all assets and interests in assets and proceeds thereof now owned or hereafter acquired by Borrower or any
Guarantor upon which a Lien is granted under any of the Loan Documents.

      “ Co mp liance Cert ificate ” means a certificate substantially in the form of Exhib it C-1 delivered by the chief financial officer of Borrower
to Lender.

      “ Contingent Obligation ” means, as to any Person and without duplication of amounts, any written obligation of such Person
guaranteeing or intended to guarantee (whether guaranteed, endorsed, co -made, d iscounted, or sold with recourse to such Person) any Debt,
noncancellable lease, dividend, reimbursement obligations relating to letters of credit, or any other obligation that pertains to Debt, a
noncancellable lease, a div idend, or a reimbursement obligation related to letters of credit (each, a “primary obligation”) of any other Person
(“primary obligor”) in any manner, whether direct ly or indirectly, including any written obligation of such Person, irrespective of whether
contingent, (a) to purchase any such primary obligation, (b) to advance or supply funds (whether in the form of a loan, advance, stock purchase,
capital contribution, or otherwise) (i) for the purchase, repurchase, or payment of any such primary obligation or any Asset constituting direct
or indirect security therefor, or (ii) to maintain wo rking capital o r equity capital o f the primary obligor, or otherwise to maintain the net worth,
solvency, or other financial condition of the primary obligor, or (c) to purchase or make payment for any Asset, securities, services, or
noncancellable lease if primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to
make pay ment of such primary obligation.

     “ Contractual Ob ligation ” means, as applied to any Person, any provision of any material indenture, mortgage, deed of trust, contract,
undertaking, agreement, or other material instrument to which that Person is a party or by which any of its Assets is subject .

                                                                          3
      “ Control Agreement ” means a control agreement, in form and substance reasonably satisfactory to Lender, executed and delivered by
Borro wer, Lender, and the applicable securities intermediary with respect to a Securities Account or bank with respect to a Deposit Account.

       “ Debt ” means, with respect to any Person, (a) all obligations for such Person for borrowed money, (b ) all obligations of such Person
evidenced by bonds, debentures, notes, or other similar instruments and all reimbu rsement or other obligations of such Person in respect of
letters of credit, bankers acceptances, interest rate swaps, or other financial products, (c) all obligations of such Person to pay the deferred
purchase price of Assets or services, exclusive of trade payables that are due and payable in th e ordinary and usual course of such Person’s
business, (d) all Cap italized Lease Obligations of such Person, (e) all obligations or liabilities of others secured by a Lien on any Asset owned
by such Person, irrespective of whether such obligation or liability is assumed, to the extent of the lesser of such obligation or liability or the
fair market value of such Asset, and (f) all Contingent Obligations of such Person.

      “ Deposit Account ” means any deposit account (as that term is defined in the Code).

      “ Designated Account ” means account number 432-654-168 of Borrower maintained with Lender, or such other deposit account of
Borro wer (located within the Un ited States) designated, in writ ing, and fro m time to time, by Borrower to Lender.

      “ Disclosure Statement ” means that certain statement, executed and delivered by a Responsible Officer of Borro wer, that sets forth
informat ion regarding or exceptions to the representations, warranties, and covenants made by Borro wer herein, as amended fro m time to time
to the extent permitted hereby.

      “ Distribution ” has the meaning ascribed thereto in Section 6.5 hereof.

    “ Dollars ” and “ $ ” mean United States of America dollars or such coin or currency of the Un ited States of America as at the time of
payment shall be lega l tender for the payment of public and private debts in the United States of America.

      “ Earn-Out Arrangements ” shall mean pay ments required to be made in connection with a Permitted Acquisition which obligations are
subordinated to the Obligations on terms satisfactory to Lender (it being understood that the subordination provisions set forth on Schedule E-1
shall be deemed to be satisfactory to Lender).

      “ EBITDA ” means, with respect to any fiscal period and for any Person, the Net Inco me, minus extraord inary gains, plus extraordinary
losses, interest expense, income taxes, depreciation, amort ization, other non -cash expenses, and expenses of Permitted Acquisitions not to
exceed $1,500,000 per Permitted Acquisition and $2,500,000 in the aggregate during any fiscal year, in each case for such period, for such
Person and determined in accordance with GAAP.

                                                                         4
      “ Eu rocurrency Reserve Requirement ” means the sum (without duplication) of the rates (exp ressed as a decimal) of reserves (including,
without limitation, any basic, marginal, supplemental, or emergency reserves) that are required to be maintained by banks dur ing the Interest
Period under any regulations of the Federal Reserve Board, or any other governmental authority having jurisdiction with respect thereto,
applicable to funding based on so-called “Eurocurrency Liab ilities”, including Regulation D (12 CFR 224).

      “ Eu rodollar Business Day ” means any Business Day on which major co mmercial banks are open for international business (including
dealings in Do llar deposits) in New York, New York and London, England.

     “ Event of Default ” shall have the meaning set forth in Article VII of th is Agreement.

      “ Exchange Act ” means the Securit ies Exchange Act of 1934, as amended or supplemented fro m t ime to t ime, and any successor statute,
and all of the rules and regulations issued or promulgated in connection therewith.

    “ Excluded Fund ” means any fund or investment company managed, directly or indirectly, by Borrower, including, without limitation,
JMP Realty Trust, Inc.

     “ Federal Reserve Board ” means the Board of Governors of the Federal Reserve System o r any successor thereto.

     “ Final Pay ment Date ” means the date that is three years after the Revolving Co mmit ment Termination Date.

      “ Fixed Charges ” means with respect to Borrower and its Subsidiaries for any period, the sum, without duplication, of (a) Interest
Expense during such period, (b) principal payments required to be paid in respect of Debt of Borro wer and its Subsidiaries during such period,
and (c) all federal, state, and local income taxes accrued for such period.

      “ Fixed Charge Coverage Rat io ” means, with respect to Borrower and its Subsidiaries for the twelve month period ending on any date,
the ratio of (i) EBITDA fo r such period minus Capital Expenditures made by Bo rrower and its Subsidiaries (to the extent not already incurred
in a prior period) or incurred during such period, to (ii) Fixed Charges for such period.

     “ Focus Reports ” means the Financial Operat ional Co mbined Un iform Single reports filed with the NASD.

      “ Foreign Subsidiary ” means any Subsidiary of Borrower that is not organized under the laws of any state of the United States or the
District of Colu mbia.

                                                                       5
     “ GAAP ” means generally accepted accounting principles in the Un ited States of America in effect fro m time to time.

    “ Governing Docu ments ” means, with respect to any Person, the certificate or art icles of incorporation, by -laws, or other organizational
documents of such Person.

      “ Govern mental Authority ” means any federal, state, local, or other governmental department, co mmission, board, bureau, agency,
central bank, court, tribunal, o r other instrumentality, do mestic or fo reign.

     “ Guarantors ” means (a) JMPAM, and (b) each other Person who fro m time to time guarantees the Obligations of Borrower under this
Agreement, and “ Guarantor ” means any one of them.

       “ Guaranty ” means that certain General Continuing Guaranty dated as of even date herewith by the Guarantors in favor of Lender, wh ich
is in form and substance satisfactory to Lender.

       “ Highest Lawfu l Rate ” means the maximu m non-usurious interest rate, as in effect fro m time to time, that may be charged, contracted
for, reserved, received, or co llected by Lender in connection with this Agreement, or the other Loan Docu ments.

     “ Indemn ified Liabilit ies ” shall have the meaning set forth in Section 8.2 of this Agreement.

     “ Indemn itee ” shall have the meaning set forth in Sect ion 8.2 of this Agreement.

     “ Immaterial Subsidiary ” means a Subsidiary having assets with a book value equal to $25,000 or less.

     “ Intercompany Subordination Agreement ” means a subordination agreement executed and delivered by Borrower, the Guarantors and
Lender, the form and substance of which is satisfactory to Lender.

     “ Interest Expense ” means, for any period, the aggregate of the interest expense of Bo rrower and its Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP.

     “ Interest Payment Date ” means, in the case of Base Rate Loans, the first day of each calendar month and, in the case of LIB OR Rate
Loans, the last day of the applicable Interest Period.

     “ Interest Period ” means the period commencing on the date each LIBOR Rate Loan is made (including the date a Base Rate Loan is
converted to a LIBOR Rate Loan, or a LIBOR Rate Loan is renewed as a LIBOR Rate Loan, which, in the latter case, will be th e

                                                                        6
last day of the exp iring Interest Period) and ending on the date which is one (1), t wo (2) or three (3) months thereafter, as selected by Borrower;
provided , however , that if such date is not a Eurodollar Business Day, the Interest Period shall be extended to the next Eurodollar Business
Day, provided , further , however , that no Interest Period may extend beyond the Final Pay ment Date.

       “ Investment ” means, as applied to any Person, any direct or indirect purchase or other acquisition by that Person of, or beneficial
interest in, stock, instruments, bonds, debentures or other securities of any other Person, or any direct or indirect loan, a dvance, or capital
contribution by such Person to any other Person, including all indebtedness and accounts receivable due fro m that other Perso n that did not
arise fro m sales or the rendition of services to that other Person in the ordinary and usual course of such Person’s business, and deposit
accounts (including certificates of deposit), and any transfer of cash, Cash Equivalents or any other Assets to any Person.

      “ JMP Securit ies ” means JMP Securities LLC, a Delaware limited liability co mpany.

      “ JMPAM ” means JMP Asset Management LLC, a Delaware limited liability company.

     “ Laws ” means, collect ively, all international, foreign, federal, state and local statutes, treaties, rules, regulations, ordinances, codes and
administrative or judicial p recedents or authorities, including the interpretation or ad ministration thereof by any Governmental Authority
charged with the enforcement, interpretation or ad ministration thereof, and all applicable ad min istrative orders, directed du ties, licenses,
authorizations and permits of, and agreements with, any Govern mental Authority.

      “ L/ C Disbursement ” means a payment made by Lender to a beneficiary of a Letter of Credit pursuant to such Letter of Credit.

      “ Lender ” shall have the meaning set forth in the introduction to this Agreement.

      “ Letter o f Cred it ” has the meaning set forth in Sect ion 2.18(a) .

      “ Letter o f Cred it Fee ” has the meaning set forth in Section 2.18(d) .

      “ Letter o f Cred it Usage ” means, as of any date of determination, the undrawn amount of outstanding Letters of Credit.

      “ LIBOR Rate ” means the rate per year (rounded upward to the next one-sixteenth (1/ 16th) of one percent (0.0625%), if necessary)
determined by Lender to be the quotient of (a) the Base LIBOR Rate div ided by (b) one minus the Eurocurrency Reserve Requirement for the
Interest Period; which is expressed by the following formu la:

                                                                  Base LIBOR Rate
                                                        1 - Eurocurrency Reserve Requirement

                                                                               7
      “ LIBOR Rate Borrowing ” means any Borro wing designated by Borrower as a LIBOR Rate Borrowing.

      “ LIBOR Rate Loan ” means any Loan bearing interest at the LIBOR Rate.

      “ Lien ” means any lien, mortgage, pledge, assignment (including any assignment of rights to receive payments of money), security
interest, charge, or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof,
and any agreement to give any security interest).

      “ Loan ” means a loan made by Lender to Borro wer pursuant to Section 2.1 of this Agreement.

      “ Loan Account ” has the meaning set forth in Sect ion 2.12 .

      “ Loan Documents ” means this Agreement, the Control Agreements (if any), the Guaranty, the Interco mpany Subordination Agreement,
the Letters of Credit, the Security Agreement, the Stock Pledge Agreement, the Trademark Security Agreement and any and all o ther
documents, agreements, or instruments that have been or are entered into by Borrower, the Guarantors, and Lender in connection with the
transactions contemplated by this Agreement.

      “ Loan Parties ” means Borrower and the Guarantors, and “ Loan Party ” means any one of them.

      “ Margin Securities ” means “marg in stock” as that term is defined in Regulation U of the Federal Reserve Board.

        “ Material Adverse Effect ” means (a) a material adverse change in the business, prospects, operations, results of operations, assets,
liab ilit ies or condition (financial or otherwise) of Borrower and its Subsidiaries, taken as a whole, (b) a material impairment of Borro wer’s or
any Guarantor’s ability to perform its obligations under the Loan Documents or of Lender’s ability to enforce the Ob ligations or realize upon
the Collateral, or (c) a material impairment of the enforceability or priority of Lender ’s Liens with respect to the Collateral.

      “ NASD ” means the National Association of Securit ies Dealers, Inc.

     “ Net Inco me ” means, with respect to any Person for any period, the net income (loss) of such Person for such period, determined in
accordance with GAAP.

                                                                          8
      “ Net Worth ” means, as of any date of determination, the result of (a) Borrower’s and its Subsidiaries’ total Assets, minus (b) such
Borro wer’s or its Subsidiaries’ total liabilities (including any contingent liabilities and guaranties), in each case determined in accordance with
GAAP; prov ided, however , that any liability representing the minority interest in any Subsidiary shall be excluded fro m clause (b) for the
purposes of determining “Net Worth”.

      “ Obligations ” means all Loans, debts, principal, interest, premiu ms, liabilit ies (including all amounts charged to Borrower’s Loan
Account pursuant hereto), contingent reimbursement obligations with respect to outstanding Letters of Cred it, obligations (inclu ding
indemn ification obligations), fees (including the Letter of Credit Fee), charges, costs, expenses (including any portion ther eof that accrues after
the commencement of an Insolvency Proceeding, whether or not allowed or allowable in whole or in part as a claim in any such Insolvency
Proceeding), guaranties, covenants, and duties of any kind and description owing by Borrower to Le nder pursuant to or evidenced by the Loan
Documents and irrespective of whether fo r the payment of money, whether direct or indirect, absolute or contingent, due or to become due,
now existing or hereafter arising, and including all interest not paid when due and all expenses that Borrower is required to pay or reimburse by
the Loan Docu ments, by law, o r otherwise. Any reference in this Agreement or in the Loan Documents to the Obligations shall include all
extensions, modifications, renewals, or alterat ions thereof, both prior and subsequent to any Insolvency Proceeding.

      “ Obligors ” means Borro wer and each Guarantor, and “ Obligor ” means any one of them.

      “ Permitted Acquired Indebtedness ” means Debt that is assumed in connection with a Permitted Acquisit ion so long as (a) such Debt is
either unsecured or is secured only by the assets of the Permitted Acquisition and is not secured by the assets of Borro wer o r an y other
Guarantor), (b) such Debt is recourse only to the entity that is acquired pursuant to t he Permitted Acquisition and it not recourse to, or
guaranteed by, Borro wer or any other Guarantor, (c) such Debt exists at the time the assets are acquired and is not created in anticipation of
such Permitted Acquisition, and (d) such Debt does not exceed $10,000,000 in the aggregate at any time.

      “ Permitted Acquisition ” means any Acquisition so long as:
     (a) the consideration is payable in cash (except for any Earn-Out Arrangements, Seller Notes or Permitted Acquired Indebtedness) or in
Stock of Borrower or one of its Subsidiaries.

      (b) no Default or Event of Defau lt has occurred and is continuing as of the date of consummat ion of the proposed Acquisition or would
result therefro m,

      (c) the assets being acquired (or in the case of a Stock Acquisition, the as sets of the Person being acquired) (i) are useful in the businesses
performed by Bo rrower

                                                                          9
as of the date of this Agreement, and (ii) shall be located within (x) the Un ited States, or (y) any other developed country; provided, however
that the aggregate consideration (including Earn-Out Arrangements, Seller Notes and Permitted Acquired Indebtedness) payable in connection
with Acquisitions described in this clause (c)(ii)(y) shall not exceed $5,000,000 in any fiscal year or $10,000,000 in the aggregate during the
term of this Agreement,

      (d)(i) if the aggregate amount of all consideration paid in connection wit h such Acquisition (including the aggregate amount of all
Earn-Out Arrangements, Seller Notes and Debt assumed in connection therewith) is equal to or greater than $5,000,000, Borro wer has provided
Lender with written confirmat ion, supported by reasonably detailed calculations, that on a pro forma basis, Borrower will be in compliance
with each of the financial covenants in Section 6.14 hereof after g iving effect to such Acquisition and as of the last day of each quarter during
the 12 month period following the date of such Acquisition, and (ii) if the aggregate amount of all consideration paid in connection with such
Acquisition (including the aggregate amount of all Earn -Out Arrangements, Seller Notes and Debt assumed in connection therewith) is less
than $5,000,000, the chief executive officer or the chief financial officer of Borrower shall have delivered to Lender a cert ifica te stating that on
a pro forma basis Borrower will be in co mp liance with each of the financial covenants in Section 6.14 hereof after giving effect to such
Acquisition and as of the last day of each quarter during the 12 month period fo llo wing the date of such Acquisition,

      (e) (i) pro mptly following a request therefor, Lender has received copies of such informat ion or documents relating to such Acquisition as
Lender shall have reasonably requested, including the acquisition agreement, related contracts and instruments and all opinio ns (to the extent
that an opinion is delivered to Borrower in connection with such Acquisition ), certificates, lien search results and other documents reasonably
requested by Lender and, to the extent that the aggregate amount of consideration (including Earn -Out Arrangements, Seller No tes and
Permitted Acquired Indebtedness) payable in connection with such Acquisition is greater than or equal to $10,000,000, each such opinion shall
also be addressed to Lender and Lenders or acco mpanied by a written authorizat ion fro m the firm or Persons delivering such opinion stating
that Lender and Lenders may re ly on such opinion as though it were addressed to them, and (ii) within 30 days after the consummation of such
Acquisition, Lender shall have received certified copies of the agreements, instruments and documents in connection with such Acquisition,
which shall be substantively identical to the documents provided pursuant to subclause (i) of this clause (e), subject to any applicable
provisions of Section 5.7,

    (f) in the case of a Stock Acquisition, the Securit ies are being acquired by Borrower or any of it s Subsidiaries, and in the case of an Asset
Acquisition, the subject assets are being acquired by Borrower or any of its Subsidiaries,

      (g) any Debt or Liens assumed in connection with the proposed Acquisition are otherwise permitted under Section 6.1 or 6.2 ,
respectively and no additional Debt or other liabilit ies shall be incurred, assumed or otherwise be reflected on a consolidat ed balance sheet of
Borro wer and its Subsidiaries after g iving effect to such Acquisition, except to the extent expressly permitted by the terms of th e Agreement,

                                                                         10
     (h) the proposed Acquisition shall be consensual and shall have been approved by the board of directors (or co mparable manage rs) of the
Person whose assets are proposed to be acquired,

     (i) Borro wer shall provide Lender with prior written notice (which notice shall not be less than 15 days prior to the closing date of the
proposed Acquisition and which notice shall include, without limitation, a reasonably detailed description of such Acquisitio n) of such
Acquisition, together with copies of all financial information, financial analysis, documentation and other information relat ing to such
acquisition as Lender or any Lender shall reasonably request,

      (j) at the time of the proposed Acquisition and after giving effect thereto, all representations and warranties contained in Article IV of this
Agreement or in the other Loan Documents shall be true and correct in all respects (which in each case shall be deemed to hav e been made on
the date of such Acquisition after giv ing effect thereto),

     (k) the aggregate amount of consideration paid by an Obligor in connection with any Stock Acquisition pursuant to which the applicable
Loan Party acquires less than a majority of the voting Securities in the acquired Person (including the proposed Stock Acquisition) is less than
$5,000,000, and

      (l) prior to the closing of the proposed Acquisition, the chief executive officer or the chief financial officer of Borro wer shall have
delivered to Lender a cert ificate as to each of the items set for in the foregoing clauses (a), (b), (c), (d), (g), (h ), (j) and (k).

