Edgar Filing: COWEN GROUP, INC.

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

FORM 10-Q


(Mark One)
ý		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2010
or
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission File Number: 001-34516

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


Delaware (State or Other Jurisdiction of Incorporation or Organization)		27-0423711 (I.R.S. Employer Identification No.)
599 Lexington Avenue New York, New York (Address of Principal Executive Offices)		10022 (Zip Code)

(212) 845-7900
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer o		Accelerated filer o		Non-accelerated filer ý (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No ý

APPLICABLE ONLY TO CORPORATE ISSUERS:

As of November 11, 2010 there were 75,449,213 shares of the registrant's common stock outstanding.

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Item No.

PART I. FINANCIAL INFORMATION
	1. Unaudited Condensed Consolidated Financial Statements		4
		Condensed Consolidated Statements of Financial Condition	4
		Condensed Consolidated Statements of Operations	5
		Condensed Consolidated Statements of Changes in Equity	6
		Condensed Consolidated Statements of Cash Flows	7
		Notes to Condensed Consolidated Financial Statements	9
	2. Management's Discussion and Analysis of Financial Condition and Results of Operations		54
	3. Quantitative and Qualitative Disclosures About Market Risk		88
	4. Controls and Procedures		88
PART II. OTHER INFORMATION
	1. Legal Proceedings		89
	1A. Risk Factors		90
	2. Unregistered Sales of Equity Securities and Use of Proceeds		90
	3. Defaults Upon Senior Securities		90
	4. (Removed and Reserved)		90
	5. Other Information		90
	6. Exhibits		90
SIGNATURES			91
EXHIBIT INDEX			92
	Exhibit 10.1
	Exhibit 10.2
	Exhibit 10.3
	Exhibit 31.1
	Exhibit 31.2
	Exhibit 32

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Special Note Regarding Forward-Looking Statements

We have made statements in this Quarterly Report on Form 10-Q (including in "Management's Discussion and Analysis of Financial Condition and Results of Operations") that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify these statements by forward-looking terms such as "may," "might," "will," "would," "could," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "project," "possible," "potential," "intend," "seek" or "continue," the negative of these terms and other comparable terminology or similar expressions. In addition, our management may make forward-looking statements to analysts, representatives of the media and others. These forward-looking statements represent only the Company's beliefs regarding future events (many of which, by their nature, are inherently uncertain and beyond our control) and are predictions only, based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from those expressed or implied by the forward-looking statements. In particular, you should consider the risks contained in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2009.

Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. We undertake no obligation to update any of these forward-looking statements after the date of this filing to conform our prior statements to actual results or revised expectations.

Unaudited Condensed Consolidated Financial Statements are presented for the three months and nine months ended September 30, 2010 and 2009. The Consolidated Financial Statements as of December 31, 2009 were audited.

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PART I. FINANCIAL INFORMATION

Item 1. Unaudited Condensed Consolidated Financial Statements

Cowen Group, Inc.

Condensed Consolidated Statements of Financial Condition

(in thousands, except share and per share data)

(unaudited)

				As of September 30, 2010			As of December 31, 2009

Assets
	Cash and cash equivalents			$	27,585		$	147,367
	Cash collateral pledged				1,882			7,246
	Securities owned, at fair value				593,239			54,153
	Securities purchased under agreement to resell				180,903			—
	Other investments				38,417			28,490
	Receivable from brokers				52,902			32,525
	Fees receivable				19,991			22,446
	Due from related parties (see Note 17)				12,523			14,860
	Fixed assets, net of accumulated depreciation and amortization of $25,861 and $16,449, respectively				29,764			32,603
	Goodwill				27,179			27,179
	Intangible assets, net of accumulated amortization of $7,235 and $4,506, respectively				13,664			16,394
	Other assets				21,145			24,199
	Consolidated Funds
	Cash and cash equivalents				4,421			625
	Securities owned, at fair value				9,836			—
	Other investments, at fair value				349,586			550,407
	Other assets				696			947