       “ Permitted Investments ” means (a) Investments in cash and Cash Equivalents, (b) Investments in negotiable instruments for collection,
(c) advances made in connection with purchases of goods or services in the ordinary course of business, (d) Investments in funds, corporations,
partnerships or other investment vehicles that are, after giving effect to such Investments (and were immediately p rior to the time of such
Investments) managed, directly or indirectly, by Borrower, if such entity is a Subsidiary, the applicab le Ob ligor shall take such action as is
required by Section 5.7 hereof to grant a first priority perfected Lien to Lender in an to such Investments, (e) Investments in publicly traded
securities in the ordinary course of business, (f) Permitted Acquisitions, (g) advances to officers, directors and emp loyees in the ordinary course
of business for travel, entertain ment, relocation and other business purposes in an aggregate amount not to exceed $500,000 in any fiscal year
of Borrower; (h) Investments permitted under Sections 6.1 and 6.7 , (i) Investments by Borrower or a Guarantor in the form of advances to an
Excluded Fund to address short term cash flow issues, redemptions and reinvestments in Excluded Funds and in investee funds, so long as
(i) such Investments are repaid by the applicable Excluded Fund to Borrower or such Guarantor, as applicable, within 5 Business D ays after the
making of such Investment, and (ii) no Event of Defau lt or Un matured Event of Defau lt shall have occurred and be

                                                                         11
continuing or result therefrom, (j) so long as no Event of Defau lt or Un matured Event of Defau lt shall have occurred a nd be continuing or
result therefro m, redemptions, repurchases or other acquisitions by Borrower of its outstanding Securities, to the extent tha t the aggregate
amount paid by Borrower in connection with all such redemptions, repurchases or other acquisitions of its Securities (after giving effect to the
proposed redemption, repurchase or other acquisition) would not exceed $5,000,000, and (k) so long as no Event of Default o r Un matured
Event of Default shall have occurred and be continuing or result therefrom, other Investments in an aggregate amount not to exceed $5,000,000
in any fiscal year.

       “ Permitted Liens ” means: (a) Liens for taxes, assessments, or governmental charges or claims the payment of which is not, at such time,
required by Section 5.4 hereof, (b) any attachment or judgment Lien either in existence less than 45 calendar days after the entry thereof, or
with respect to which execution has been stayed, or with respect to which payment in full above any applicable deductible is covered by
insurance (so long as no reservation of rights has been made by the insurer in connection with such coverage), and Liens incurred to secure any
surety bonds, appeal bonds, supersedeas bonds, or other instruments serving a similar purpose in connection with the appeal of any such
judgment, (c) banker’s Liens in the nature of rights of setoff arising in the ordinary course of business of Borro wer, (d) carrier’s
warehousemen’s mechanics’ materialmen’s repairmen’s or other like Liens arising as a matter of law in the ordinary course of business which
are not overdue or which are being contested in good faith by appropriate proceedings promptly instituted and diligently cond ucted, and an
adequate reserve or other appropriate provision, if any, shall have been made as required in order to be in conformity with GA AP; (e) p ledges
or deposits of cash in the ordinary course of business in connection with any worker’s co mpensation, unemployment insurance and other
similar legislat ion; (f) deposits of cash to secure the performance of b ids, trade contracts and leases, statutory obligations, surety bonds,
performance bonds and other obligations of a like nature incurred in the ordinary course of business; (g) easements, rights of way and zoning
restrictions affecting real property which do not materially interfere with or impair the use or operation thereof; (h) Liens described in the
definit ion of “Permitted Acquired Indebtedness ”; (i) Liens granted by Borrower and the Guarantors to Lender in order to secure their respective
obligations under this Agreement and the other Loan Docu ments to which they are a party; and (j) Liens on deposits of cash to secure Debt
described in Section 6.1(l).

    “ Person ” means and include natural persons, corporations, partnerships, limited liab ilit y co mpanies, jo int ventures, associations,
companies, business trusts, or other organizations, irrespective of whether they are legal entities.

     “ Refinancing Debt ” means refinancings, renewals, or extensions of Debt so long as: (a) the terms and conditions of such refinancings,
renewals, or extensions do not, in Lender’s reasonable judgment, materially impair the prospects of repayment of the Ob ligatio ns by Borrower
or materially impair Borro wer’s creditworthiness, (b) such refinancings, renewals, or extensions do not result in an increase in t he principal
amount of the Debt so refinanced, renewed, or extended, (c) such refinancings, renewals, or extensions

                                                                         12
do not result in an increase in the interest rate with respect to, the Deb t so refinanced, renewed, or extended, (d) such refinancings, renewals, or
extensions do not result in a shortening of the average weighted maturity of the Debt so refinanced, renewed, or extended, no r are they on terms
or conditions that, taken as a whole, are materially mo re burdensome or restrict ive to Borrower, (e) if the Debt that is refinanced, renewed, or
extended was subordinated in right of payment to the Obligations, then the terms and conditions of the refinancing, renewal, or extension must
include subordination terms and conditions that are at least as favorable to Lender as those that were applicable to the refinanc ed, renewed, or
extended Debt, and (f) the Debt that is refinanced, renewed, or extended is not recourse to any Person that is liab le on account of the
Obligations other than those Persons which were obligated with respect to the Debt that was refinanced, renewed, or extended.

      “ Regulatory Change ” shall have the meaning ascribed thereto in Sect ion 2.13 hereof.

      “ Request for Borrowing ” means an irrevocable written notice fro m a Responsible Officer o f Borro wer to Lender of Borrower’s request
to borrow any Loan, which notice shall be substantially in the form of Exh ibit R-1 attached hereto.

      “ Request for Conversion/Continuation ” means an irrevocable written notice fro m a Responsible Officer of Borro wer to Lender pursuant
to the terms of Section 2.7 , substantially in the form of Exh ibit R-2 attached hereto.

     “ Responsible Officer ” means the president, chief executive officer, chief operating officer, chief financial officer, general counsel, or
controller of a Person, or such other officer of such Person designated by a Responsible Officer in a writing delivered to Le nder.

      “ Revolving Co mmit ment Terminat ion Date ” means (a) subject to the provisions of Section 2.3(e) , June 30, 2008, or (b) such earlier
date on which the Loans shall become due and payable in accordance with the terms of this Agreement and the other Loan Docume nts.

      “ Revolving Credit Facility ” means the revolving credit facility described in Section 2.1 hereof.

      “ Revolving Credit Facility Co mmit ment ” means $30,000,000.

    “ Revolving Credit Facility Usage ” means, at the time any determination thereof is to be made, th e sum of (a) the aggregate Dollar
amount of the outstanding Loans plus (b) the aggregate Letter of Credit Usage.

      “ SEC ” means the Securities and Exchange Co mmission of the United States of America or any successor thereto.

                                                                         13
     “ Security Agreements ” means one or more security agreements, dated as of even date herewith, among Borrower, the Guarantors, and
Lender, which Security Agreement shall be in form and substance satisfactory to Lender.

      “ Securit ies ” means the capital stock, or other securities of a Person, all warrants, options, convertible securities, and other interests
which may be exercised in respect of, converted into or otherwise relate to such Person ’s capital stock or other equity interests and any other
securities, including debt securities of such Person.

      “ Securit ies Account ” means a “securities account” as that term is defined in the Code.

     “ Seller Notes ” shall mean those promissory notes delivered by Borrower in connection with the closing of a Permitted Acquisition,
which are subordinated to the Obligations on terms satisfactory to Lender (it being understood that the subordination provisions set forth on
Schedule E-1 shall be deemed to be satisfactory to Lender).

     “ Stock Acquisition ” means the purchase or other acquisition by Borrower or a Guarantor of at least a majority of all of the voting
Securities of any other Person.

      “ Stock Pledge Agreements ” means one or mo re stock pledge agreements, in form and s ubstance satisfactory to Lender, executed and
delivered by Borrower and the Guarantors to Lender.

      “ Subsidiary ” means, with respect to any Person (a) any corporation in which such Person, directly or indirect ly through its Subsidiaries,
owns more than 50% of the stock of any class or classes having by the terms thereof the ordinary voting power to elect a majority of the
directors of such corporation, and (b) any partnership, association, joint venture, limited liability company, or other entity in wh ich s uch
Person, directly or indirectly through its Subsidiaries, has more than a 50% equity interest at the time; p rovided , however , that for the
purposes of this Agreement, no Excluded Fund or Subsidiary of an Excluded Fund shall be deemed to be a Subsidiar y.

      “ Taxes ” means any tax based upon or measured by net or gross income, gross receipts, sales, use, ad valorem, transfer, franchise,
withholding, payroll, employ ment, excise, occupation, premiu m or property taxes, or conduct of business, together with an y int erest and
penalties, additions to tax and additional amounts imposed by any federal, state, local, or foreign taxing authority upon any Person.

      “ Trademark Security Agreement ” means a trademark security agreement executed and delivered by Borrower an d Lender, in form and
substance satisfactory to Lender.

     “ Un matured Event of Defau lt ” means an event, act, or occurrence which, with the giving of notice or the passage of time, would become
an Event of Default.

                                                                         14
      1.2 Construction . Unless the context of this Agreement clearly requires otherwise, references to the plural include the singular and to the
singular include the plural, the part includes the whole, the term “including” is not limiting, and the term “or” has, except where otherwise
indicated, the inclusive meaning represented by the phrase “and/or.” References in this Agreement to a “determination” or “designation”
include estimates by Lender (in the case of quantitative determinations or designations), and beliefs by Lend er (in the case of q ualitative
determinations or designations). The words “hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this Agreement refer to this
Agreement as a whole and not to any particular provision of this Agreement. Article, sect ion, subsection, clause, exh ibit, and schedule
references are to this Agreement unless otherwise specified. Any reference herein to this Agreement or any of the Loan Docume nts includes
any and all alterations, amend ments, changes, extensions, modificat ions , renewals, or supplements thereto or thereof, as applicable.


                                                                   ARTICLE II

                                                     AMOUNT AND TERMS OF LOANS

      2.1 Revolving Cred it Facility .
      (a) Subject to the terms and conditions hereof:
            (i) Subject to the provisions of Article III hereof, Lender agrees to make Loans to Borro wer fro m the Closing Date to, but no t
including, the Revolving Co mmit ment Termination Date, at such times and in such amounts as Borrower may request in accordance with
Section 2.6 hereof; and

           (ii) Borrowings under the Revolving Credit Facility may be borro wed, repaid without penalty or premiu m, and reborrowed.

       (b) In no event shall Lender be obligated to make Loans hereunder if, after giv ing effect to the requested Loa n, the Revolv ing Credit
Facility Usage would exceed the Revolv ing Credit Facility Co mmit ment.

      (c) In the event that, at any time the Revolv ing Credit Facility Usage exceeds the amount of the Revolv ing Credit Facility Co mmit ment,
then Borrower immed iately s hall repay the amount of such excess to Lender to be applied to the outstanding principal balance of the Loans.

     (d) Lender shall have no obligation to make any Loan under the Revolving Credit Facility on or after the Revolving Co mmit ment
Termination Date.

     (e) Subject to Section 2.1(b) hereof, each Borrowing under the Revolving Cred it Facility shall be in a min imu m p rincipal amou nt of
$250,000 and, thereafter, in integral mu ltiples of $100,000, unless such Borrowing is being made to pay any interest, fees, o r expenses then due
hereunder, in wh ich case such Borrowing may be in the amount of such interest, fees, or expenses.

                                                                         15
      2.2 Rate Designation . Borrower shall designate each Borrowing under the Revolving Cred it Facility as a Base Rate Borrowing or a
LIBOR Rate Borrowing in the Request for Borro wing or Request for Conversion/Continuation given to Lender in accordance with Sect ion 2.6
or Section 2.7 , as applicable.

     2.3 Interest Rates; Payment of Principal and Interest .
     (a) Borrower shall make each pay ment due hereunder by making, or causing to be made, the amount thereof available to Lender ’s
account maintained with Lender in Los Angeles, California, not later than noon Pacific Time, on the date of payment. In lieu th ereof, Borrower
hereby authorizes Lender to, and Lender shall, charge such interest, the Letter of Credit Fee, and all other fees and expense s provided for in this
Agreement or the other Loan Documents (as and when accrued or incurred), to Borrower’s Loan Account, which amounts thereafter shall
accrue interest at the rate then applicable to Base Rate Loans hereunder.

       (b) Subject to Sect ion 2.4 , each Base Rate Loan shall bear interest upon the unpaid principal balance thereof, fro m and including the date
advanced or converted, to but excluding the date of conversion or repayment thereof, at a fluctuating rate, per annum, equal to the lesser of
(i) the Base Rate minus 1.25 percentage points, or (ii) the Highest Lawfu l Rate. Any change in the interest rate resulting fro m a change in the
Base Rate will beco me effective on the day on which each change in the Base Rate is announced by Lender. Interest due with re spect to Base
Rate Loans shall be due and payable, in arrears, co mmencing on the first Interest Payment Date following the Closing Date, an d continuing on
each Interest Payment Date thereafter up to and including the Interest Payment Date immediately preced ing the Final Pay ment D ate, and on the
Final Pay ment Date.

      (c) Subject to Section 2.4 , each LIBOR Rate Loan shall bear interest upon the unpaid principal balance thereof, fro m the date advanced,
converted, or continued, at a rate, per annu m, equal to the lesser of (i) the LIBOR Rate plus 1.25 percentage points, and (ii) the Highest Lawful
Rate. Interest due with respect to each LIBOR Rate Loan shall be due and payable, in arrears, on each Interest Payment Date a p plicable to that
LIBOR Rate Loan and on the Final Pay ment Date. Anything to the co ntrary contained in this Agreement notwithstanding, Borrower may not
have more than 10 LIBOR Rate Loans outstanding at any one time.

      (d) Unless prepaid in accordance with the terms hereof, the outstanding principal balance of all Loans, together with accru ed and unpaid
interest thereon, shall be due and payable in accordance with clause (e) below.

     (e) On the Revolv ing Co mmit ment Termination Date, Lender shall have the option to elect to either (i) extend the Revolv ing
Co mmit ment Termination Date by one

                                                                        16
year, in which case the Revolving Co mmit ment Termination Date shall be one year later than the previously existing Revolving Co mmit ment
Termination Date so long as Borrower has provided its written consent to such extension, or (ii) terminate the Revolving Facilit y Cred it
Co mmit ment and convert the outstanding principal balance of all Loans into a single term loan, wh ich shall be repayable in 12 equal quarterly
principal installments, each in an amount equal to 1/12th of the outstanding principal balance of such term loan as of the date of conversion, on
the first day of each fiscal quarter of Borro wer thereafter, with all unpaid amounts due and payable on the Final Pay ment Dat e. If Lender fails
to notify Borro wer within thirty (30) days prior to the Revolving Co mmit ment Termination Date that it has elected to extend the Revolving
Co mmit ment Termination Date by one year, Lender shall be deemed to have elected to terminate all Revolving Facility Credit Co mmit ments
and to convert the Loans into a term loan pursuant to subclause (ii) above if this clause (e).

      2.4 Default Rate . Upon the occurrence and during the continuance of an Event of Default, all Obligations shall bear interest at a rate
equal to (i) the Base Rate, plus (ii) 1.75 percentage points. All amounts payable under this Section 2.4 shall be immed iately due and payable
without the requirement of notice or demand.

      2.5 Co mputation of Interest and Fees Maximu m Interest Rate .
      (a) All computations of interest with respect to the Loans and computations of the fees (including the Letter of Credit Fee) due hereunder
for any period shall be calculated on the basis of a year of 360 days for the actual number o f days elapsed in such p eriod, provided that all
computations of interest with respect to Base Rate Loans shall be calculated on the basis of a year of 365/366 days for the a ctual nu mber of
days elapsed in such period. Interest shall accrue fro m the first day of the making of a Loan (or the date on which interest or fees or other
payments are due hereunder, if applicable) to (but not including) the date of repayment of such Loan (or the date of the payment of interest or
fees or other payments, if applicable) in accordance with the provisions hereof.

       (b) Anything to the contrary contained in this Agreement notwithstanding, Borrower shall not be obligated to pay, and Lender shall not be
entitled to charge, collect, receive, reserve, or take interest (it being understood that interes t shall be calculated as the aggregate of all charges
which constitute interest under applicable law that are contracted for, charged, reserved, received, or paid) in excess of th e High est Lawfu l
Rate. During any period of time in which the interest rates specified herein exceed the Highest Lawfu l Rate, interest shall accru e and be
payable at such Highest Lawful Rate; provided , however , that, if the interest rate otherwise applicable hereunder declines below the Highest
Lawfu l Rate, interest shall continue to accrue and be payable at the Highest Lawful Rate (so long as there remains any unpaid principal with
respect to the Loans) until the interest that has been paid hereunder equals the amount of interest that would have been paid if interest had at all
times accrued and been payable at the applicable interest rates otherwise specified in this Agreement. For purposes of this Section 2.5 , the term
“applicable law” shall mean that law in effect fro m time to time and applicable to this loan transaction which lawfully permits the

                                                                          17
charging and collection of the highest permissible, lawfu l, non -usurious rate of interest on such loan transaction and this Agreement, including
laws of the State of California and, to the extent controlling, laws of the United States of America.

      2.6 Request for Borrowing .
     (a) Each Base Rate Borrowing shall be made on a Business Day and each LIBOR Rate Borro wing shall be made on a Eurodollar
Business Day.

      (b) Each Borro wing shall be made upon written notice, by way of a Request for Borrowing, wh ich Request for Borro wing shall be
irrevocable and shall be given by telex, telecopy, mail, or personal service, and delivered to Lender at 555 S. Flower Street , 16t h Floor, Los
Angeles, CA 90071, as fo llo ws:
           (i) for a Base Rate Borrowing, Bo rrower shall give Lender notice not later than noon Pacific Time 1 Business Day prior to the date
on which such Borrowing is to be made (which date shall be a Business Day), and such notice shall specify that a Base Rate Bo rrowing is
requested and state the amount thereof (subject to the provisions of this Article II );

            (ii) for a LIBOR Rate Borro wing, Borrower shall g ive Lender notice no earlier than two (2) Eu rodollar Business Days before and
no later than noon Pacific Time on the day the LIBOR Rate Bo rrowing is to be made, and such notice shall specify that a LIBOR Rate
Borro wing is requested and state the amount thereof (subject to the provisions of this Article II ); provided , however , that no Borro wing shall
be available as a LIBOR Rate Borrowing when any Un matured Event of Defau lt or Event of Default has occurred and is continuing . If
Borro wer fails to designate a Loan as a LIBOR Rate Borro wing in accordance herewith, the Loan will be a Base Rate Borrowing, and any
outstanding LIBOR Rate Loan will be deemed to be a LIBOR Rate Loan with an Interest Period of one (1) month upon expirat ion of the
applicable Interest Period.

       (c) If the notice provided for in clause (b) of this Section 2.6 with respect to a Base Rate Borro wing or a LIBOR Rate Borrowing is
received by Lender not later than noon, Pacific Time, on a Business Day or Eu rodollar Business Day, as applicable, such day s hall be treated as
the first Business Day or Eurodollar Business Day, as applicable, of the required notice period. In any other event, such notice will be treated as
having been received immediately before noon, Pacific Time, of the next Business Day or Eurodollar Business Day, as applicable.

     (d) Each Request for Borrowing shall (i) specify, if applicable, among other informat ion, the identity of the Excluded Fund(s) that the
proceeds of such Borrowing will be used by Borrower to invest in and the amount of each such Investment and (ii) include a description of all
Margin Securities (if any) held or to be acquired by any Loan Party in connection with such Borrowing (including the name of the issuer of
such Margin Securit ies, the owner (o r proposed owner) thereof and the number of shares of each class of

                                                                        18
Margin Securities held or to be acquired by such Person), and, upon request of the Lender, Borrower will provide a Borrower -p repared
financial report with respect to the Loan Part ies (including a Bo rrower-prepared balance sheet with respect to the Loan Parties) as of the end of
the most recent fiscal month then ended.

     2.7 Conversion or Continuation .
       (a) Subject to the provisions of clause (d) of this Section 2.7 and the provisions of Section 2.14 , Borro wer shall have the option to
(i) convert all or any portion of the outstanding Base Rate Bo rrowings equal to $250,000, and integral mu ltip les of $100,000 in e xcess of such
amount, to a LIBOR Rate Borro wing, (ii) convert all or any portion of the outstanding LIBOR Rate Borrowings equal to $250,000 and integral
mu ltip les of $100,000 in excess of such amount, to a Base Rate Bo rrowing, and (iii) upon the exp iration of any Interest Period applicable to
any of its LIBOR Rate Borrowings, continue all or any portion of such LIBOR Rate Borro wing equal to $250,000, and integral mu ltip les of
$100,000 in excess of such amount, as a LIBOR Rate Borro wing, and the succeeding Interest Period of such continued Borrowing shall
commence on the expiration date of the Interest Period previously applicab le thereto; provided , however , that a LIBOR Rate Borro wing only
may be converted or continued, as the case may be, on the expiration date of the Interest Period applicab le thereto; provided further , however ,
that no outstanding Borrowing may be continued as, or be converted into, a LIBOR Rate Borro wing when any Unmatured Event of Default o r
Event of Default has occurred and is continuing; provided further , however , that if, befo re the expiration of an Interest Period of a LIBOR
Rate Borro wing, Borrower fails timely to deliver the appropriate Request for Conversion/Continuation, such LIBOR Rate Borrowing
automatically shall be converted to a LIBOR Rate Borrowing with an Interest Period of one (1) month.

       (b) Borro wer shall by telex, telecopy, mail, or personal service deliver a Request for Conversion/Continuation to Lender (i) no later than
noon, Pacific Time, on the Business Day that is the proposed conversion date (in the case of a conversion to a Base Rate Borro wing), and
(ii) no earlier than two (2) Eurodollar Business Days before and no later than noon Pacific Time on the day of the proposed conversion or
continuation date (in the case of a conversion to, or a continuation of, a LIBOR Rate Borrowing). A Request for Conversion/Continuation shall
specify (x) the proposed conversion or continuation date (which shall be a Business Day or a Eurodollar Business Day, as applicable), (y) the
amount and type of the Borrowing to be converted or continued, and (z) the nature of the proposed conversion or continuation.

     (c) Any Request for Conversion/Continuation (or telephonic notice in lieu thereof) shall be irrevocable and Bo rrower shall be obligated to
convert or continue in accordance therewith.

       (d) No Bo rrowing (or portion thereof) may be converted into, or continued as, a LIBOR Rate Borrowing with an Interest Period that ends
after the Final Pay ment Date.

                                                                        19
      2.8 Mandatory Repayment .
       (a) The Revolving Cred it Facility Co mmit ment shall terminate on the Revolving Co mmit ment Termination Date, and the Loans shall
convert into a term loan and shall be repayable as provided in Sect ion 2.3(e) hereof. Notwithstanding the foregoing, at the request of Borrower,
any Letters of Credit that are outstanding on the Revolving Co mmit ment Termination Date shall be renewed through the Final Pa yment Date.
On the Final Pay ment Date all remaining outstanding Loans, all interest that has accrued and remains un paid thereon, all contin gent
reimbursement obligations of Borrower with respect to outstanding Letters of Cred it, all unpaid fees, costs, or expenses that are payable
hereunder or under any other Loan Document, and all other Obligations immediately shall e ach beco me due and payable in full, without notice
or demand (includ ing either (i) providing cash collateral to be held by Lender in an amount equal to 105% of the Letter of Cred it Usage, or
(ii) causing the original Letters of Cred it to be returned to Lender), on such date.

     (b) In the event that, at any time, the Revolv ing Credit Facility Usage exceeds the then extant amount of the Revolving Credit Facility
Co mmit ment, then, and in each such event, Borrower immediately shall repay the amount of such excess to Lender.

      (c) All prepayments of the Loans made pursuant to this Section 2.8 after the date when the Loans have been converted into a term loan
pursuant to the provisions of Section 2.3(e) shall be applied against the remain ing installments of principal due in respect thereof in the inverse
order of maturity.

      2.9 Vo luntary Prepay ments . Borrower shall have the right, at any time and fro m time to time, to prepay the Loans without penalty or
premiu m. Borro wer shall give Lender notice of any such prepayment with respect to Base Rate Loans and not less than 3 Eurodollar Business
Days prior written notice of any such prepayment with respect to LIBOR Rate Loans. In each case, such notice shall specify th e date on which
such prepayment is to be made (wh ich shall be a Business Day or Eurodollar Business Day, as applicable), and the amount of such prepayment.
Each such prepayment shall be in an aggregate min imu m amount of $250,000, and integral mult iples of $50,000 in excess of such amount, in
each case, and shall include interest accrued on the amount prepaid to, but not including, the date of payment in accordance with the terms
hereof (or, in each case, such lesser amount constituting the amount of all Loans then outstanding). All prepay ments of the Loans made
pursuant to this Section 2.9 after the date when the Loans have been converted into a term loan pursuant to the provisions of Section 2.3(e)
shall be applied against the remain ing installments of principal due in respect thereof in the inverse order of maturity. The foreg oing to the
contrary notwithstanding, (x) Borrower may not make a partial principal prepay ment on a LIBOR Rate Loan; and (y) Borrower may prepay the
full outstanding principal balance on a LIBOR Rate Loan prior to the end of the Interest Perio d, provided , that such prepayment is
accompanied by a fee (“ LIBOR Prepay ment Fee ”) equal to the amount, if any, by which (i) the additional interest which would have been
earned by Lender had the LIBOR Rate Loan not been prepaid, at the LIBOR Rate that would have been

                                                                         20
applicable thereto, for the period fro m the date of such prepayment to the last day of the then current Interest Period there fore, exceeds (ii) the
interest which would have been recoverable by Lender by placing the amount of the LIBOR Rate Loan on deposit in the LIBOR market for a
period starting on the date on which it was prepaid and ending on the last day of the applicable Interest Period. Lender ’s calculation of the
LIBOR Prepay ment Fee will be deemed conclusive absent manifest error.

     2.10 Closing Fee . Borro wer shall pay a fee (the “ Closing Fee ”) to Lender in the amount of $75,000. The Closing Fee shall be due and
payable on the Closing Date.

       2.11 Unused Co mmit ment Fee . Borro wer shall pay a fee (the “Unused Commit ment Fee”) to Lender quarterly in arrears, co mmencing on
the first day of the first fiscal quarter of Borrower following the Closing Date, and continuing on the first day of each fis cal quarter of Borrower
thereafter so long as the Revolving Credit Facility Co mmit ment is extant. The Unused Co mmit ment Fee shall be equal to 0.25% per annum
times the average daily amount of the unfunded portion of the Revolving Credit Facility Co mmit ment and shall be calculated, as set forth in
Section 2.6 hereof, on the basis of a year of 360 days for the actual number of days elapsed. In the case of the first date on which the Unused
Co mmit ment Fee is payable, such fee shall be calculated based upon the period fro m and aft er the Closing Date to the last day of the fiscal
quarter of Bo rrower during which the Closing Date occurs.

      2.12 Maintenance of Loan Account; Statements of Obligations . Lender shall maintain an account on its books in the name of Borrower
(the “ Loan Account ”) on which Borro wer will be charged with all Loans made by Lender to Borrower or for Borrower ’s account, the Letters
of Credit issued by Lender for Borrower’s account, and with all other payment Obligations, including all accrued interest, fees and expenses (in
each case, as and when payable hereunder or under the other Loan Docu ments). Lender shall render statements regarding the Loa n Account to
Borro wer, including principal, interest, fees, and including an itemizat ion of all expenses owing, and such statements shall be conclusively
presumed to be correct and accurate (absent manifest error) and constitute an account stated between Borrower and Lender unle ss, within 30
days after receipt thereof by Borro wer, Borro wer shall deliver to Lender written ob jection thereto describing the error or erro rs contained in any
such statements.

      2.13 Increased Costs . If after the Closing Date, the adoption of, or any change in, any applicable law, rule, or regulation, or any change in
the interpretation or administration thereof by any Governmental Authority charged with the interpretation or ad min istration thereof, or
compliance by Lender (or its Affiliates) with any request, guideline, or d irective (irrespective of whether having the force of law) o f any
governmental authority (a “ Regulatory Change ”) shall impose, modify, o r deem applicable any reserve, special deposit, or similar requirement
(including any such requirement imposed by the Federal Reserve Board, but excluding with respect to any LIBOR Rate Loan any such
requirement included in the calculat ion of the Base LIBOR Rate, as applicable) against

                                                                          21
Assets of, deposits with, or for the account of, or credit extended by, Lender (or its Affiliates) or shall impose on Lender (or its Affiliates) or
the interbank eurodollar market any other condition affecting its LIBOR Rate Loans, as applicable, or its obligation to make LIBOR Rate
Loans, as applicable, then, Lender may, by written notice given to Borro wer, require Borro wer to pay to Lende r such additional amounts as
shall compensate Lender for any such increased cost, reduction, loss, or expense actually incurred by Lender in connection with the Loans for
preceding the date on which such notice is given during each fiscal quarter thereafte r. Any such request for compensation by Lender under this
Section 2.13 shall set forth the basis of calculation thereof and shall, in the absence of man ifest error, be conclusive and binding for a ll
purposes.

      2.14 Suspension of LIBOR Rate Loans . If Lender, on any Eurodollar Business Day, is unable to determine the Base LIBOR Rate
applicable for a new, continued, or converted LIBOR Rate Loan for any reason, or any law, regulation, o r governmental order, rule or
determination, makes it unlawful for Lender to make a LIBOR Rate Loan, Borrower’s right to select LIBOR Rate Loans will b e suspended
until Lender is again able to determine the Base LIBOR Rate or make LIBOR Rate Loans, as the case may be. During such suspens ion, new
Loans, outstanding Base Rate Loans, and LIBOR Rate Loans whose Interest Periods terminate may only be Base Rate Loans. Any such
determination shall, in the absence of manifest error, be conclusive and binding for all purposes.

      2.15 Funding Sources . Nothing herein shall be deemed to obligate Lender to obtain the funds to make any Loan in any particular place or
manner and nothing herein shall be deemed to constitute a representation by Lender that it has obtained or will obtain such f unds in any
particular p lace or manner.

     2.16 Place of Borrowings . All Borrowings made hereunder shall be d isbursed by credit to Borro wer ’s Designated Account or as may
otherwise be agreed to between Borrower and Lender.

      2.17 Surv ivability . Borrower’s obligations under Section 2.13 hereof shall survive repayment of the Loans made hereunder and
termination of the Revolving Credit Facility Co mmit ment for a period of 90 days.

      2.18 Letters of Credit .
       (a) Subject to the terms and conditions of this Agreement, Lender agrees to issue letters of credit for the account of Borrower (each, a “
Letter of Credit ”). Each request for the issuance of a Letter of Credit, or the amend ment, renewal, o r extension of any outstanding Letter of
Cred it, shall be made in writ ing by an Authorized Person and delivered to Lender v ia hand delivery, telefacsimile, or other e lect ronic method of
transmission reasonably in advance of the requested date of issuance, amend ment, rene wal, or extension. Each such request shall be in form
and substance satisfactory to Lender in its reasonable discretion and shall specify (i) the amount of such Letter of Cred it, (ii) the date of
issuance, amend ment, renewal, or extension of such Letter of Credit, (iii) the expiration date of such

                                                                         22
Letter of Credit, (iv) the name and address of the beneficiary thereof, and (v) such other informat ion (including, in the case of an amend ment,
renewal, or extension, identification of the outstanding Letter of Cred it to be so amended, renewed, or extended) as shall be necessary to
prepare, amend, renew, or extend such Letter of Cred it. Lender shall have no obligation to issue a Letter of Credit if any of the following would
result after giving effect to the issuance of such requested Letter of Cred it:
            (i) the Letter of Credit Usage would exceed $2,500,000, or

            (ii) the Revolver Credit Facility Usage would exceed the Revolving Credit Facility Co mmit ment.

       Each Letter of Credit shall be in form and substance acceptable to Lender (in the exercise of its reasonable discretion), inc ludin g the
requirement that the amounts payable thereunder must be payable in Dollars. If Lender is obligated to advance funds unde r a Letter of Credit,
Borro wer immediately shall reimburse such L/C Disbursement to Lender by paying to Lender an amount equal to such L/C Dis burse ment not
later than 11:00 a.m., Californ ia t ime, on the date that such L/C Disbursement is made, if Borrower shall have received written or telephonic
notice of such L/C Disbursement prior to 10:00 a.m., California t ime, on such date, or, if such notice has not been received by Borro wer p rior
to such time on such date, then not later than 11:00 a.m., California time, on the Business Day that Borrower receives such notice, if such
notice is received prio r to 10:00 a.m., California t ime, on the date of receipt, and, in the absence of such reimbursement, t he L/C Disbursement
immed iately and automatically shall be dee med to be a Base Rate Loan hereunder and, thereafter, shall bear interest at the rate then applicable
to Base Rate Loans. To the extent an L/C Disbursement is deemed to be a Base Rate Loan hereunder, Borro wer’s obligation to reimburse such
L/ C Disbursement shall be discharged and replaced by the resulting Base Rate Loan.

       (b) Borro wer hereby agrees to indemn ify, save, defend, and hold Lender harmless from any loss, cost, expense, or liab ility, a nd
reasonable attorneys fees incurred by Lender arising out of o r in connection with any Letter of Credit; provided , however , that Borrower shall
not be obligated hereunder to indemnify for any loss, cost, expense, or liab ility to the extent that it is caused by the gros s negligence or willfu l
misconduct of Lender. Borrower agrees to be bound by the Lender’s interpretations of any Letter of Cred it issued by Lender to or for
Borro wer’s account, even though this interpretation may be d ifferent fro m Borrower’s own, and Borro wer understands and agrees that Lender
shall not be liab le for any error, negligence, or mistake, whether of o mission or co mmission, in following Borrower’s instructions or those
contained in the Letter of Cred it or any modificat ions, amend ments, or supplements thereto. Borrower hereby acknowledges and agrees that
Lender shall not be responsible for delays, erro rs, or o missions resulting fro m the malfunction of equip ment in connection with any Letter of
Cred it.

      (c) If by reason of (x) any change after the Closing Date in any applicable law, t reaty, rule, or regulation or any change in the
interpretation or applicat ion thereof by

                                                                          23
any Govern mental Authority, or (y) co mpliance by Lender with any direction, request, or requirement (irrespective of whether having the force
of law) o f any Govern mental Authority or monetary authority including, Regulation D of the Federal Reserve Board as fro m t ime to time in
effect (and any successor thereto):
           (i) any reserve, deposit, or similar requirement is or shall be imposed or modified in respe ct of any Letter of Credit issued
hereunder, or

           (ii) there shall be imposed on Lender any other condition regarding any Letter of Cred it issued pursuant hereto,

and the result of the foregoing is to increase, directly or indirectly, the cost to Lender of issuing, making, guaranteeing, or maintaining any
Letter of Credit or to reduce the amount receivable in respect thereof by Lender, then, and in any such case, Le nder may, at any time within a
reasonable period after the additional cost is incurred or the amount received is reduced, notify Borro wer, and Borrower shall p ay on demand
such amounts as Lender may specify to be necessary to compensate Lender for such add itional cost or reduced receipt, together with interest on
such amount fro m the date of such demand until pay ment in full thereof at the rate then applicable to Base Rate Loans hereunder. The
determination by Lender of any amount due pursuant to this Section, as set forth in a certificate setting forth the calculation thereof in
reasonable detail, shall, in the absence of man ifest or demonstrable error, be final and conclusive and binding on all of the parties hereto.