			Total Assets	$	1,383,733		$	959,441

Liabilities and Stockholders' Equity
	Securities sold, not yet purchased, at fair value			$	306,174		$	14,812
	Securities sold under agreement to repurchase				259,454			—
	Payable to brokers				103,731			3,817
	Compensation payable				40,920			80,923
	Note payable and short-term borrowings				18,000			49,746
	Fees payable (see Note 17)				2,196			5,387
	Due to related parties (see Note 17)				8,324			8,103
	Accounts payable, accrued expenses and other liabilities				44,588			65,599
	Consolidated Funds
	Capital withdrawals payable				—			26,312
	Accounts payable, accrued expenses and other liabilities				2,358			392

			Total Liabilities		785,745			255,091

Commitments and Contingencies (see Note 12)
Redeemable non-controlling interests					156,743			230,825

Stockholders' equity
	Preferred stock, par value $0.01 per share; 10,000,000 shares authorized, no shares issued and outstanding				—			—
	Class A common stock, par value $0.01 per share: 250,000,000 shares authorized, 75,423,866 and 74,743,163 shares issued and outstanding as of September 30, 2010 and December 31, 2009, respectively (including 1,554,124 and 2,554,182 restricted shares, respectively)				726			726
	Class B common stock, par value $0.01 per share: 250,000,000 authorized, no shares issued and outstanding				—			—
	Additional paid-in capital				501,158			483,872
	Accumulated deficit				(60,081	)		(10,553	)
	Accumulated other comprehensive loss				(558	)		(520	)

		Total stockholders' equity			441,245			473,525

			Total Liabilities and Stockholders' Equity	$	1,383,733		$	959,441

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Cowen Group, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(unaudited)

				Three Months Ended September 30,						Nine Months Ended September 30,

				2010			2009			2010			2009
Revenues
	Investment banking			$	7,199		$	—		$	23,142		$	—
	Brokerage				26,020			—			85,389			—
	Management fees				8,278			8,974			26,429			31,408
	Incentive income				2,672			177			4,666			177
	Interest and dividends				4,270			47			7,054			225
	Reimbursement from affiliates				1,380			2,342			4,864			7,832
	Other				622			577			1,642			2,265
	Consolidated Funds
		Interest and dividends			1,764			4,319			10,510			12,186
		Other			(3	)		26			384			126

			Total revenues		52,202			16,462			164,080			54,219
Expenses
	Employee compensation and benefits				47,994			22,083			130,005			50,869
	Floor brokerage and trade execution				3,664			—			12,637			—
	Interest and dividends				1,299			435			2,366			1,122
	Professional, advisory and other fees				3,258			3,993			8,519			12,022
	Service fees				3,783			470			12,359			1,611
	Communications				3,584			228			10,198			755
	Occupancy and equipment				5,609			2,446			17,559			7,519
	Depreciation and amortization				2,212			1,129			7,096			3,563
	Client services and business development				2,885			1,537			11,316			4,850
	Other				4,712			1,375			15,529			6,628
	Consolidated Funds
		Interest and dividends			109			2,286			1,499			6,917
		Professional, advisory and other fees			843			2,552			2,352			4,259
		Stock loan fees			6			—			1,000			—
		Other			287			473			753			655

			Total expenses		80,245			39,007			233,188			100,770
Other income (loss)
	Net gains (losses) on securities, derivatives and other investments				8,810			1,274			9,983			(2,702	)
	Consolidated Funds
		Net realized and unrealized gains (losses) on investments and other transactions			8,220			26,891			19,225			59,178
		Net realized and unrealized gains (losses) on derivatives			(1,312	)		(5,972	)		(813	)		(30,870	)
		Net gains (losses) on foreign currency transactions			(702	)		(1,563	)		(650	)		(3,040	)

			Total other income (loss)		15,016			20,630			27,745			22,566

			Income (loss) before income taxes		(13,027	)		(1,915	)		(41,363	)		(23,985	)

Income tax expense (benefit)					299			(5,929	)		632			(5,978	)

			Net income (loss)		(13,326	)		4,014			(41,995	)		(18,007	)
	Net (income) loss attributable to redeemable non-controlling interests in consolidated subsidiaries				(2,029	)		(9,899	)		(7,533	)		(13,888	)

			Net income (loss) attributable to Cowen Group, Inc. stockholders	$	(15,355	)	$	(5,885	)	$	(49,528	)	$	(31,895	)

Weighted average common shares outstanding:
	Basic				73,385			37,537			72,866			37,537
	Diluted				73,385			37,537			72,866			37,537
Earnings (loss) per share:
	Basic			$	(0.21	)	$	(0.16	)	$	(0.68	)	$	(0.85	)

	Diluted			$	(0.21	)	$	(0.16	)	$	(0.68	)	$	(0.85	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Cowen Group, Inc.

Condensed Consolidated Statements of Changes in Equity

(in thousands, except share data)

(unaudited)

			Common Stock		Additional Paid-in Capital		Accumulated Other Comprehensive Loss			Accumulated deficit			Total Stockholders' Equity			Redeemable Noncontrolling Interest			Total Comprehensive Income (loss)

Balance, December 31, 2009		74,743,163	$	726	$	483,872	$	(520	)	$	(10,553	)	$	473,525		$	230,825

Comprehensive income (loss):
	Net income (loss)	—		—		—		—			(49,528	)		(49,528	)		7,533		$	(41,995	)
	Defined Benefit Plans	—		—		—		79			—			79			—			79
	Foreign currency translation	—		—		—		(117	)		—			(117	)		—			(117	)

Total comprehensive income (loss)		—		—		—		(38	)		(49,528	)		(49,566	)		7,533		$	(42,033	)
Capital contributions		—		—		—		—			—			—			5,602
Capital withdrawals		—		—		—		—			—			—			(85,912	)
Consolidation of Replication Ltd (see Note 2b)		—		—		—		—			—			—			408
Deconsolidation of CHRP GP (see Note 2b)		—		—		—		—			—			—			(1,713	)
Restricted stock awards issued		680,703		—		—		—			—			—			—
Amortization of share based compensation		—		—		17,286		—			—			17,286			—

Balance, September 30, 2010		75,423,866	$	726	$	501,158	$	(558	)	$	(60,081	)	$	441,245		$	156,743

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Cowen Group, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

							Nine Months Ended September 30,

							2010			2009
							(dollars in thousands)
Cash flows from operating activities:
	Net loss						$	(41,995	)	$	(18,007	)
	Adjustments to reconcile net loss to net cash (used in) / provided by operating activities:
		Depreciation and amortization						7,096			3,563
		Share-based compensation						17,286			—
		Net loss on disposal of fixed assets						267			202
		Purchases of securities owned, at fair value						(1,963,890	)		(81,892	)
		Proceeds from sales of securities owned, at fair value						1,352,942			95,711
		Proceeds from the sale of short investments						1,170,810			—
		Payments to cover short investments						(911,040	)		—
		Net (gains) losses on securities, derivatives and other investments						(12,305	)		(2,335	)
		Consolidated Funds:
			Purchases of securities owned, at fair value					(302,406	)		—
			Proceeds from sales of securities owned, at fair value					292,548			—
			Purchases of other investments					(23,693	)		(2,181	)
			Proceeds from sales of other investments					252,930			73,237
			Net realized and unrealized (gains) losses on investments and other transactions					(22,452	)		(31,560	)
		(Increase) decrease in operating assets:
				Cash collateral pledged				(1,381	)		202
				Securities owned, at fair value, held at broker dealer				74,384			(6,619	)
				Receivable from brokers				(20,377	)		9,097
				Fees receivable				2,455			7,212
				Due from related parties				2,337			5,575
				Other assets				3,054			496
				Consolidated Funds:
					Cash and cash equivalents			948			(1,030	)
					Other assets			134			(606	)
		Increase (decrease) in operating liabilities:									—
				Securities sold, but not yet purchased, at fair value, held at broker dealer				36,584			—
				Payable to brokers				99,914			—
				Compensation payable				(39,693	)		(12,061	)
				Fees payable				(3,208	)		(5,909	)
				Due to related parties				221			(1,773	)
				Accounts payable, accrued expenses and other liabilites				(21,011	)		2,790
				Consolidated Funds:
					Due to related parties			—			(136	)
					Accounts payable, accrued expenses and other liabilities			1,966			(18	)

						Net cash (used in) / provided by operating activities	$	(47,575	)	$	33,958

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Cowen Group, Inc.