      (d) Borro wer shall pay Lender a Letter of Credit fee (the “Letter of Credit Fee”) which shall accrue at a rate equal to 1.25% per annum
times the Daily Balance of the undrawn amount of all outstanding Letters of Cred it, and wh ich shall be payable quarterly in a rrears on the first
day of each fiscal quarter beginning after the Closing Date.


                                                                   ARTICLE III

                                                           CONDITIONS TO LOANS

       3.1 Conditions Precedent to Initial Loan . The obligation of Lender to make its init ial Loan hereunder is, in addit ion to the conditions set
forth in Sect ion 3.2 hereof, subject to the fulfillment, to the satisfaction of Lender and its counsel, of each of the following conditions on or
before the Closing Date:
      (a) Borrower shall have executed and delivered to Lender the Disclosure Statement required under this Agreement. The form and content
of the Disclosure Statement shall be satisfactory to Lender;

     (b) Lender shall have received the Guaranty, the Intercompany Subordination Agreement, the Security Agreements, the Stock Ple dge
Agreement, the Trademark Security Agreement, the Control Agreements, and each other Loan Docu ment, each duly executed and delivered by
each party thereto;

                                                                         24
     (c) Lender shall have received the written opinions, dated the date of this Agreement, of counsel to Borro wer, subst antially in t he form
and substance of Exhib it 3.1(c) attached hereto, or otherwise in form and substance reasonably satisfactory to Lender and its counsel;

       (d) Lender shall have received a cert ificate of status with respect to Borrower dated within 10 days of the date of this Agreement, such
certificate to be issued by the Secretary of State of Delaware, wh ich certificate shall ind icate that Borrower is in good sta nding in such State;

       (e) Lender shall have received a cert ificate of status with respect to JM PAM dated within 10 days of the date of this Agreement, such
certificate to be issued by the Secretary of State of Delaware, wh ich certificate shall ind icate JMPAM is in good standing in such State;

     (f) Lender shall have received a copy of the Governing Docu ments of Borro wer, JMPAM and JMP Securit ies, certified by the Secretary
of Borrower;

     (g) Lender shall have received a copy of the management contracts to which Borro wer or a Guarantor is a party, cert ified by t he secretary
of Borrower, which shall be in form and substance satisfactory to Lender;

      (h) Lender shall have received a signature and incumbency certificate of the Responsible Officers of Borro wer executing this Agreement,
the Intercompany Subordination Agreement, the applicable Security Agreement, the Stock Pledge Agreement, the Trademark Security
Agreement and the other Loan Docu ments to which Borrower is a party, cert ified by a Secretary o f Borro wer;

       (i) Lender shall have received a signature and incumbency certificate of the Responsible Officers of JMPAM executing the Guaranty, the
Intercompany Subordination Agreement, the applicable Security Agreement and the other Loan Documents to which JMPAM is a part y,
certified by a Secretary o f JMPAM;

      (j) Lender shall have received full pay ment of the Closing Fee;

     (k) Lender shall have received form FR U-1, with Part I fully co mpleted and executed by Borro wer, together with the information
necessary in order for Lender to co mplete the disclosures required in Part II and Part III of such form;

      (l) Lender shall have received a cert ificate executed by a Responsible Officer of Borro wer to the effect that Borro wer and ea ch of its
Subsidiaries has each obtained all orders, consents, approvals, and other authorizations and having made all filings and other notifications
(governmental or otherwise) required in connection with the Loan Documents, other than orders, consents, approvals, authoriza tions, or filings
the failu re to obtain or file, as applicable, which could not reasonably be expected to have a Material Adverse Effect on Borrower or any of its
Subsidiaries;

                                                                          25
      (m) Lender shall have received a copy of the resolutions of Borrower and JMPAM, cert ified as of the Closing Date by an Respon sible
Officer thereof, authorizing (A) the transactions contemplated by the Loan Documents to which such Person is or will be a part y, and (B) the
execution, delivery and performance by such Person of each Loan Document to wh ich such Person is or will be a party and the e xecution and
delivery of the other documents to be delivered by such Person in connection herewith and therewith;

       (n) no litigation, inquiry, other action or proceeding (governmental o r otherwise), or injunction or other restrain ing order s hall b e pending
or overtly threatened that could have, in the reasonable opinion of Lender: (i) a material adverse effect on Borrower’s or any Guarantor’s
ability to repay the Loans or (ii) a Material Adverse Effect on Borro wer or any Guarantor; and

      (o) all other documents and legal matters in connection with the transactions contemplated by this Agreement shall have been delivered
or executed or recorded and shall be in form and substance reasonably satisfactory to Lender and its counsel.

      3.2 Conditions Precedent to All Loans . The obligation of Lender to make each Loan hereunder is subject to the fulfillment, at o r prior to
the time of the making of such Loan, of each of the fo llo wing conditions:
      (a) the representations and warranties of Borro wer contained in this Agreement and the other Loan Documents shall be true and correct in
all material respects on and as of the date of such Loan as though made on and as of such date (except to the extent that such representations
and warranties solely relate to an earlier date);

      (b) no Event of Defau lt or Un matured Event of Defau lt shall have occurred and be continuing on the date of such Loan, nor shall either
result fro m the making of such Loan; and

      (c) Borrower shall have delivered to Lender a Request for Borro wing pursuant to the terms of Sect ion 2.6 hereof.


                                                                    ARTICLE IV

                                                  REPRES ENTATIONS AND WARRANTIES
                                                            OF BORROWER

      Borro wer makes the following representations and warranties which, except as set forth in the Disclosure Statement with a specific
reference to the Section of this Article IV affected thereby, shall be true, correct, and co mplete in all respects as of the date hereof,

                                                                          26
and shall be true, correct, and co mplete in all respects as of the Closing Date, and at and as of the date of each Loan made thereafter, as though
made on and as of the date of the making of such Loan and at and as of the date of each issuance of, renewal of, or amendment to any Letter of
Cred it, as though made on and as of the date of the making of such Loan or at and as of the date of such issuance of, renewal of, or amend ment
to any Letter of Cred it (except to the extent that such representations and warranties relate solely to an earlier date) and such representations
and warranties shall survive the execution and delivery of this Agreement and the making of the Loans and the issuance of the Letters of
Cred it:

       4.1 Due Organization . Borrower is a duly organized and validly existing limited liab ility co mpany in good standing under the laws of the
State of Delaware and is duly qualified to conduct business in all ju risdictions where its failure to do so could reasonably be expected to have a
Material Adverse Effect on Borro wer. Each Guarantor is a duly organized and valid ly existing limited liability co mpany or limit ed partnership,
as applicable, in good standing under the laws of the State of Delaware and is duly qualified to conduct business in all jurisdictions where its
failure to do so could reasonably be expected to have a Material Adverse Effect on such Guarantor.

     4.2 Interests in Borrower and its Subsidiaries .
     (a) As of the Closing Date, all of the interests in Borrower and its Subsidiaries are o wned by the Persons identified in the Disclosure
Statement.

     (b) Borro wer may amend the Disclosure Statement with respect to this Section 4.2 to reflect changes that would not, individually or in the
aggregate result in a Change of Control Event.

      4.3 Requisite Power and Authorizat ion . Borro wer has all requisite power to execute and deliver this Agreement and the other Loan
Documents to which it is a party, and to borrow the sums provided for in this Agreement. Each Guarantor has all requisite pow er to execute
and deliver the Loan Docu ments to which it is a party. Borrower and each Guarantor has all govern mental licenses, authorizatio ns, consents,
and approvals necessary to own and operate its Assets and to carry on its businesses as now conducted an d as proposed to be conducted, other
than licenses, authorizations, consents, and approvals that are not currently required or the failure to obtain which reasona bly could not be
expected to have a Material Adverse Effect on Borrower or any Guarantor. The execution, delivery, and perfo rmance of this Agreement and the
other Loan Docu ments have been duly authorized by Borro wer and all necessary action in respect thereof has been taken, and th e execution,
delivery, and perfo rmance thereof do not require any consent or approval of any other Person that has not been obtained. The execution,
delivery, and perfo rmance of the Loan Docu ments to which it is a party have been duly authorized by each Guarantor and all ne cessary action
in respect thereof has been taken, and the execution, delivery, and performance of the Loan Docu ments to which a Guarantor are a party do not
require any consent or approval of any other Person that has not been obtained.

                                                                        27
      4.4 Binding Agreements . This Agreement and the other Loan Documents to which Borro wer is a party, when executed and delivered by
Borro wer, will constitute, the legal, valid, and binding obligations of Borrower, enforceable against Borrower in accordance wit h their terms,
and the Loan Documents to which the Guarantors are a party, when executed and delivered by the Guarantors, will constitute, the le gal, valid,
and binding obligations of the Guarantors, enforceable against the Guarantors in accordance with their terms, in each c ase except as the
enforceability hereof or thereof may be affected by: (a) bankruptcy, insolvency, reorganization, mo ratoriu m, or other similar laws affecting the
enforcement of creditors’ rights generally, and (b) the limitat ion of certain remedies by certain equitable princip les of general applicability.

       4.5 Other Agreements . The execution, delivery, and performance by Borrower of this Agreement and the other Loan Documen ts to
which it is a party, and the execution, delivery and performance by the Guaran tors of the Loan Documents to which they are a p arty, do not and
will not: (a) v iolate (i) any provision of any federal (including the Exchange Act), state, or local law, rule, or regulation (including Regulations
T, U, and X of the Federal Reserve Board) binding on Bo rrower or any Guarantor, (ii) any order o f any domestic governmental authority, court,
arbitration board, or t ribunal b inding on Borro wer o r any Guarantor, or (iii) the Governing Documents of Bo rrower or any Guarantor, or
(b) contravene any provisions of, result in a breach of, constitute (with the giving of notice or the lapse of time) a default under, or result in the
creation of any Lien (other than a Permitted Lien) upon any of the Assets of Borrower or any Guarantor pursuant to, any Contr actual
Obligation of Borro wer or any Guarantor, or (c) require termination of any Contractual Obligation of Borrower or any Guarant or, or
(d) constitute a tortious interference with any Contractual Ob ligation of Bo rrower or any Guarantor.

      4.6 Litigation: Adverse Facts .
      (a) There is no action, suit, proceeding, or arb itration (irrespective of whether purportedly on behalf of Borrower or any of its
Subsidiaries) at law or in equity, or before or by any federal, state, mun icipal, or other governmental depart ment, co mmissio n, board, bureau,
agency, or instrumentality, do mestic or foreign, pending or, to the knowledge of Borrower, threatened in writ ing against or a ffecting Borro wer
or any of its Subsidiaries, that reasonably could be expected to have a Material Adverse Effect on Borro wer or any of its Subsidiaries, or
reasonably could be expected to materially and adversely affect the ability of Borrower or the Guarantors to perform their re spective
obligations under the Loan Documents (including Borro wer ’s ability to repay any or all of the Obligations when due);

      (b) None of Bo rrower or any of its Subsidiaries is: (i) in violat ion of any applicable law in a manner that reasonably could be expected to
have a Material Adverse Effect on such Person, or (ii) subject to or in default with respect to any final judgment, writ, injunctio n, decree, ru le,
or regulation of any court or of any federal, state, municipal, or other govern mental depart ment, commission, board, bureau, agency, or
instrumentality, do mestic or foreign, in a manner that reasonably could be expected to have a Material Adverse Effect

                                                                         28
on such Person, or reasonably could be expected to materially and adversely affect the ability of Borro wer o r the Guarantors to perform their
respective obligations under the Loan Documents (including Borrower ’s ability to repay any or all of the Obligations when due); and

      (c) (i) there is no action, suit, proceeding or, to the best of Borrower ’s knowledge or belief, investigation pending or, to the best of
Borro wer’s knowledge or belief, threatened in writing against or affect ing Borrower or any of its Subsidiaries that questions the valid ity or the
enforceability of this Agreement or other the Loan Docu ments, and (ii) there is no action, suit, or proceeding pending against or affecting
Borro wer o r any of its Subsidiaries pursuant to which, on the date of the making of any Loan hereunder, there is in effect a binding injunction
that could materially and adversely affect the validity or enforceability of th is Agreement or the other Loan Docu ments.

      4.7 Govern ment Consents . Other than such as may have previously been obtained, filed, or g iven, as applicable, no consent, license,
permit, approval, or authorization of, exempt ion by, notice to, report to or registration, filing, or declaration with, any g overnmental authority
or agency is required in connection with the execution, delivery, and performance by Borrower and the Guarantors of the Loan Documents to
which they are a party.

      4.8 Title to Assets; Liens . Except for Permitted Liens, all of the Assets of Borro wer and its Subsidiaries are free fro m all Liens of any
nature whatsoever. Except for Permitted Liens, Borro wer and its Subsidiaries have good and sufficient title to all of their respective Assets
reflected in their books and records as being owned by them or their no minee. Neither this Agreement, nor any of the other Loan Documents,
nor any transaction contemplated under any such agreement will affect any right, tit le, o r interest of Borro wer or any of its Subsidiaries in and
to any of the Assets of Borro wer o r any of its Subsidiaries in a manner that reasonably could be expected to have a Material Adverse Effect on
Borro wer o r any of its Subsidiaries.

      4.9 Pay ment of Taxes. All tax returns and reports of Borro wer and its Subsidiaries (and all taxpayers with wh ich Bo rrower or it s
Subsidiaries is or has been consolidated or combined) required to be filed by it has been timely filed (inclusive of any perm itted extensions),
and all Taxes, assessments, fees, amounts required to be withheld and paid to a Govern mental Autho rity and all other governmental charges
upon Borrower and its Subsidiaries, and upon their Assets, income, and franchises, that are due and payable have been paid, e xcept to the
extent that: (a) the failure to file such returns or reports, or pay such Taxes, assessments, fees, or other governmental charges, as applicable,
reasonably could not be expected to have a Material Adverse Effect on Bo rrower or any of its Subsidiaries, or (b) other than wit h respect to
Taxes, assessments, charges or claims which have become a tax Lien upon any of Borrower ’s or any of its Subsidiaries’ Assets, such Tax,
assessment, charge, or claim is being contested, in good faith, by appropriate proceedings promptly instituted and diligently conducted, and an
adequate reserve or other appropriate provision, if

                                                                         29
any, shall have been made as required in order to be in conformity with GAAP. Borrower does not know of any proposed, asserte d, or assessed
tax deficiency against it or any of its Subsidiaries that, if such deficiency existed and had to be rectified, reasonably could be expected to have a
Material Adverse Effect on Borro wer or any of its Subsidiaries.

      4.10 Govern mental Regulat ion .
     (a) Borrower and its Subsidiaries are not, nor immediately after the ap plication by Borro wer of the proceeds of the Loans will t hey be,
subject to regulation under the Investment Co mpany Act of 1940, as amended, or an exemption to such regulation is available.

     (b) Borro wer and each of its Subsidiaries, is, to the extent required thereby, duly registered as an investment adviser under the Investment
Advisers Act of 1940, as amended (the “Investment Advisers Act”). Each of Borrower and each of its Subsidiaries is, to the ext ent that any
such Person is required to be registered as an “investment company” under the Investment Co mpany Act, duly registered as such thereunder or
properly exempt.

      (c) Borrower is not required to be duly registered as a broker -dealer under applicable law. Each Subsidiary of Borrower that is required to
be so registered is so duly registered and is a member of a self-regulatory organization, such as NASD or is properly registered with any other
Govern mental Authority under applicable law.

       (d) Each Subsidiary of Borrower registered as a broker-dealer has not exceeded the business activities enumerated in any applicable
restriction or membership agreement or other limitations imposed in connection with its regulations with any Governmental Aut hority,
including the NASD, and such registration, membership and membership agreement does not limit its ability to enter into the Loan Documents
to which it is a party.

      (e) Borrower and each of its Subsidiaries and each of their respective members, partners, officers and directors, as the case may be, is
duly registered, licensed or qualified as an investment adviser, broker-dealer representative, or agent in each State of the United States where
the conduct of its business requires the registration, licensing, qualification or membership and is in co mp liance in all material respects with
applicable laws requiring such registration, licensing, qualification or membership.

       (f) None of Borrower or any Guarantor is subject to regulation under the Federal Power Act, the Interstate Commerce Act, or any federal,
state, or local law, ru le, or regulation generally limit ing its ability to incur Debt.

       4.11 Disclosure . No representation or warranty of Borro wer or any Guarantor contained in this Agreement or any other document,
certificate, or written statement furnished to Lender by or on behalf of Borrower with respect to the business, operations, Assets, or condition
(financial o r otherwise) of Borro wer and the Guarantors for

                                                                         30
use solely in connection with the transactions contemplated by this Agreement contains any untrue statement of a material fac t or omits to state
a material fact necessary in order to make the statements contained herein or therein, in lig ht of the circu mstances under which they were made,
not materially misleading. There is no fact actually known to Bo rrower (other than matters of a general econo mic nature) that Borrower
believes reasonably could be expected to have a Material Adverse Effect on Borrower or any Guarantor, that has not been disclosed herein or in
such other documents, certificates, and statements furnished to Lender for use in connection with the transactions contemplat ed hereby. All
financial project ions represent, as of the date on which any other such financial project ions are delivered to Lender, Borrower ’s good faith best
estimate of its and its Subsidiaries future performance for the periods covered thereby.

     4.12 Debt . Neither Borro wer nor any of its Subsidiaries has any Debt outstanding other than Debt permitted by Section 6.1 hereof.