Condensed Consolidated Statements of Cash Flows (Continued)

(in thousands)

(unaudited)

				Nine Months Ended September 30,

				2010			2009
				(dollars in thousands)
Cash flows from investing activities:
	Securities purchased under agreement to resell				(180,903	)		—
	Purchases of other investments				(207,021	)		(215	)
	Proceeds from sales of other investments				199,940			6,527
	Purchase of fixed assets				(1,794	)		(312	)
	Sale of fixed assets				—			130

			Net cash (used in) / provided by investing activities		(189,778	)		6,130

Cash flows from financing activities:
	Securities sold under agreement to repurchase				259,454			(1,425	)
	Repayments on the line of credit				(25,001	)		(202	)
	Capital withdrawals to members				—			(16,941	)
	Capital contributions from non-controlling interests in Ramius operating entities				—			541
	Consolidated Funds;
		Repayments on the line of credit			—			(10,207	)
		Capital contributions by non-controlling interests in Consolidated Funds			5,603			490
		Capital withdrawals to non-controlling interests in Consolidated Funds			(122,485	)		(53,149	)

			Net cash used in financing activities		117,571			(80,893	)

Change in cash and cash equivalents					(119,782	)		(40,806	)
Cash and cash equivalents at beginning of period					147,367			46,677

Cash and cash equivalents at end of period				$	27,585		$	5,871

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Cowen Group, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

1. Organization and Business

Cowen Group, Inc., a Delaware corporation, was formed on June 1, 2009 in connection with the Transaction Agreement and Agreement and Plan of Merger ("Transaction Agreement"), dated as of June 3, 2009, by and among Cowen Holdings, Inc., ("Cowen Holdings," formerly Cowen Group, Inc.), Lexington Merger Corp., Ramius LLC ("Ramius," formerly Park Exchange LLC) and RCG Holdings LLC ("RCG," formerly Ramius LLC). For more information related to the acquisition, see Note 3.

Cowen Group, Inc. is a diversified financial services firm and, together with its consolidated subsidiaries (collectively, "Cowen Group" or the "Company") provides alternative investment management, investment banking, research, and sales and trading services through its two business segments: alternative investment management and broker-dealer. The alternative investment management segment includes hedge funds, fund of funds, real estate funds, healthcare royalty funds, cash management and commodity trading funds, offered primarily under the Ramius name. The broker-dealer segment offers industry focused investment banking for growth-oriented companies including advisory and global credit markets origination and domain knowledge-driven research and a sales and trading platform for institutional investors, primarily under the Cowen name.

2. Significant Accounting Policies

a. Basis of presentation

These consolidated financial statements include the accounts of the Company, its operating and other subsidiaries, and entities in which the Company has a controlling financial interest or a substantive, controlling general partner interest. All material intercompany transactions and balances have been eliminated in consolidation. Certain fund entities that are consolidated in these consolidated financial statements, as further discussed below, are not subject to these consolidation provisions with respect to their own investments pursuant to their specialized accounting.

In the opinion of management these unaudited consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America ("US GAAP") and the rules and regulations of the U.S. Securities and Exchange Commission ("SEC") related to interim financial statements. Results for interim periods should not be considered indicative of results for any other interim period or for the full year. These financial statements should be read in conjunction with the audited consolidated financial statements as of December 31, 2009 and 2008 and for the years ended December 31, 2009, 2008 and 2007, included in the Form 10-K of Cowen Group as filed with the SEC on March 25, 2010. The financial information contained herein is unaudited; however, management believes all adjustments have been made that are necessary for a fair presentation of the results for the interim periods.

The business combination between Ramius and Cowen Holdings was accounted for as an acquisition by Ramius of Cowen Holdings. As a result, the historical financial statements of Ramius have become the historical financial statements of the Company.

The assets and liabilities of Cowen Holdings were recorded at their respective fair values, as of November 2, 2009, and combined with those of Ramius. The financial statements of the Company that include periods after November 2, 2009 reflect such fair values and were not restated retroactively to reflect the historical financial position or results of operations of Cowen Holdings. For periods after

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Cowen Group, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

2. Significant Accounting Policies (Continued)

November 2, 2009, the results of operations of Cowen Holdings are included in the results of operations of the Company. Stockholders' equity has been retroactively restated to include the 37,536,826 shares of Class A common stock issued to RCG at the consummation of the Transactions (as defined in Note 3) as the issued capital for all periods prior to the Transactions.