      4.13 Existing Defau lts . Neither Borro wer nor any of its Subsidiaries is in default in the performance, observance or fulfillment of any of
the obligations, contained in any Contractual Ob ligation applicable to it, and no condition exists which, with or without the giving of notice or
the lapse of time, would constitute a default under such Contractual Obligation, except, in any such case, where the conseque nces, direct or
indirect, o f such default or defaults, if any, reasonably could not be expected to have a Material Adverse Effect on Borrower or any of its
Subsidiaries. Neither Borrower nor any of its Subsidiaries is in v iolation of any law, ordinance, rule, or regulation to whic h it or any of its
Assets is subject, the failure to comp ly with wh ich could reasonably be expected to have a Material Adverse Effect on Borro we r or any of its
Subsidiaries.

     4.14 No Defau lt . No Event of Default or Un matured Event of Default has occurred and is co ntinuing.

     4.15 Immaterial Subsidiaries . Alternative Capital Services LLC, a Delaware limited liability co mpany, is the only Immaterial Subsidiary.


                                                                   ARTICLE V

                                              AFFIRMATIVE COVENANTS OF BORROWER

       Borro wer covenants and agrees that, so long as any portion of the Revolving Cred it Facility Co mmit ment under this Agreement s hall be
in effect and until payment, in full, of the Loans, with interest accrued and unpaid thereon, any other Obligations (includ ing Obligations in
respect of Letters of Credit) and any other amounts due hereunder, and except as set forth in the Disclosure Statement with s pecific reference to
the Section of this Article V affected thereby concerning matters which do not conform to t he covenants of this Article V , Borrower will, and
will cause each of its Subsidiaries to do each and all of the following:

                                                                        31
       5.1 Accounting Records and Inspection . (a) Maintain adequate financial and accounting books and records in accordance with sound
business practices and GAAP consistently applied, (b) permit any representative of Lender upon reasonable notice to Borro wer, at any time
during usual business hours, to inspect, audit, and examine such books and records and to ma ke copies and take extracts therefrom, and to
discuss its affairs, financing, and accounts with Borrower ’s or the applicable Subsidiary’s officers and independent public accountants, and
(c) furnish Lender with any informat ion reasonably requested by Lender regarding Borrower’s or its Subsidiaries’ business or finances
promptly upon request.

      5.2 Financial Statements and Other Informat ion . Furn ish to Lender:
       (a) With in 120 days after the end of each fiscal year of Borro wer, an annual report containing a sta tement of assets, liabilit ies, and capital
as of the end of such fiscal year, and statements of operations and cash flows, for the year then ended, all of which shall b e accompanied by a
report and an unqualified opinion, prepared in accordance with generally accepted auditing standards, of independent certified public
accountants of recognized standing selected by Borrower and satisfactory to Lender (which opin ion shall be without (i) a “goin g concern” or
like qualification or exception, (ii) any qualification or exception as to the scope of such audit, or (iii) any qualification which relates to the
treatment or classification of any item and wh ich, as a condition to the removal of such qualification, would require an adju stment to such item,
the effect of wh ich would be to cause any noncompliance with the provisions of Section 6.14 ), together with a written statement of such
accountants (1) to the effect that, in making the examination necessary for their audit of such financial statements, they have not obtained any
knowledge of the existence of an Event of Default under Section 6.14 and (2) if such accountants shall have obtained any knowledge of the
existence of an Event of Defau lt under Section 6.14 , describing the nature thereof;

     (b) Within 45 days after the end of each of the first three quarters of each fiscal year of Borrower, a Borrower -prepared financial report
containing a statement of assets, liabilities, and capital, and statements of operations and cash flows, in each case for the period then ended;

       (c) With in 45 days after the end of each quarter of each fiscal year of Borrower, a Co mp liance Certificate duly executed by t he chief
financial officer of Borrower stating that he or she has individually reviewed the provisions of this Agreement and the other Lo an Documents,
that (i) the financial statements delivered hereunder have been prepared in accordance with GAAP (except for the lack of footnotes and being
subject to year-end audit adjustments) and fairly present in all material respects the financial condition of Bo rrower and its Subsidiaries,
(ii) Borrower and its Subsidiaries are in co mp liance with the financial covenants set forth in Section 6.14 and attaching the calculations of such
financial covenants as of the end of such fiscal quarter, (iii) a review of the activ ities of Borro wer and its Subsidiaries during such year or
quarterly period, as the case may be, has

                                                                           32
been made by or under such individual’s supervision, with a view to determining whether Borro wer and such Subsidiaries have fulfilled all of
its obligations under this Agreement, and the other Loan Docu ments, that no Event of Default or Un matured Event of Default h a s occurred and
is continuing, or if an Event of Default or Un matured Event of Default has so occurred and is continuing, specifying all such defaults and
events of which such individual may have knowledge or belief, and (iv) Borrower has negotiated all transactions described in Section 6.8 ,
other than transactions in de minimis amounts, in good faith and on an arm’s length basis;

      (d) if not otherwise provided pursuant to clause (a) or (b), above, as applicable, then, contemporaneously with each quarterly an d
year-end financial report required by clauses (a) and (b) of this Section 5.2 , a certificate of the chief financial officer of Bo rrower separately
identifying and describing all Contingent Obligations of Borrower and its Subsidiaries that could reasonably be expected to r esult in pay ments
(indiv idually or in the aggregate) of greater than $5,000,000;

      (e) notice, as soon as possible and, in any event, within 5 days after Borrower has knowledge, of the occurrence of any Event of Defau lt
or any Un matured Event of Defau lt. In any such event, Borrower also shall supply Lende r with a statement fro m Borrower’s chief financial
officer or general counsel setting forth the details thereof and the action that Borrower proposes to take with respect there to;

      (f) as soon as practicable, any written report pertaining to material items in respect of Borro wer’s and its Subsidiaries’ internal control
matters submitted to Borrower or such Subsidiary by its independent accountants in connection with each annual audit of the f inancial
condition of Borrower and its Subsidiaries;

     (g) as soon as practicable, written notice of any condition or event which has resulted or reasonably could be expected to result in: (i) a
Material Adverse Effect on Borro wer or any of its Subsidiaries; or (ii) a material b reach of, or noncompliance with, any material term,
condition, or covenant of any Contractual Obligation of Borrower or any of its Subsidiaries, if such breach or noncompliance could reasonably
be expected to result in a Material Adverse Effect;

       (h) pro mptly upon becoming aware of any Person’s seeking to obtain or threatening in writ ing to seek to obtain a decree or order for
relief with respect to Borrower or any of its Subsidiaries in an involuntary case under any applicable bankruptcy, insolvency , or other similar
law now or hereafter in effect, a written notice thereof specifying what action Borrower is taking or proposes to take with respect thereto;

      (i) pro mptly, copies of all material amend ments to the Governing Docu ments of Borrower or any of its Subsidiaries;

      (j) pro mpt notice of:

                                                                         33
            (i) all legal or arbitral proceedings, and all proceedings by or before any governmental or regulatory authority or agency, a gainst or,
to the knowledge of Borrower, threatened in writing against or affect ing Borrower or any of its Subsidiaries wh ich, if adversely determined,
reasonably could be expected to have a Material Adverse Effect on Borrower or any of its Subsidiaries, or on the timely pay me nt of the
principal of or interest on the Loans, or the enforceability of this Agreemen t or the other Loan Docu ments, or the rights and remed ies of Lender
hereunder or thereunder, as applicable; and

            (ii) the issuance by any United States of America federal or state court or any United States of America federal or state reg ulatory
authority of any injunction, order, or other restraint prohibiting, or having the effect of prohib iting or delaying, the making of th e Loans, or the
institution of any litigation or similar proceeding seeking any such injunction, order, or other restraint;

     (k) upon request by Lender and, within 5 Business Days after the filing thereof, upon the occurrence and during the continuation of an
Event of Default or Un matured Event of Default, copies of Focus Reports for JMP Securit ies and each of its Subsidiaries;

     (l) pro mptly, such other informat ion and data with respect to Borrower or any of its Subsidiaries, as fro m time to time may be reasonab ly
requested by Lender.

      5.3 Existence . Preserve and keep in fu ll force and effect, at all times, its existence.

       5.4 Pay ment of Taxes and Claims . Pay all Taxes, assessments, and other governmental charges imposed upon it or any of its Assets or in
respect of any of its businesses, incomes, or Assets before any penalty or interest accrues thereon, and all claims (including claims for labor,
services, materials, and supplies) for sums which have become due and payable and which by law have or may beco me a Lien upon any of its
Assets, prior to the time when any penalty or fine shall be incurred with respect thereto; provided , however , that, other than with respect to
Taxes, assessments, charges or claims which have become secured by a tax Lien upon any of Borrower ’s or any of its Subsidiaries’ Assets, no
such Tax, assessment, charge, or claim need be paid if the same is being contested, in good faith, by appropriate proceedings promptly
instituted and diligently conducted and if an adequate reserve or other appropriate provision, if any, shall have been made t here for as required
in order to be in conformity with GAA P.

     5.5 Co mpliance with Laws . Co mply in all material respects with the requirements of all applicable laws, ru les, regulations (including
Regulations T, U and X o f the Federal Reserve Board), and orders of any governmental authority, noncompliance with wh ich could reasonably
be expected to have a Material Adverse Effect on Borro wer o r any of its Subsidiaries.

                                                                           34
     5.6 Fu rther Assurances . At any time or fro m t ime to t ime upon the request of Lender, execute and deliver such further documents and do
such other acts and things as Lender may reasonably request in order to effect fully the purposes of this Agreement or the ot her Loan
Documents and to provide for payment of the Loans made hereunder, with interest thereon, in accordance with the terms of this Agreement.

       5.7 Fo rmation of Subsidiaries . At the time that (x) Borrower or any Guarantor forms any Subsidiary or acquires any Subsidiary after the
Closing Date (in each case other than an Immaterial Subsidiary), or (y ) any Subsidiary of Borrower or any Guarantor that is not a Guarantor is
no longer an Immaterial Subsidiary, (a) cause such new Subsidiary to provide to Lender a joinder to the Guaranty, the Interco mpany
Subordination Agreement, the Security Agreement, and the Stock Pledge Agreement or supplement to an existing Stock Pledge Agreement, as
applicable, together with such other security documents, as well as appropriate UCC-1 financing statements, all in form and substance
satisfactory to Lender (including being sufficient to grant Lender a first priority Lien (subject to Permitted Liens) in and to the assets of such
newly formed or acquired Subsidiary), (b) provide to Lender a pledge agreement and appropriate certificates and powers or UCC-1 financing
statements, hypothecating all of the direct or beneficial ownership interest of Borrower or a Guarantor in such new Subsidiar y, in form and
substance satisfactory to Lender, (c) if such Subsidiary is a limited liability company or limited partnership formed under the laws of Delaware,
include in the limited liab ility co mpany agreement, limited partnership agreement, or other similar Governing Documents langu age
substantively similar to the provisions of Sections 7(e) and 7(f) of the Stock Pledge Agreement, and (d) provide to Lender all other
documentation, including one or more op inions of counsel satisfactory to Lender, which in its opinion is appropriate with res pect to the
execution and delivery of the applicable documentation referred to above. Any document, agreement, or instrument executed or issued pursuant
to this Section 5.7 shall be a Loan Document. The foregoing to the contrary notwithstanding, such new Subsidiary shall not be required to
execute and delivery a joinder to the Guaranty, Security Agreement or Stock Pledge Agreement, and neither Borro wer nor any Guarantor, as
applicable, shall be required to pledge more than 66% of the voting stock of such new Subsidiary to the extent that (x) such new Subsidiary is a
Foreign Subsidiary, and (y) Borrower would incur material adverse tax consequences therefrom; provided , however , that if such Subsidiary is
a Foreign Subsidiary, Borro wer or such Guarantor, as applicab le, must deliver such documents as required by this Section 5.7 within sixty
(60) days of the date such entity was deemed to be a Subsidiary.

      5.8 Post-Closing Covenants .
          (a) Borrower will use its best efforts to deliver to Lender, within 30 days after the Closing Date, the orig inal p ro missory n ote issued
by Warrington Partners to JMPAM, together with an allonge executed in blan k which is in form and substance satisfactory to Lender.

                                                                         35
           (b) Borro wer will use its best efforts to deliver to Lender, within 30 days after the Closing Date, an endorsement in favor o f Lender
with respect to each of its insurance policies which is in form and substance satisfactory to Lender, together with a copy of each underlying
insurance policy issued for the benefit of the Loan Part ies.


                                                                  ARTICLE VI

                                                NEGATIVE COVENANTS OF B ORROWER

       Borro wer covenants and agrees that, so long as any portion of the Revolving Cred it Facility Co mmit ment under this Agreement s hall be
in effect and until payment, in full, of the Loans, with interest accrued and unpaid thereon, any other Obligations (includin g Obligations in
respect of Letters of Credit) and any other amounts due hereunder, and any other amounts due hereunder, and except as set forth in the
Disclosure Statement with specific reference to the Section of this Article VI affected thereby concerning matters which do not conform to the
covenants of this Article VI , Borrower will not, and will not permit any of its Subsidiaries to do any of the following:
     6.1 Debt . Create, incur, assume, permit , guarantee, or otherwise become or remain, directly or indirectly, liable with respect to any Debt,
except:
      (a) the Ob ligations and any other Debt evidenced by this Agreement and the ot her Loan Docu ments;

     (b) Debt resulting fro m Cap italized Leases entered into in the ordinary course of business, in an aggregate outstanding amoun t not in
excess of $250,000 at any one time;

      (c) Contingent Obligations resulting fro m the endorsement of instruments for collection in the ordinary course of business;

      (d) Permitted Acquired Indebtedness;

      (e) Debt in respect of Earnout Arrangements and Seller Notes incurred in connection with a Permitted Acquisition;

     (f) Debt consisting of loans or advances from t ime to time made by Borro wer to JM P Securities in an aggregate outstanding amount at
any one time not to exceed $5,000,000;

      (g) Debt incurred by JMP Securit ies consisting of loans or advances from time to time made in connection with underwrit ing ad vances or
lines of cred it that are subject to the applicable NASD form, that are advanced to JMP Securities to permit it to meet its ne t capital requirements
under applicable NA SD rules or under SEC Rule 15c3-1, so long as (x) such Debt that is repaid within 45 Business Days after the date when
incurred, (y) no Event of Default or Un matured Event of Default has occurred and is continuing at the time that

                                                                         36
such Debt is proposed to be incurred or would result therefro m and (z) no more than $20,000,000 o f such loans, together with the Debt
described below in clause (h) of this Section 6.1 is funded fro m the direct or indirect proceeds of a Borrowing under this Agreement;

      (h) Debt incurred by JMP Securit ies consisting of loans or advances from time to time made in connection with underwrit ing ad vances or
lines of cred it that are subject to the applicable NASD form, that are advanced to JMP Securities to permit it to meet it s net capital requirements
under applicable NA SD rules or under SEC Rule 15c3-1, so long as (x) such Debt that is repaid within one year after the date when incurred,
(y) no Event of Defau lt or Un matured Event of Defau lt has occurred and is continuing at the time that such Debt is proposed to be incurred or
would result therefro m and (z) no more than $20,000,000 of such loans, together with the Debt described below in clause (g) of this Section 6.1
is funded fro m the direct or indirect proceeds of a Borrowing under this Agreement;

      (i) Advances by Borrower or any of its Subsidiaries to Borrower, any Subsidiary, any Affiliate or an Excluded Fund for the pu rpose of
funding overhead and other operating expenses, so long as (x) the aggregate amount of such advances made by a Loan Party during any fiscal
year of Borrower does not exceed $1,000,000 and (y) no Event of Default o r Un matured Event of Default has occurred and is continuing at the
time that such Debt is proposed to be incurred or would result therefro m;

     (j) Interco mpany Debt advanced by an Obligor to a domestic Obligor, so long as such domestic Obligor is party to the Intercom pany
Subordination Agreement;

      (k) Guarantees by Borrower of any Debt of a Guarantor otherwise permitted hereunder and guarantees by any Guarantor of any Debt of
Borro wer o r another Guarantor otherwise permitted hereby (in each case, other than Permitted Acquired Indebtedness);

      (l) Reimbu rsement obligations in respect of letters of credit issued after the Revolving Co mmit ment Termination Date, to the extent that
Lender elects not to issue such letters of credit under this Agreement (it being understood that if Lender does not notify Bo rro wer that it has
elected to issue such letters of credit under this Agreement within four (4) Business Days after the date when Lender receives a written request
therefor fro m Borro wer, Lender shall be deemed to have elected not to issue the requested letter of credit); and

      (m) any Refinancing Debt in respect of any Debt identified on the Disclosure State ment with respect to this Section 6.1, or Deb t
described above in clauses (b) , (d) or (l ).

                                                                         37
      6.2 Liens .
          (a) Create, incur, assume, or permit to exist, directly or indirectly, any Lien on or with respect to any of its Assets, of any kind,
whether now owned or hereafter acquired, or any inco me or pro fits therefro m, except Permitted Liens, or

          (b) enter into, assume, or permit to exist any agreement to refrain fro m g ranting Liens to or for the benefit of Lender, other than
such agreements by JMP Securit ies;

      6.3 Investments . Make or own, d irectly or indirectly, any Investment in any Person, except Permitted Investments; provided , however ,
that the Obligors shall not have Permitted Investments in Deposit Accounts or Securit ies Accounts (other than such Deposit Accounts or
Securities Accounts maintained with Lender) in an aggregate amount in excess of $250,000 at any one time unless the applicable Obligor and
the applicable securities intermed iary or bank have entered into Control Agreements governing such Permitted Investments in order to perfect
(and further establish) the Lender’s Liens in such Permitted Investments.

      6.4 [Intentionally Omitted] .