The Company serves as the managing member/general partner and/or investment manager to affiliated fund entities which it sponsors and manages. Certain of these funds in which the Company has a substantive, controlling general partner interest are consolidated with the Company pursuant to US GAAP as described below (the "Consolidated Funds"). Consequently, the Company's consolidated financial statements reflect the assets, liabilities, income and expenses of these funds on a gross basis. The ownership interests in these funds which are not owned by the Company are reflected as non-controlling interests in consolidated subsidiaries in the accompanying consolidated financial statements. The management fees and incentive income earned by the Company from these funds are eliminated in consolidation.

b. Principles of consolidation

The Company determines whether it has a controlling financial interest in an entity by first evaluating whether the entity is a voting interest entity ("VOE") or a variable interest entity ("VIE") under US GAAP.

VOEs are entities in which (i) the total equity investment at risk is sufficient to enable the entity to finance its activities independently and (ii) the equity holders have the obligation to absorb losses, the right to receive residual returns and the right to direct the activities of the entity that most significantly impact the entity's economic performance. VOEs are consolidated in accordance with Financial Accounting Standards Board ("FASB") accounting standards. In accordance with these standards, the Company presently consolidates five funds deemed to be VOEs for which it acts as the general partner or investment manager. RTS Global 3x Fund LP ("RTS Global 3x") was first consolidated in the first quarter of 2010, when it commenced operations. Ramius Alternative Replication Fund Ltd ("Replication Ltd") was first consolidated as of April 1, 2010, when the Company first invested into the fund, which commenced operations in October 2009, resulted in a substantial ownership interest in the fund.

VIEs are entities that lack one or more of the characteristics of a VOE. Any enterprise having a controlling financial interest in a VIE is considered that VIE's primary beneficiary. In accordance with FASB accounting standards, an enterprise must consolidate all VIEs of which it is the primary beneficiary. Prior to the adoption of the revised accounting guidance for VIEs (as discussed in Note 2d) the primary beneficiary of a VIE is defined as the enterprise that has a variable interest, or a combination of variable interests, that will absorb a majority of the VIE's expected losses, receive a majority of the VIE's expected residual returns, or both. Subsequent to the adoption of the revised accounting guidance for VIEs the primary beneficiary of a VIE is the enterprise that has the power to direct the activities of the VIE that most significantly impact the VIE's economic performance, and which has an obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.

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Cowen Group, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

2. Significant Accounting Policies (Continued)

The Company determines whether it is the primary beneficiary of a VIE by performing a qualitative and/or quantitative analysis of the VIE that includes a review of, among other things, its capital structure, terms of any contracts between the Company and the VIE, which interests create or absorb variability, related party relationships and the design of the VIE.

The Company has determined that it no longer exercises control over Cowen Healthcare Royalty GP, LLC (the "CHRP GP") as it no longer acts as managing member of this entity, and beginning with the first quarter of 2010, no longer consolidates this entity. The Company now accounts for its investment in the CHRP GP under the equity method of accounting.

As at September 30, 2010 the Company consolidates the following funds (the "Consolidated Funds"); Ramius Enterprise LP ("Enterprise LP"), Ramius Multi-Strategy FOF LP ("Multi-Strat FOF"), Ramius Vintage Multi-Strategy FOF LP ("Vintage LP"), Ramius Levered Multi-Strategy FOF LP ("Levered FOF"), Replication Ltd and RTS Global 3x.

c. Valuation of investments and derivative contracts

The FASB accounting standards establish a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy are as follows:


Level 1		Inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date;
Level 2		Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly, including inputs in markets that are not considered to be active; and
Level 3		Fair value is determined based on pricing inputs that are unobservable and includes situations where there is little, if any, market activity for the asset or liability. The determination of fair value for assets and liabilities in this category requires significant management judgment or estimation.

Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. Inputs may include price information, volatility statistics, specific and broad credit data, liquidity statistics, and other factors. A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes "observable" requires significant judgment by the Company. The Company considers observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. The categorization of a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and does not necessarily correspond to the Company's perceived risk of that instrument.

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Cowen Group, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

2. Significant Accounting Policies (Continued)

The Company and its operating company subsidiaries act as the manager for the Consolidated Funds. Both the Company and the Consolidated Funds hold certain investments which are valued by the Company, acting as the investment manager. The fair value of these investments is generally estimated based on proprietary models developed by the Company, which include discounted cash flow analyses, public market comparables, and other techniques and may be based, at least in part, on independently sourced market information. The material estimates and assumptions used in these models include the timing and expected amount of cash flows, the appropriateness of discount rates used, and, in some cases, the ability to execute, timing of, and estimated proceeds from expected financings. Significant judgment and estimation goes into the selection of an appropriate valuation methodology as well as the assumptions used in these models, and the timing and actual values realized with respect to investments could be materially different from values derived based on the use of those estimates. The valuation methodologies applied impact the reported value of the Company's investments and the investments held by the Consolidated Funds in the consolidated financial statements. Certain of the Company's investments are relatively illiquid or thinly traded and may not be immediately liquidated on demand if needed. Fair values assigned to these investments may differ significantly from the fair values that would have been used had a ready market for the investments existed and such differences could be material.

The Company primarily uses the "market approach" valuation technique to value its financial instruments measured at fair value. In determining an instrument's placement within the hierarchy, the Company separates the Company's financial instruments into three categories: securities, derivative contracts and other investments. To the extent applicable, each of these categories can further be divided between those held long or sold short.

Securities—Securities whose values are based on quoted market prices in active markets for identical assets, and are therefore classified in level 1 of the fair value hierarchy, include active listed equities, certain U.S. government and sovereign obligations, and certain money market securities. The Company does not adjust the quoted price for such instruments, even in situations where the Company holds a large position and a sale could reasonably impact the quoted price.

Certain positions for which there is a limited market, consisting primarily of convertible debt, corporate debt and loans, are stated at fair value. The estimated fair values assigned by management are determined in good faith and are based on available information considering, among other things, quotations provided by published pricing services, counterparties and other market participants, and pricing models using quoted inputs, and do not necessarily represent the amounts which might ultimately be realized. Such positions that trade in markets that are not considered to be active, but are valued based on quoted market prices, dealer quotations or alternative pricing sources which are supported by observable inputs are classified within level 2. As level 2 investments include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability.

Derivative contracts—Derivative contracts can be exchange-traded or privately negotiated over-the-counter ("OTC"). Exchange-traded derivatives, such as futures contracts and exchange traded option contracts, are typically classified within level 1 or level 2 of the fair value hierarchy depending on whether or not they are deemed to be actively traded. OTC derivatives, such as generic forwards,

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Cowen Group, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

2. Significant Accounting Policies (Continued)

swaps and options, have inputs which can generally be corroborated by market data and are therefore classified within level 2. Derivative contracts are included within other assets or accounts payable, accrued expenses and other liabilities on the consolidated statements of financial condition.

Other investments—Other investments consist primarily of portfolio funds, real estate investments and equity method investments, which are valued as follows:

i.: Portfolio funds—Portfolio funds ("Portfolio Funds") include interests in funds and investment companies managed by the Company or its affiliates. The Company follows an accounting pronouncement regarding fair value measurements and disclosures relating to investments in certain entities that calculate net asset value ("NAV") per share (or its equivalent). The guidance permits, as a practical expedient, an entity holding investments in certain entities that either are investment companies as defined by the AICPA Audit and Accounting Guide, Investment Companies, or have attributes similar to an investment company, and calculate net asset value per share or its equivalent for which the fair value is not readily determinable, to measure the fair value of such investments on the basis of that NAV per share, or its equivalent, without adjustment.

The Company categorizes its investments in Portfolio Funds within the fair value hierarchy dependent on the ability to redeem the investment. If the Company has the ability to redeem its investment at NAV at the measurement date or within the near term, the Portfolio Fund is categorized as a Level 2 fair value measurement. If the Company does not know when it will have the ability to redeem its investment or cannot do so in the near term, the Portfolio Fund is categorized as a Level 3 fair value measurement. See Note 4 for further details of the Company's investments in Portfolio Funds.

ii.: Real estate investments—Real estate investments are valued at estimated fair value. The fair value of real estate investments are estimated based on the price that would be received to sell an asset in an orderly transaction between marketplace participants at the measurement date. Real estate investments without a public market are valued based on assumptions and valuation techniques used by the Company. Such valuation techniques may include discounted cash flow analysis, prevailing market capitalization rates or earning multiples applied to earnings from the investment, analysis of recent comparable sales transactions, actual sale negotiations and bona fide purchase offers received from third parties, consideration of the amount that currently would be required to replace the asset, as adjusted for obsolescence, as well as independent external appraisals. In general, the Company considers several valuation techniques when measuring the fair value of a real estate investment. However, in certain circumstances, a single valuation technique may be appropriate. Real estate investments are reviewed on a quarterly basis by the Company for significant changes at the property level or a significant change in the overall market which would impact the value of the real estate investment resulting in unrealized appreciation or depreciation.