       6.5 Div idends . If an Event of Default or Un matured Event of Default has occurred and is continuing or would result fro m any of the
following, make or declare, d irectly o r indirectly, any dividend (in cash, return of cap ital, or any other form of Assets) on , or make any other
payment or distribution on account of, or set aside Assets for a sinking or other similar fund for the purchase, redemption, o r ret irement of, or
redeem, purchase, retire, or otherwise acquire any interest of any class in Borrower, whether now or hereafter outstanding, or grant or issue any
warrant, right, or option pertaining thereto, or other security convertible into any of the foregoing, or make any other dist ributio n in respect
thereof, either d irectly or indirectly, whether in cash or Assets or in obligations (collect ively, a “ Distribution ”); provided that , at all times,
(a) any direct or indirect Subsidiary may make such a Distribution to any Guarantor or to Borrower; (b) any Subsidiary of Borrower that is or
intends to be a Real Estate Investment Trust, a Business Development Co mpany or any other entity whose tax treat ment is dependent on
distributions of income can make such Distributions that are necessary to enable such Subsidiary to maintain such tax treat me nt ; (c) Borrower
may make payments to JMP Ho ldings Inc. in accordance with the terms of the Services Agreement, dated August 18, 2004, between Borrower
and JMP Hold ings Inc, and any renewals thereof, in an aggregate amount during any fiscal year of Borrower not to exceed $500, 000; and (d) in
no event will Borro wer be permitted to redeem, repurchase or otherwise acquire its outstanding Securities (i) if an Event of Default or
Un matured Event of Defau lt has occurred and is continuing or would result therefro m, or (ii) to the extent that the aggregate amount paid by
Borro wer in connection with all such redemptions, repurchases or other acquisitions of its Securit ies (after g iving effect to the proposed
redemption, repurchase or other acquisition) would exceed $5,000,000.

      6.6 Restriction on Fundamental Changes . Change its name, change the nature of its business from that conducted by the Loan Parties on
the date of this Agreement

                                                                          38
(and other ancillary businesses reasonably related thereto), enter into any merger, consolidation, reorganizat ion, or recapit alization, or
reclassify its partnership interests (whether limited or general) or membership interests, as applicable, or convey, sell, assign, lease, transfer, or
otherwise dispose of, in one transaction or a series of transactions, all o r any substantial part of its business or Assets, whether now owned or
hereafter acquired except:
      (a) Borrower or any of its Subsidiaries may sell Assets in accordance with the provisions of Section 6.7 hereof;

      (b) Borro wer or JMP Realty Trust, Inc. may sell, exchange or otherwise offer or sell its equity interests in a public offerin g;

      (c) Borrower or any of its Subsidiaries may offer or sell its me mbership interests to its employees so long as the aggregate voting power
of the membership interests purchased by such employees does not exceed 49% of the aggregate voting power of the membership interests of
each of Borrower or any of its Subsidiaries, as applicable;

      (d) upon 10 days prior written notice to Lender, Borro wer or any its Subsidiaries may change its name;

      (e) Any Subsidiary of Borrower may merge into another Subsidiary, any Subsidiary may merge with a Guarantor, as long as the
Guarantor is the surviving entity and Borrower and JMP Hold ings, Inc. may merge, so long as (x) a Change of Control Event does not result
therefro m and (y) the survivor thereof assumes Borrower’s obligations under the Loan Docu ments and agrees to be bound hereby and the reby;
and

      (f) JMP Securities or JMPAM may enter into a recapitalizat ion with respect to its membership or other equity interests, so lo ng as
Borro wer remains the managing member of such Subsidiary and holds a majority of the voting interest in such Subsidiary.

      6.7 Sale of Assets . Sell, assign, transfer, convey, or otherwise dispose of all or any part of its Assets, whether now owned or hereafter
acquired, except for:
     (a) the sale or other disposition of any of the businesses or Assets of Borro wer or any of its Subsidiaries in the ordinary course of
business, for not less than the fair value thereof, to the extent that the fair market value of the foregoing does not exceed $5,000,000 in the
aggregate in any fiscal year (other than sales and dispositions of Investments by JMP Securit ies in publicly traded securities in t he ordinary
course of business);

      (b) involuntary sales or other dispositions of any of the businesses or Assets of Borrower or any of its Subsidiaries

                                                                          39
     (c) d ispositions of Cash Equivalents for not less than the fair market value thereof; and

     (d) dispositions by any Subsidiary to another Subsidiary, Borrower or a Guarantor, d ispositions by Borrower to a Guarantor or g anized
under the laws of a state within the Un ited States and dispositions by a Guarantor to Borrower.

      6.8 Transactions with Shareholders and Affiliates . Enter into or permit to exist, directly or indirectly, any transaction (includin g the
purchase, sale, lease, or exchange of any Asset or the rendering of any service) with any holder of 5% or mo re of any class of equity interests of
Borro wer o r any of its Subsidiaries or Affiliates, or with any Affiliate of Borro wer o r of any such holder, on terms that are less favorable to
Borro wer than those terms that might be obtained at the time fro m Persons who are not such a holder, Subsidiary, or Affiliate, o r if such
transaction is not one in which terms could be obtained fro m such other Person on terms that are not negotiated in good faith on an arm’s length
basis.

    6.9 Conduct of Business . Engage in any business other than the businesses in which it is permitted to conduct under its Governing
Documents, or any businesses or activities substantially similar or related thereto.

      6.10 A mendments or Waivers of Certain Docu ments; Actions Requiring the Consent of Lender . Without the prior written consent of
Lender which consent shall not unreasonably be withheld, agree to any amendment to or waiver of the terms or provisions of it s Governing
Documents except for: (i) immaterial amend ments or waivers permitted by such Govern ing Documents not requiring the consent of the holders
of the Securit ies in Borrower or the applicable Subsidiary, as applicable; (ii) amend ments or waivers which would not, either in dividually o r
collectively, be materially adverse to the interests of Lender, Borrower or the applicable Subsidiary; or (iii) amend ments required to permit the
consummation of a transaction permitted by Section 6.6 .

     6.11 Use of Proceeds . Use the proceeds of the Loans made hereunder for any purpose other than, consistent with the terms and
conditions hereof, to fund Permitted Investments, to fund Permitted Acquisitions and to fund Borrower ’s working capital needs in the ordinary
course of its business.

      6.12 Misrepresentations . Furnish Lender any cert ificate or other document required hereunder that: (a) contains any untrue statement of
material fact; or (b) o mits to state a fact necessary to make it not materially misleading in light of the circu mstances under wh ich it was
furnished.

      6.13 Margin Regulation . Use any portion of the proceeds of any of the Loans in any manner which might cause the Borrowing, the
application of such proceeds, or the transactions contemplated by this Agreement to violate Regulat ions T, U or X of the Federal Reserve
Board, or any other regulation of such board, or to violate the Exchange Act, or to violate the Investment Co mpany Act of 194 0.

                                                                        40
      6.14 Financial Covenants .
            (a) M inimu m Net Inco me . Fail to maintain Net Inco me for Borrower and its Subsidiaries, measured as of the last day of each fiscal
quarter of Bo rrower, for any such fiscal quarter, of at least $0, for 2 consecutive fiscal quarters.

            (b) Min imu m EBITDA . Fail to maintain EBITDA for Borrower and its Subsidiaries, measured as of the last day of each fiscal
quarter of Bo rrower, for each twelve month period ending on any such date, of at least $20,000,000.

            (c) M inimu m Net Worth . Fail to maintain Net Worth for Borrower and its Subsidiaries, as of the last day of each fiscal quarter of
Borro wer, of at least $45,000,000.

           (d) Min imu m Fixed Charge Coverage Ratio . Fro m and after the date when the Revolving Facility Credit Co mmit ment has been
terminated, fail to maintain a Fixed Charge Coverage Ratio for Borro wer and its Subsidiaries, measured as of the last day of each fiscal quarter
of Borrower during such period, for each t welve month period ending on any such date, of at least 1.25:1.00.


                                                                    ARTICLE VII

                                                   EVENTS OF DEFA ULT AND REMEDIES

     7.1 Events of Default . The occurrence of any one or mo re of the fo llo wing events, acts, or occurrences shall constitute an event of default
(“Event of Defau lt”) hereunder:
      (a) Failure to Make Pay ments When Due . Borrower shall fail to pay any amount owing hereunder with respect to the principal of any of
the Loans or Obligations in respect of Letters of Credit when such amount is due or Borro wer shall fail to pay any amount owin g hereunder
with respect to, interest on any of the Loans, or with respect to any other Obligations or other amounts (including fees, costs, or expenses)
payable in connection herewith or the other Loan Documents, within three (3) Business Days of the date when such amount is due, whether at
stated maturity, by acceleration, or otherwise;

      (b) Breach of Certain Covenants .
            (i) Borro wer shall fail to perform or co mp ly fu lly with any covenant, term, or condition contained in Sect ions 5.1(b) or 5.8 or
Article VI; o r

              (ii) Borrower shall fail to perform or co mp ly fully with any covenant, term, or condition contained in Sections 5.1(a) , 5.2(a) , (b) ,
(c) , (d) , (e) , (f) , or 5.4 (except with respect to unpaid Taxes in an aggregate amount less than $25,000), of this A greement and such failure
shall not have been remedied or waived within 10 days after the occurrence thereof;

                                                                           41
           (iii) Borrower shall fail to perform o r co mply fully with any covenant, term, or condition contained in Sections 5.1(c), 5.6 or 5.7 of
this Agreement and such failure shall not have been remed ied or waived within 20 days after the occurrence thereof (except wit h respect to any
Foreign Subsidiary in connection with Sect ion 5.7 , in wh ich case such cure period shall be 30 days);

            (iv) Bo rrower shall fail to perform or co mply fully with any covenant, term, or condition contained in Section 5.4 (with respect to
unpaid Taxes in an aggregate amount less than $25,000) of this Agreement and such failure shall not have been remedied or waived within 30
days after the occurrence thereof

           (v) Borro wer or any Guarantor shall fail to perform o r co mply fully with any other covenant, term, or condition contained in this
Agreement or other Loan Docu ments to which it is a party and such failu re shall not have been remed ied or waived within 45 d ays after the
occurrence thereof; provided , however , that this clause (iv) shall not apply to: (1) the covenants, terms, or conditions referred t o in any other
subsections of this Section 7.1 ; or (2) the covenants, terms, or conditions referred to in clauses (i), (ii), (iii) or (iv) above of this subsection (b)
;

      (c) Breach of Representation or Warranty . Any financial statement, representation, warranty, or certification made or furnish ed by
Borro wer under this Agreement or in any statement, document, letter, or other writ ing or instru ment furnished or delivered by o r on behalf of
Borro wer o r any Guarantor to Lender pursuant to or in connection with this Agreement or any other Loan Docu ment to which it is a party, or as
an inducement to Lender to enter into this Agreement or any other Loan Docu ment shall have been false, incorrect, or inco mple te when made,
effective, or reaffirmed, as the case may be in any material respect (except that s uch materiality qualifier shall not be applicable to any
representations and warranties that already are qualified or mod ified by materiality in the text thereof);

      (d) Involuntary Ban kruptcy .
            (i) If an involuntary case seeking the liquidation or reorganization of Borrower or any of its Subsidiaries under Chapter 7 or Ch apter
11, respectively, of the Bankruptcy Code or any similar proceeding shall be co mmenced against Borrower or any of its Subsidia ries under any
other applicable law and any of the fo llo wing events occur: (1) such Person consents to the institution of the involuntary case or similar
proceeding; (2) the petition co mmencing the involuntary case or similar proceeding is not timely controverted; (3) the petition commencing the
involuntary case or similar proceeding is not dismissed within 45 days of the date of the filing thereof; provided , however , that, during the
pendency of such period, Lender shall be relieved of its obligation to make additional Loans; (4) an interim trustee is appointed to take
possession of all or a substantial portion of the Assets of Borrower or any of its Subsidiaries; or (5) an order for relief shall have been issued or
entered therein;

                                                                           42
             (ii) A decree or order of a court having ju risdiction in the premises for the appointment of a receiver, liquidator, sequestr ator,
custodian, trustee, or other officer having similar powers over Borro wer o r any of its Subsidiaries to take possession of all or a substantial
portion of its Assets shall have been entered and, within 45 days from the date of entry, is not vacated, discharged, or bond ed against, provided
, however , that, during the pendency of such period, Lender shall be relieved of their obligation to make additional Loans;

       (e) Vo luntary Ban kruptcy . Borro wer or any of its Subsidiaries shall institute a voluntary case seeking liquidation or reorganizat ion under
Chapter 7 or Chapter 11, respectively, of the Bankruptcy Code; Bo rrower or any of its Subsidiaries shall file a petition, answer, or comp laint or
shall otherwise institute any similar proceeding under any other applicable law, or shall consent thereto; Borrower or any of its Subsidiaries
shall consent to the conversion of an involuntary case to a voluntary case; or Borrower or any of its Subsidiaries shall consent or acquiesce to
the appointment of a receiver, liquidator, sequestrator, custodian, trustee, or other officer with similar powers to take pos session of all o r a
substantial portion of its Assets; Borrower or any of its Subsidiaries shall generally fail to pay debts as such debts become due or shall ad mit in
writing its inability to pay its debts generally; or Borrower or any of its Subsidiaries shall make a general assignment for the benefit of
creditors;

     (f) Dissolution . Any order, judgment, or decree shall be entered decreeing the dissolution of Borrower, JMPAM, or JMP Securities, and
such order shall remain undischarged or unstayed for a period in excess of 45 days;

      (g) Change of Control . A Change of Control Event shall occur;

      (h) Judgments and Attachments . Borrower or any of its Subsidiaries shall suffer any money judgment, writ, or warrant of attachment, or
similar process involving payment of money in an amount in excess of $250,000 (except to the extent payment in fu ll above any applicable
deductible is fully covered by insurance (so long as no reservation of rights has been made by the insurer in connection with such coverage)),
and shall not discharge, vacate, bond, or stay the same within a period of 45 days;

      (i) Cross-Default . There is a default in any agreement to which Borro wer or any of its Subsidiaries is a party and such default
(a) involves amounts in excess of $250,000 and (b) either (i) occurs at the final maturity of the obligations thereunder, or (ii) results in a right
by the other party thereto, irrespective of whether exercised, to accelerate the maturity of such Borrower’s or such Subsidiaries’ obligations
thereunder or to terminate such agreement, unless such right is waived in writing by such other party;

                                                                          43
      (j) If the obligation of any Guarantor under the Guaranty is limited or terminated by operation of law or by any Guarantor th ereunder;

      (k) [Intentionally Omitted.]

      (l) [Intentionally Omitted.]

      (m) If Borro wer or any of its Subsidiaries makes any payment on account of Indebtedness that has been contractually subordinated in
right of pay ment to the payment of the Obligations and any other Debt evidenced by this Agreeme nt or any other Loan Docu ment, except to the
extent such payment is permitted by the terms of the subordination provisions applicable to such Indebtedness;

      (n) If this Agreement or any other Loan Docu ment that purports to create a Lien, shall, fo r any reas on, fail or cease to create a valid and
perfected and, except to the extent permitted by the terms hereof or thereof, first priority Lien on or security interest in the Assets covered
hereby or thereby; or

      (o) Any provision of any Loan Docu ment shall at any time for any reason be declared to be null and void, or the validity or enforceability
thereof shall be contested by Borrower o r any Guarantor, or a proceeding shall be co mmenced by Borrower or any Guarantor, or by any
Govern mental Authority having juris diction over Borrower or any Guarantor, seeking to establish the invalidity or unenforceability thereof, or
Borro wer o r any Guarantor shall deny that Borro wer o r any Guarantor has any liability or obligation purported to be created under any Loan
Document.

      7.2 Remed ies . Upon the occurrence of an Event of Defau lt:
     (a) If such Event of Default arises under subsections (d) or (e) of Section 7.1 hereof, then the Revolv ing Credit Facility Co mmit ment
hereunder immediately shall terminate and the unpaid princip al amount of and any accrued and unpaid interest on the Loans and any other
amounts owing hereunder or under the other Loan Documents automatically shall become immediately due and payable, without pre sentment,
demand, protest, notice, or other requirements of any kind, all o f wh ich are hereby exp ressly waived by Borrower; and

     (b) In the case of any other Event of Default, Lender, by written notice to Borrower, may declare the Revolving Cred it Facility
Co mmit ment hereunder terminated and the unpaid principal amount of and any accrued and unpaid interest on the Loans and any other
amounts owing hereunder or under the Loan Docu ments to be, and the same immediately shall beco me due and payable, witho ut pre sentment,
demand, protest, further notice, or other requirements of any kind, all of which are hereby expressly waived by Borro wer.

                                                                          44
       Upon acceleration, Lender (without notice to or demand upon Borrower, which are expressly waived by Borro wer to the fu llest e xtent
permitted by law), shall be entitled to proceed to protect, exercise, and enforce its rights and remed ies hereunder or under the other Loan
Documents, or any other rights and remed ies as are provided by law or equity. Lender may determine, in its sole discretion, t he order and
manner in which Lender’s rights and remedies are to be exercised. All pay ments received by Lender shall be applied as follows (regard less of
how Lender may treat the payments for the purpose of its own accounting): first , to all out-of-pocket costs and expenses (inclu ding reasonable
attorneys fees and expenses) actually incurred by Lender in enfo rcing any Obligation of Borrower hereunder, or in collecting any payments due
hereunder or under the other Loan Documents, or wh ich Borro wer is required to pay to Lender pursuant to Section 8.1 hereof, until paid in fu ll;
second , to any fees then due to Lender under the Loan Documents until paid in fu ll; th ird , to any accrued and unpaid interest on the Loans,
until paid in fu ll; fourth , ratably (i) to pay the principal of all Loans owing to Lender until paid in full and (ii) to be held by Len der as cash
collateral, until an amount up to 105% of the Letter o f Cred it Usage is so held; and fifth , to any other Obligations, until paid in full.


                                                                 ARTICLE VIII

                                                       EXPENS ES AND INDEMNITIES

      8.1 Expenses . Irrespective of whether the transactions contemplated hereby are consummat ed, Borrower agrees to pay on demand: (a) all
of Lender’s actual out-of-pocket costs and expenses of preparation of any Loan Docu ment executed after the Closing Date, (b) the reasonable
fees, expenses, and disbursements of counsel to Lender in connection with the negotiation, preparation, printing, reproduction, execution and
delivery of any Loan Docu ment executed after the Closing Date, (c) the administration of this Agreement, the other Loan Docu ments, and any
waivers hereto or thereto, (d) filing, recording, publicat ion, and search fees paid or incurred by or on behalf of Lender in connection with the
transactions contemplated by this Agreement and the other Loan Docu ments, (e) all other actual out-of-pocket expenses incurred by Lender in
connection with the negotiation, preparation, and execution of any Loan Document executed after the Closing Date, (f) the out-of-pocket costs
and expenses incurred by Lender, in connection with audits, inspections, and appraisals contemplated by this Agreement and the other Loan
Documents, and (g) all costs and expenses (including reasonable attorneys fees and costs of settlement) incurred by Lender in enforcing or
collecting any Ob ligations of Bo rrower or defending the Loan Docu ments (including reasonable attorneys fees a nd expenses incurred in
connection with a “workout,” a “restructuring,” or any bankruptcy or insolvency proceeding concerning Borrower), irrespective of whether suit
is brought; the foregoing to the contrary notwithstanding, in no event shall Bo rrower be required to reimbu rse Lender for any costs or expenses
incurred on or before the Closing Date.

     8.2 Indemnity . In addit ion to the payment of expenses pursuant to Section 8.1 hereof, and irrespective of whether the transactions
contemplated hereby are

                                                                         45
consummated, Borro wer agrees to indemnify, exonerate, defend, pay, and hold harmless Lender, and any holder of any interest in this
Agreement, and the officers, directors, emp loyees, and agents of and counsel to Lender and such holde rs (collectively the “Indemn itees” and
individually as “Indemn itee”) fro m and against any and all liabilities, obligations, losses, damages, penalties, actions, causes of action,
judgments, suits, claims, costs, expenses, and disbursements of any kind or n ature whatsoever (including, the reasonable fees and
disbursements of counsel for such Indemnitees in connection with any investigation, administrative, or judicial proceeding, w hether such
Indemnitee shall be designated a party thereto), that may be impos ed on, incurred by, or asserted against such Indemnitee, in an y manner
relating to or arising out of the Revolv ing Credit Facility Co mmit ment, the use or intended use of the proceeds of the Loans or the
consummation of the transactions contemplated by this Agreement, including any matter relat ing to or arising out of the filing or recordation of
any of the Loan Docu ments which filing or recordation is done based upon information supplied by Borro wer to Lender and its c ounsel (the
“Indemnified Liab ilities”); provided , however , that Borrower shall have no obligation hereunder with respect to Indemnified Liabilities
arising fro m the gross negligence or willful misconduct of any such Indemnitee. Each Indemnitee will pro mpt ly notify Borrower of each event
of which it has knowledge which may g ive rise to a claim under the indemnificat ion provisions of this Section 8.2 . If any investigative,
judicial, or ad ministrative proceeding arising fro m any of the fo regoing is brought against any Indemnitee indemnified or intended to be
indemn ified pursuant to this Section 8.2 , Borrower, will resist and defend such action, suit, or proceeding or cause the same to be resisted and
defended by counsel designated by Borrower (which counsel shall be reasonably satisfactory to th e Indemnitee or intended Indemn itee). Each
Indemnitee will use its reasonable efforts to cooperate in the defense of any such action, writ, or proceeding. To the extent that the undertaking
to indemnify, pay, and hold harmless set forth in the preceding sentence may be unenforceable because it is violative of any law or public
policy, Borro wer shall make the maximu m contribution to the payment and satisfaction of each of the Indemnified Liabilities t hat is
permissible under applicable law. The obligations of Borro wer under this Section 8.2 shall survive the termination of this Agreement and the
discharge of Borro wer’s other obligations hereunder.


                                                                  ARTICLE IX

                                                              MIS CELLANEOUS

       9.1 No Waivers, Remedies . No failure or delay on the part of Lender, or the holder of any interest in this Agreement in exercising any
right, power, privilege, or remedy under this Agreement or any of the other Loan Docu ments shall impair or operate as a waive r thereof, nor
shall any single or partial exercise of any such right, power, privilege, or remedy preclude any other or further exercise thereo f or the exercise
of any other right, power, priv ilege, or remedy. The waiver of any such right, power, privilege, or remedy with respect to particular facts and
circu mstances shall not be deemed to be a waiver with respect to other facts and circu mstances. The remedies provided for und er this
Agreement or the other Loan Documents are cu mulat ive and are not exclusive of any remed ies t hat may be available to Lender, or the holder of
any interest in this Agreement at law, in equity, or otherwise.

                                                                        46
      9.2 Waivers and Amend ments . No amend ment, modification, restatement, supplement, termination, or waiver o f or to, o r consent to any
departure fro m, any provision of this Agreement or the other Loan Docu ments, shall be effective unless the same shall be in writing and signed
by or on behalf of Lender and Borrower. Any waiver of any provision of this Agreement or the oth er Loan Docu ments and any consent to any
departure of Borrower fro m the terms of any provisions of this Agreement or the Loan Documents shall be effect ive only in the specific
instance and for the specific purpose for which g iven. In any event, no notice t o, or demand on, Borro wer shall entitle Bo rrower to any other or
further notice or demand in similar or other circu mstances.

      9.3 Notices . Except as otherwise provided in Sections 2.6 and 2.7 hereof, all notices, demands, instructions, requests, and other
communicat ions required or permitted to be given to, or made upon, any party hereto shall be in writing and (except for finan cial statements
and other related informat ional documents to be furnished pursuant hereto which may be sent by first -class mail, postage prepaid) shall be
personally delivered or sent by registered or certified mail, postage prepaid, return receipt requested, or by courier or telefacsimile and shall be
deemed to be given for purposes of this Agreement on the day that such writing is received by the Person to whom it is to be sent pursuant to
the provisions of this Agreement. Un less otherwise specified in a notice sent or delivered in accordance with the foregoing p rovisions of this
Section 9.3 , notices, demands, requests, instructions , and other commun ications in writ ing shall be given to or made upon the respective
parties hereto at their respective addresses (or to their respective telefacsimile nu mbers) indicated on Exhib it 9.3 attached hereto.

       9.4 Successors and Assigns . This Agreement shall be binding upon, and inure to the benefit of, the parties hereto and their respective
successors and assigns; provided , however , that (a) Borrower may not assign or transfer any interest or rights hereunder without the prior
written consent of Lender and any such prohibited assignment or transfer shall be absolutely void, and (b) unless an Event of Default has
occurred and is continuing, Lender may not assign its obligations hereunder without the prior written consent of Borro wer, such consent not to
be unreasonably withheld, delayed or conditioned, except in connection with (x) an assignment or transfer by Lender to an Affiliate of Lender
or (y) any merger, consolidation, sale, transfer, or other disposition of all or any substantial portion of Lender’s business or loan portfolio.

     9.5 Headings . Article and section headings used in this Agreement and the table of contents preceding this Agreement are for
convenience of reference only and shall neither constitute a part of this Agreement for any other purpose nor affect the construction of this
Agreement.

     9.6 Execution in Counterparts; Effectiveness . This Agreement may be executed in any nu mber of counterparts and by different parties on
separate counterparts,

                                                                         47
each of which counterparts, when so executed and delivered, shall be deemed to be an orig inal. All of such counterparts, take n together, shall
constitute but one and the same Agreement. Th is Agreement shall beco me effective upon the execution of a coun terpart of this Agreement by
each of the parties hereto.

    9.7 GOVERNING LAW . EXCEPT AS SPECIFICALLY S ET FORTH IN ANY OTHER LOAN DOCUMENT: (A) THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS S HALL B E DEEMED TO HAVE B EEN MADE IN THE S TATE OF
CALIFORNIA; AND (B ) THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS , AND THE
CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS OF THE
PARTIES THER ETO S HALL B E DETER MINED UNDER, GOVERNED B Y, AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF CALIFORNIA.

    9.8 JURISDICTION AND VENUE . TO THE EXT ENT THEY MA Y LEGALLY DO SO, THE PARTIES HER ETO AGREE
THAT ALL ACTIONS, S UITS, OR PROCEEDINGS ARIS ING B ETWEEN LENDER, OR BORROWER IN CONNECTION WITH
THIS AGREEMENT, THE REVOLVING CREDIT FACILITY NOTE, OR THE OTHER LOAN DOCUMENTS S HALL B E TRIED
AND LITIGATED ONLY IN THE S TATE OR FED ERAL COURTS LOCATED IN THE COUNTY OF LOS ANGEL ES , STATE OF
CALIFORNIA. BORROWER AND LENDER, TO THE EXT ENT THEY MA Y LEGALLY DO SO, HEREB Y WAIVE ANY RIGHT
EACH MAY HAVE TO ASS ERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJ ECT TO VENUE TO THE
EXTENT ANY PROCEEDING IS B ROUGHT IN ACCORDANCE WITH THIS S ECTION 9.8 AND S TIPULATE THAT THE
STATE AND FED ERAL COURTS LOCATED IN THE S TATE OF CALIFORNIA SHALL HAVE IN PERS ONAM JURIS DICTION
AND VENUE OVER S UCH PARTY FOR THE PURPOS E OF LITIGATING ANY S UCH DISPUTE, CONTROVERS Y, OR
PROCEEDING ARIS ING OUT OF OR RELATED TO THIS AGREEMENT, THE REVOLVING CREDIT FACILITY NOTE, OR
THE OTHER LOAN DOCUMENTS. TO THE EXT ENT PERMITT ED B Y LAW, S ERVICE OF PROCESS S UFFICIENT FOR
PERSONAL J URISDICTION IN ANY ACTION AGAINST BORROWER MAY B E MADE B Y REGISTER ED OR CERTIFIED
MAIL, RETURN REC EIPT REQUES TED, TO ITS ADDRESS INDICATED ON EXHIB IT 9.3 ATTACHED HERET O.

    9.9 WAIVER OF TRIAL B Y J URY . BORROWER AND LENDER, TO THE EXT ENT THEY MAY L EGALLY DO SO,
HER EB Y EXPRESS LY WAIVE ANY RIGHT TO TRIAL B Y J URY OF ANY CLAIM, DEMAND, ACTION, CAUS E OF ACTION,
OR PROCEEDING ARIS ING UNDER OR WITH RESPECT TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS, OR
IN ANY WAY CONNECTED WITH, OR RELAT ED TO, OR INCIDENTAL TO, THE DEALINGS OF THE PARTIES HER ETO
WITH RESPECT TO THIS AGREEMENT OR THE

                                                                       48
OTHER LOAN DOCUMENTS, OR THE TRANSACTIONS RELATED HER ETO OR THERETO, IN EACH CAS E WHETHER
NOW EXIS TING OR HEREAFT ER ARIS ING, AND IRRESPECTIVE OF WHETHER SOUNDING IN CONTRACT, TORT, OR
OTHERWIS E. TO THE EXTENT THEY MAY LEGALLY DO SO, BORROWER AND LENDER HER EB Y AGREE THAT ANY
SUCH CLAIM, DEMAND, ACTION, CAUS E OF ACTION, OR PROCEEDING S HALL B E DECIDED B Y A COURT TRIAL
WITHOUT A J URY AND THAT ANY PARTY HER ETO MAY FIL E AN ORIGINAL COUNTERPART OR A COPY OF THIS
SECTION 9.9 WITH ANY COURT AS WRITTEN EVID ENCE OF THE CONS ENT OF THE OTHER PARTY OR PARTIES
HER ETO TO WAIVER OF ITS OR THEIR RIGHT TO TRIAL B Y J URY.

       9.10 Independence of Covenants . All covenants under this Agreement and other Loan Documents shall be given independent effect so
that if a part icular action or condition is not permitted by any one coven ant, the fact that it would be permitted by another covenant, shall not
avoid the occurrence of an Event of Default or Un matured Event of Default if such action is taken or condition exists.

       9.11 Confidentiality . Lender agrees that material, non-public information regarding Bo rrower and its Subsidiaries, their operations,
assets, and existing and contemplated business plans shall be treated by Lender in a confidential manner, and shall not be disclo sed by Lender
to Persons who are not parties to this Agreement, except: (a) to counsel for and other advisors, accountants, auditors, and consultants to Lender,
(b) to Subsidiaries and Affiliates of Lender, prov ided that any such Subsidiary or Affiliate shall have agreed to receive such in format ion
hereunder subject to the terms of this Section 9.11 , (c) as may be required by statute, decision, or judicial or ad ministrative order, ru le, o r
regulation, (d) as may be agreed to in advance by Borrower or its Subsidiaries or as requested or required by any Govern menta l Authority
pursuant to any subpoena or other legal process, (e) as to any such informat ion that is or becomes generally availab le to the public (other than
as a result of prohibited disclosure by Lender), (f) in connection with any assignment, prospective assignment, sale, prospective sale,
participation or prospective participations, or pledge or prospective pledge of Lender’s interest under this Agreement, provided that any such
assignee, prospective assignee, purchaser, prospective purchaser, participan t, prospective participant, pledgee, or prospective pledgee shall
have agreed in writing to receive such information hereunder subject to the terms of this Section, and (g) in connection with any lit igation or
other adversary proceeding involving parties hereto which such litigation or adversary proceeding involves claims related to the rights or duties
of such parties under this Agreement or the other Loan Docu ments. The provisions of this Section 9.11 shall survive for 2 years after the
payment in fu ll of the obligations of Borro wer under this Agreement.

       9.12 Co mplete Agreement . Th is Agreement, together with the exh ibits hereto, the Disclosure Statement, and the other Loan Documents
is intended by the parties hereto as a final exp ression of their agreemen t and is intended as a complete statement of the terms and conditions of
their agreement with respect to the subject matter of this Agreement.

                                                                         49
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and d elivered as of the date first set forth above.

                                                                             JMP GROUP LLC
                                                                             a Delaware limited liab ility co mpany

                                                                             By:       /s/ Craig R. Johnson
                                                                             Title:    President

                                                                             CITY NATIONAL BANK,
                                                                             a national banking association

                                                                             By:       /s/ Aaron Cohen
                                                                             Title:    Senior Vice President
                                                                                                                                     Exhi bit 10.5

                                                    INDEMNIFICATION AGREEMENT

      This INDEMNIFICATION A GREEM ENT (th is “ Agreement ”) is made and entered into this                    day of         , 2007 (t he
“Effective Date”) by and between JMP Group Inc., a Delaware corporation (the “ Co mpany ”), and                   (the “ Indemn itee ”).

     WHEREAS, the Co mpany believes it is essential to retain and attract qualified directors and officers;

     WHEREAS, the Indemnitee is a director and/or officer of the Co mpany;

      WHEREAS, both the Co mpany and the Indemnitee recognize the increased risk o f lit igation and other claims being asserted again st
directors and officers of public co mpanies;

     WHEREAS, the Co mpany’s Certificate of Incorporation (the “Certificate of Incorporation ”) and Bylaws (the “ Bylaws ”) require the
Co mpany to indemn ify and advance expenses to its directors and officers to the extent permitted by the DGCL (as hereinafter d efined);

      WHEREAS, the Indemnitee has been serving and intends to continue serving as a director and/or officer of the Co mpany in part in
reliance on the Cert ificate of Incorporation and By laws; and

       WHEREAS, in recognition of the Indemnitee’s need for (i) substantial protection against personal liability based on the Indemnitee’s
reliance on the Cert ificate of Incorporation and By laws, (ii) specific contractual assurance that the protection promised by the Certificate of
Incorporation and Bylaws will be available to the Indemnitee, regardless of, among other things, any amendment to or revocation of the Bylaws
or any change in the composition of the Co mpany’s Board of Directors (the “ Board ”) or acquisit ion transaction relating to the Co mpany, and
(iii) an inducement to continue to provide effective services to the Company as a director and/or officer thereof, the Co mpany wishes to
provide for the indemnificat ion of the Indemnitee and to advance expenses to the Indemnitee to the fullest extent permitted b y law and as set
forth in this Agreement, and, to the extent insurance is maintained by the Co mpany, to provide for the continued coverage of the Indemn itee
under the Company’s directors’ and officers’ liability insurance policies.

       NOW, THEREFORE, in consideration of the premises contained herein and of the Indemnitee continuing to serve the Company directly
or, at its request, with another enterprise, and intending to be legally bound hereby, the parties hereto agree as follows:
     1. Certain Defi nitions.
           (a) A “ Change in Control ” shall be deemed to have occurred if:
                    (i) any “person,” as such term is used in Sections 13(d) and 14(d ) of the Securit ies Exchange Act of 1934, as amended, and
the rules and regulations thereunder (the “ Exchange Act ”), other than (a) a trustee or other fiduciary hold ing securities under an emp loyee
benefit plan of the Co mpany; (b) a corporation owned, directly or indirectly, by the stockholders

                                                                        1
of the Co mpany in substantially the same proportions as their ownership of stock of the Co mpany; or (c) any current beneficial stockholder or
group, as defined by Rule 13d-5 of the Exchange Act, including the heirs, assigns and successors thereof, of beneficial ownership, within the
mean ing of Rule 13d-3 of the Exchange Act, of securities possessing more than 50% of the total co mb ined voting power of the Co mpany ’s
outstanding securities; hereafter becomes the “beneficial o wner,” as defined in Rule 13d -3 of the Exchange Act, direct ly or indirectly, of
securities of the Co mpany representing 20% or more of the total comb ined voting power represented by the Company ’s then outstanding
Vot ing Securit ies;

                   (ii) during any period of t wo consecutive years, individuals who at the beginning of such period constitute the Board and any
new director whose election by the Board or no mination for election by the Co mpany ’s stockholders was approved by a vote of at least
two-thirds of the directors then in office who either were directors at the beginning of the period or whose election or nominatio n for election
was previously so approved, cease for any reason to constitute a majority thereof; or

                    (iii) the stockholders of the Co mpany approve a merger or consolidation of the Co mpany with any other corporation, other
than a merger or consolidation which would result in the Voting Securities of the Co mpany outstanding immediately p rior thereto continuing to
represent (either by remain ing outstanding or by being converted into Voting Securities of the surviving entity) at least 80% of the total voting
power represented by the Vot ing Securit ies of the Co mpany or such surviving entity outstanding immediately after such merger or
consolidation, or the stockholders of the Company approve a plan of co mplete liquidation of the Co mpany or an agreemen t for the sale or
disposition by the Company, in one transaction or a series of transactions, of all or substantially all of the Co mpany ’s assets.

            (b) “ DGCL ” shall mean the General Corporation Law of the State of Delaware, as the same exists or may hereafter be amended or
interpreted; provided, however, that in the case of any such amendment or interpretation, only to the extent that such amendment or
interpretation permits the Co mpany to provide broader indemnification rights than were permitted prior thereto.