The Company also reflects its real estate equity investments net of investment level financing. Valuation adjustments attributable to underlying financing arrangements are considered in the real estate equity valuation based on amounts at which the financing liabilities could be transferred to market participants at the measurement date.

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Cowen Group, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

2. Significant Accounting Policies (Continued)

Real estate and capital markets are cyclical in nature. Property and investment values are affected by, among other things, the availability of capital, occupancy rates, rental rates and interest and inflation rates. In addition, the Company invests in real estate and real estate related investments for which no liquid market exists. The market prices for such investments may be volatile and may not be readily ascertainable. Amounts ultimately realized by the Company from investments sold may differ from the fair values presented, and the differences could be material.

The Company's real estate investments are typically categorized as Level 3 within the fair value hierarchy as management uses significant unobservable inputs in determining their estimated fair value.

See Note 4 for further information regarding the Company's investments, including equity method investments, and fair value measurements.

d. Securities purchased under agreements to resell and securities sold under agreements to repurchase

Transactions involving purchases of securities under agreements to resell are carried at their contract value which approximates fair value. As of September 30, 2010, the fair value of the collateral received by the Company was $175.7 million.

Transactions involving the sale of securities under agreements to repurchase are carried at their contract value and are accounted for as collateralized financings. In connection with these financings, as of September 30, 2010, the Company had pledged collateral in the amount $279.6 million, which is included in securities owned, at fair value in the consolidated statements of financial condition.

Collateral is valued periodically and the Company and its counterparties may adjust the collateral or require additional collateral to be deposited when appropriate. Collateral held by counterparties may be sold or rehypothecated by such counterparties, subject to certain limitations sometimes imposed by the Company. Collateralized repurchase agreements may result in credit exposure in the event the counterparties to the transactions are unable to fill their contractual obligations. The Company minimizes the credit risk associated with this activity by monitoring credit exposure and collateral values, and by requiring additional collateral to be promptly deposited with or returned to the Company when deemed necessary. The Company's securities purchased under agreements to resell and securities sold under agreements to repurchase were transacted pursuant to agreements with multiple counterparties at September 30, 2010.

e. Recently adopted accounting pronouncements

In June 2009, the FASB issued a new accounting standard which revises the accounting for VIEs by introducing a new consolidation model. This new standard changes the approach to determining the primary beneficiary of a VIE and requires companies to more frequently assess whether they must consolidate VIEs. The new model identifies two primary characteristics of a controlling financial interest: (1) the power to direct significant activities of the VIE, and (2) the obligation to absorb losses of and/or provide rights to receive benefits from the VIE that are potentially significant to the VIE. In February 2010, the FASB finalized an Accounting Standards Update ("ASU") which defers the

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Cowen Group, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

2. Significant Accounting Policies (Continued)

requirements of this standard for certain interests in investment funds and certain similar entities. Therefore the adoption of this new standard on January 1, 2010 did not have a material impact on the Company's financial position, results of operations or cash flows, as substantially all of the entities in which it holds variable interests qualify for the scope deferral under the ASU.

In June 2009, the FASB issued amended guidance on accounting for transfers of financial assets. The amendments were issued to improve the information that a reporting entity provides in its financial statements about a transfer of financial assets, the effects of a transfer on its financial statements, and a transferor's continuing involvement, if any, in transferred financial assets. The amendments eliminate the concept of qualifying special purpose entities from US GAAP. These entities will now be evaluated for consolidation in accordance with the applicable consolidation criteria. The amendments are effective for reporting periods beginning on or after November 15, 2009. The adoption of this new standard on January 1, 2010 did not have a material impact on the Company's financial position, results of operations or cash flows.

In January 2010, the FASB issued a new accounting standard that provides amended disclosure requirements related to fair value measurements. This standard is effective for financial statements issued for reporting periods beginning after December 15, 2009 for certain disclosures and for reporting periods beginning after December 15, 2010 for other disclosures. Since these amended principles require only additional disclosures concerning fair value measurements, adoption will and has not affected the Company's financial condition, results of operations or cash flows.

f. Future adoption of accounting pronouncements

As of September 30, 2010, none of the changes to the Codification issued by the FASB that are not yet effective are expected to have an impact on the Company's financial position or results of operations.