             (c) “ Expense ” shall mean attorneys’ fees and all other costs, expenses and obligations paid or incurred in connection with
investigating, defending, being a witness in or participating in (including on appeal), or preparing for any of the fo regoing, any Proceeding
relating to any Indemn ifiable Event.

            (d) “ Indemn ifiable Event ” shall mean any event or occurrence that takes place either prior to or after the execution of this
Agreement, related to the fact that the Indemnitee is or was a director or officer of the Co mpany, or is or was serving at th e request of the
Co mpany as a director, officer, emp loyee, or agent of another corporation or of a partnersh ip, joint venture, trust or other enterprise, including
service with respect to employee benefit plans, or by reason of anything done or not done by the Indemnitee in any such capac ity.

         (e) “ Potential Change in Control ” shall be deemed to occur if (i) the Co mpany enters into an agreement or arrangement, the
consummation of which would result in the occurrence of a Change in Control; (ii) any person (including the Co mpany) publicly

                                                                          2
announces an intention to take or to consider taking actions which, if consummated, would constitute a Change in Control; (iii) any person
(other than a trustee or other fiduciary hold ing securities under an employee benefit p lan of the Co mpany acting in such capa city or a
corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock
of the Co mpany) who is or becomes the beneficial o wner, d irectly or indirectly, of securities of the Co mpany representing 10% or more of the
combined voting power of the Co mpany’s then outstanding Vot ing Securit ies, increases his or her beneficial o wnership of such securities by
5% or more over the percentage so owned by such person on the date hereof; or (iv) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a Potential Change in Control has occurred.

             (f) “ Proceeding ” shall mean any threatened, pending or completed action, suit, investigation or proceeding, and any appeal thereof,
whether civil, criminal, ad min is trative or investigative and/or any inquiry or investigation, whether conducted by the Company or any other
party, that the Indemnitee in good faith believes might lead to the institution of any such action.

            (g) “ Reviewing Party ” shall mean any appropriate person or body consisting of a member or members of the Co mpany ’s Board or
any other person or body appointed by the Board (including the special independent counsel referred to in Section 6) who is not a party to the
particular Proceeding with respect to which the Indemn itee is seeking indemn ification.

           (h) “ Vot ing Securities ” shall mean any securities of the Co mpany which vote generally in the elect ion of directors.

       2. Indemnification. In the event the Indemnitee was or is a party to or is involved (as a party, witness, or otherwise) in any Proceeding by
reason of (or arising in part out of) an Indemn ifiable Event, whether the basis of the Proceeding is the Indemnitee ’s alleged action in an official
capacity as a director or officer or in any other capacity while serving as a director or o fficer, the Co mpany shall indemn ify the Indemnitee to
the fullest extent permitted by the DGCL against any and all Expenses, liability, and loss (including judg ments, fines, ERISA excise taxes or
penalties, and amounts paid or to be paid in settlement, and any interest, assessments, or other charges imposed thereon, and any federal, state,
local, or fo reign taxes imposed on any director or officer as a result of the actual or deemed receipt of a ny payments under this Agreement)
(collect ively, “ Liab ilit ies ”) reasonably incurred or suffered by such person in connection with such Proceeding. The Co mpany shall provide
indemn ification pursuant to this Section 2 as soon as practicable, but in no event later than 30 days after it receives written demand fro m the
Indemnitee. Notwithstanding anything in this Agreement to the contrary and except as provided in Section 5 belo w, the Indemn itee shall not be
entitled to indemn ification pursuant to this Agreement (i) in connection with any Proceeding in itiated by the Indemnitee against the Co mpany
or any director or officer of the Co mpany unless the Co mpany has joined in or consented to the initiation of such Proceeding or (ii) on account
of any suit in which judgment is rendered against the Indemnitee pursuant to Section 16(b ) of the Exchange Act for an accounting of profits
made fro m the purchase or sale by the Indemnitee of securit ies of the Co mpany.

     3. Advancement of Expenses. The Co mpany shall advance Expenses to the Indemnitee within 30 business days of such request (an “
Expense Advance ”); provided,

                                                                         3
however, that if required by applicable corporate laws such Expenses shall be advanced only upon delivery to the Co mpany of a n undertaking
by or on behalf of the Indemnitee to repay such amount if it is ultimately determined that the Indemnitee is not entitled to be indemnified by the
Co mpany; and provided further, that the Company shall make such advances only to the extent permitted by law. Expenses incurred by the
Indemnitee while not acting in h is/her capacity as a director or officer, including service with respect to employee benefit p lans, may be
advanced upon such terms and conditions as the Board, in its sole discretion, deems appropriate.

      4. Review Procedure for Indemnificati on. Notwithstanding the foregoing, (i) the obligations of the Co mpany under Sections 2 and 3
above shall be subject to the condition that the Reviewing Party shall not have determined (in a written opinion, in any case in which the
special independent counsel referred to in Sect ion 6 hereof is involved) that the Indemnitee would not be permitted to be indemnified under
applicable law, and (ii) the obligation of the Co mpany to make an Expense Advance pursuant to Section 3 above shall be subject to the
condition that, if, when and to the extent that the Reviewing Party determines that the Indemnitee would not be permitted to be so indemnified
under applicable law, the Co mpany shall be entitled to be reimbursed by the Indemnitee (who hereby agrees to reimburse the Company) for all
such amounts theretofore paid; provided, however, that if the Indemn itee has commenced legal proceedings in a court of co mpet ent jurisdiction
pursuant to Section 5 below to secure a determination that the Indemnitee should be indemnified under applicab le law, any determination made
by the Reviewing Party that the Indemnitee would not be permitted to be indemnified under applicab le law shall not be binding and the
Indemnitee shall not be required to reimburse the Co mpany for any Expense Advance until a final jud icial determination is mad e with respect
thereto (as to which all rights of appeal therefrom have been exhausted or have lapsed). The Indemnitee ’s obligation to reimburse the Company
for Expense Advances pursuant to this Section 4 shall be unsecured and no interest shall be charged thereon. The Reviewing Party shall be
selected by the Board, unless there has been a Change in Control, other than a Change in Control wh ich has been appr oved by a majority of the
Co mpany’s Board who were d irectors immediately prior to such Change in Control, in which case the Reviewing Party shall be the specia l
independent counsel referred to in Section 6 hereof.

      5. Enforcement of Indemnification Rights. If the Reviewing Party determines that the Indemnitee substantively would not be permitted
to be indemnified in whole or in part under applicable law, or if the Indemnitee has not otherwise been paid in full pursuant to Sections 2 and 3
above within 30 days after a written demand has been received by the Company, the Indemn itee shall have the right to commen ce litigation in
any court in the State of Delaware having subject matter ju risdiction thereof and in which venue is proper to recover the unp aid amount of the
demand (an “ Enfo rcement Proceeding ”) and, if successful in whole or in part, the Indemnitee shall be entitled to be paid any and all Expenses
in connection with such Enforcement Proceeding. The Co mpany hereby consents to service of process for su ch Enforcement Proceeding and to
appear in any such Enforcement Proceeding. Any determination by the Reviewing Party otherwise shall be conclusive and binding on the
Co mpany and the Indemnitee.

     6. Change i n Control . The Co mpany agrees that if there is a Change in Control of the Co mpany, other than a Change in Control wh ich
has been approved by a majority of the Co mpany’s Board who were d irectors immediately prior to such Change in Control, then with

                                                                        4
respect to all matters thereafter arising concerning the rights of the Indemnitee to indemnity payments and Expense Advances under this
Agreement or any other agreement or under applicable law or the Co mpany ’s Cert ificate of Incorporation or By laws now or hereafter in effect
relating to indemn ification for Indemnifiable Events, the Company shall seek legal advice only fro m special independent couns el selected by
the Indemnitee and approved by the Company, which approval shall not be unreasonably withheld. Such special independent counsel shall not
have otherwise performed services for the Co mpany or the Indemnitee, other than in connection with such matters, within the l ast five years.
Such independent counsel shall not include any person who, under the applicable standards of professional conduct then prevailing, would have
a conflict of interest in representing either the Co mpany or the Indemnitee in an action to determine the Indemnitee ’s rights under this
Agreement. Such counsel, among other things, shall render its written opinion to the Company and the Indemnitee as to whether and to what
extent the Indemnitee would be permitted to be indemnified under applicable law. The Co mpany agrees to pay the reasonable fee s of the
special independent counsel referred to above and to indemnify fu lly such counsel against any and all expenses (including attorneys ’ fees),
claims, liabilities and damages arising out of or relating to this Agreement or the engagement of special independent counsel pursuant to this
Agreement.

      7. Es tablishment of Trust . In the event of a Potential Change in Control, the Co mpany shall, upon written request by the Indemn itee,
create a trust (the “ Trust ”) for the benefit of the Indemnitee, and fro m time to time upon written request of the In demnitee shall fund such
Trust, to the extent permitted by law, in an amount sufficient to satisfy any and all Expenses reasonably anticipated at the time of each such
request to be incurred in connection with investigating, preparing for and defending any Proceeding relating to an Indemnifiab le Event, and any
and all judgments, fines, penalties and settlement amounts of any and all Proceedings relating to an Indemnifiab le Event fro m time to time
actually paid or claimed, reasonably anticipated or proposed to be paid. The amount or amounts to be deposited in the Trust pursuant to the
foregoing funding obligation shall be determined by the Reviewing Party, in any case in wh ich the special independent counsel referred to in
Section 6 is involved. The terms of the Trust shall provide that upon a Change in Control (i) the Trust shall not be revoked or the principal
thereof invaded, without the written consent of the Indemnitee, (ii) the trustee of the Trust (the “ Trustee ”) shall advance, within ten business
days of a request by the Indemnitee, any and all Expenses to the Indemnitee, to the extent permitted by law, (and the Indemnitee hereby agrees
to reimburse the Trust under the circu mstances under which the Indemnitee wo uld be required to reimburse the Co mpany under Section 4 of
this Agreement), (iii) the Trust shall continue to be funded by the Co mpany in accordance with the funding obligation set forth above, (iv) the
Trustee shall pro mptly pay to the Indemn itee all amounts for which the Indemn itee shall be entitled to indemn ification pursuant to this
Agreement or otherwise, and (v) all unexpended funds in the Trust shall revert to the Co mpany upon a final determination by the Reviewing
Party or a court of co mpetent jurisdiction, as the case may be, that the Indemnitee has been fully indemn ified under the terms of this
Agreement. The Trustee shall be a bank or trust company or other individual or entity chosen by the Indemnitee and acceptable to and
approved of by the Co mpany. Nothing in this Section 7 shall relieve the Co mpany of any of its obligations under this Agreement. All inco me
earned on the assets held in the Trust shall be reported as income by the Co mpany for federal, state, local and foreign tax p urposes.

                                                                        5
       8. Partial Indemni ty . If the Indemn itee is entitled under any provision of this Agreement to indemnificat ion by the Company for some
or a portion of the Expenses and Liabilities, but not, however, for all of the total amount thereof, the Co mpany shall nevertheless indemnify the
Indemnitee for the portion thereof to wh ich the Indemn itee is entitled. Moreover, notwithstanding any other provision of this Agreement, to the
extent that the Indemnitee has been successful on the merits or oth erwise in defense of any or all Proceedings relat ing in whole or in part to an
Indemnifiable Event or in defense of any issue or matter therein, includ ing dismissal without prejudice, the Indemn itee shall be indemn ified
against all Expenses incurred in connection therewith. In connection with any determination by the Reviewing Party or otherwise as to whether
the Indemnitee is entitled to be indemnified hereunder, the burden of proof shall be on the Co mpany to establish that the Ind emnitee is not so
entitled.

      9. Non-exclusi vity . The rights of the Indemnitee hereunder shall be in addition to any other rights the Indemnitee may have under any
statute, provision of the Company’s Cert ificate of Incorporation or By laws, vote of stockholders or disinterested directors or otherwise, both as
to action in an official capacity and as to action in another capacity while hold ing such office. To the extent that a change in the DGCL permits
greater indemnification by agreement than would be affo rded currently under the Co mpany’s Certificate of Incorporation and Bylaws and this
Agreement, it is the intent of the parties hereto that the Indemnitee shall enjoy by this Agreement the greater benefits so a fforded by such
change.

      10. Liability Insurance . To the extent the Co mpany maintains an insurance policy or policies providing directors ’ and officers’ liability
insurance, the Indemnitee shall be covered by such policy or policies, in accordance with its or their terms, to the maximu m ext ent of the
coverage available fo r any director or officer of the Co mpany.

       11. Settlement of Cl aims . The Co mpany shall not be liable to indemnify the Indemn itee under this Agreement (a) for any amo unts paid
in settlement of any action or claim effected without the Company ’s written consent, which consent shall not be unreasonably withheld; or
(b) for any judicial award if the Co mpany was not given a reasonable and timely opportunity, at its expense, to participate in th e defense of
such action.

      12. No Presumpti on . Fo r purposes of this Agreement, to the fullest extent permitted by law, the termination of any Proceeding, action,
suit or claim, by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere, or its
equivalent, shall not create a presumption that the Indemnitee did not meet any particular standard of conduct or have any pa rticular belief or
that a court has determined that indemn ification is not permitted by applicable law.

      13. Period of Li mitations . No legal act ion shall be brought and no cause of action shall be asserted by or on behalf of the Co mpany or
any affiliate of the Co mpany against the Indemnitee, the Indemnitee’s spouse, heirs, executors or personal or legal representatives after the
expirat ion of two years fro m the date of accrual o f such cause of action, or such longer period as may be required by state law u nder the
circu mstances, and any claim or cause of action of the Co mpany or its affiliate shall be ext inguished and deemed rele ased unless asserted by
the timely filing of a legal act ion within such period; provided, however, that if any shorter period of limitations is other wise applicable to any
such cause of action, such shorter period shall govern.

                                                                          6
      14. Consent and Wai ver by Third Parties . The Indemnitee hereby represents and warrants that he or she has obtained all waivers
and/or consents fro m third parties which are necessary for his or her employ ment with the Co mpany on the terms and conditions set forth
herein and to execute and perform this Agreement without being in conflict with any other agreement, obligation or understand ing with any
such third party. The Indemnitee represents that he or she is not bound by any agreement or any other existing o r previous business relationship
which conflicts with, or may conflict with, the performance of his or her obligations hereunder or prevent the full performan ce of his or her
duties and obligations hereunder.

      15. Amendment of this Agreement . No supplement, modification or amend ment of this Agreement shall be binding unless executed in
writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitu te a waiver of any
other provisions hereof (whether or not similar), nor shall such waiver constitute a continuing waiver. Except as specifically provided herein,
no failu re to exercise or any delay in exercising any right or remedy hereunder shall constitute a waiver thereof.

       16. Subrogation . In the event of payment under this Agreement, the Co mpany shall be subrogated to the extent of such payment to all of
the rights of recovery of the Indemnitee, who shall execute all papers required and shall do everything that may be necessary to secure such
rights, including the execution of such documents necessary to enable the Co mpany effectively to bring suit to enforce such rights.

     17. No Duplication of Payments . The Co mpany shall not be liab le under this Agreement to make any payment in connection with any
claim made against Indemn itee to the extent the Indemnitee has otherwise actually received payment (under any insurance policy , By law, vote,
agreement or otherwise) of the amounts otherwise indemn ifiable hereunder.

       18. Bindi ng Effect . This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their
respective successors, assigns, including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially
all of the business and/or assets of the Company, spouses, heirs, and personal and legal representatives. The Company shall req uire and cau se
any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all, or a su bstantial part, of the
business and/or assets of the Company, by written agreement in form and substance satisfactory to the Indemnitee, expressly t o assume and
agree to perform this Agreement in the same manner and to the same extent that the Company would b e required to perform if no such
succession had taken place. This Agreement shall continue in effect regard less of whether the Indemnitee continues to serve a s a director or
officer of the Co mpany or of any other enterprise at the Co mpany ’s request.

      19. Severability . The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any
provision within a single section, paragraph or sentence) is held by a court of competent jurisdiction to be invalid, void or otherwise
unenforceable, and the remaining provisions shall remain enforceable to the fullest extent permitted by law. Furthermore, to the fullest extent
possible, the provisions of this Agreement (including, without limitation, each portion of this Agreement containing any provision held to be
invalid, void or otherwise unenforceable, that is not itself invalid, void or unenforceable) shall be construed so as to give effect to the intent
man ifested by the provision held invalid, illegal or unenforceable.

                                                                          7
     20. Governing Law . Th is Agreement shall be governed by and construed and enforced in accordance with the laws of the Stat e of
Delaware applicable to contracts made and to be performed in such State without giving effect to the princip les of conflicts of laws.

     21. Counterparts . Th is Agreement may be executed in one or mo re counterparts, each of which shall be deemed an original, b ut all of
which together shall constitute one and the same instrument.

     22. Notices . All notices, demands, and other communications required or permitted hereunder shall be made in writing and shall be
deemed to have been duly given if delivered by hand, against receipt, or mailed, postage prepaid, certified or reg istered mail, retu rn receipt
requested, and addressed to the Co mpany at:

                                      600 Montgomery Street, Suite
                                      1100
                                      San Francisco, California 94111
                                      Attn: Janet L. Tarkoff

     and to the Indemnitee at:




      Notice of change of address shall be effect ive only when done in accordance with this Section. All notices comply ing with this Section
shall be deemed to have been received on the date of delivery or on the third business day after mailing.

                                                                       ****

                                                                         8
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement as of the day first set forth above.

                                                                            THE COMPANY:
                                                                            JMP GROUP INC.

                                                                            By:
                                                                            Name:
                                                                            Title:

                                                                            INDEMNIT EE:


                                                                                                   Signature

                                                                            Print Name:

                                           [INDEM NIFICATION A GREEM ENT]

                                                              9
                                                                                                                                 Exhi bit 23.2

                           CONS ENT OF INDEPENDENT REGIS TERED PUB LIC ACCOUNTING FIRM

We hereby consent to the use in Amendment No. 1 to the Reg istration Statement on Form S-1 (No. 333-140689) of our reports dated March 12,
2007 relating to the consolidated financial statements of JMP Group LLC and the financial statements of JMP Hold ings I nc. We also consent to
the reference to us under the heading “Experts” in such Registration Statement.

/s/ PricewaterhouseCoopers LLP
San Francisco, CA
March 27, 2007