3. Acquisition

On November 2, 2009, the transactions contemplated by the Transaction Agreement (the "Transactions"), were consummated including (1) the merger of Lexington Merger Corp. with and into Cowen Holdings, pursuant to which each outstanding share of common stock of Cowen Holdings was converted into one share of Class A common stock of the Company and (2) the transfer by RCG (which prior to the consummation of the Transactions operated the Ramius business) of substantially all of its assets and liabilities to Park Exchange LLC in exchange for the Company's issuance to RCG of 37,536,826 shares of Class A common stock of the Company. Following the consummation of the Transactions, each of Park Exchange LLC and Cowen Holdings became wholly owned subsidiaries of the Company, and Park Exchange LLC was renamed Ramius LLC.

The Transactions were accounted for under the acquisition method in accordance with US GAAP. Accordingly, the Transactions were accounted for as an acquisition by Ramius of Cowen Holdings. As such, results of operations for Cowen Holdings are included in the consolidated statements of operations for periods subsequent to the date of acquisition, and not for the three months and nine months ended September 30, 2009. The assets acquired and liabilities assumed were recorded at their fair value as at the acquisition date.

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Cowen Group, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

3. Acquisition (Continued)

The following table provides unaudited supplemental pro forma financial information for the three months and nine months ended September 30, 2009 as if the Transactions had occurred as of the beginning of that period:

		Three Months Ended September 30, 2009			Nine Months Ended September 30, 2009

		(in thousands, except per share data) (unaudited)
Pro forma total revenues		$	64,626		$	195,901
Pro forma net loss			(11,876	)		(50,185	)
Pro forma net loss attributable to Cowen Group, Inc. stockholders			(21,828	)		(63,432	)
Pro forma net loss per share:
	Basic	$	(0.40	)	$	(1.15	)
	Diluted	$	(0.40	)	$	(1.15	)

4. Investments and Fair Value Measurements for Operating Entities and Consolidated Funds

a. Operating Entities

Securities owned, at fair value

Securities owned are held by the Company and considered held for trading and carried at fair value. Substantially all equity securities and options are pledged to the clearing broker under terms which permit the clearing broker to sell or re-pledge the securities to others subject to certain limitations.

As of September 30, 2010 and December 31, 2009, securities owned consisted of the following, at fair value:

	As of September 30, 2010		As of December 31, 2009

	(dollars in thousands)
U.S. Government securities(a)	$	274,587	$	—
Common stocks		80,040		11,439
Restricted common stock		5,000		—
Convertible bond(b)		2,975		—
Corporate bonds(c)		217,007		38,327
Options		12,080		1,312
Warrants and rights		314		1,356
Mutual Funds		1,236		1,719

	$	593,239	$	54,153

(a): At September 30, 2010, maturities ranged from October 2010 to November 2024 and interest rates ranged between 0.11% and 8.75%.
(b): At September 30, 2010, the maturity of this bond was July 2015 with an interest rate of 3.5%.
(c): At September 30, 2010, maturities ranged from October 2010 to December 2020 and interest rates ranged between 3.5% and 13.5%. At December 31, 2009, maturities ranged from January 2010 to January 2013 and interest rates ranged between 0.27% and 10.00%.

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Cowen Group, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

4. Investments and Fair Value Measurements for Operating Entities and Consolidated Funds (Continued)

The Company's direct involvement with derivative financial instruments includes credit default swaps, futures, equity swaps, options and warrants and rights. The Company's long exposure to futures and equity swap derivative contracts, at fair value, at September 30, 2010 of $1.5 million is included in other assets in the accompanying consolidated statement of financial condition. The Company's short exposure to futures and equity swap derivative contracts, at fair value, at September 30, 2010 of $1.1 million is included in accounts payable, accrued expenses and other liabilities in the accompanying consolidated statement of financial condition.

The Company may transact in a variety of derivative instruments primarily for trading purposes with each instruments' primary risk exposure being interest rate, credit, foreign exchange, equity or commodity risk.

Pursuant to the various derivatives transactions discussed above, the Company is required to post collateral for its obligations or potential obligations. At September 30, 2010 collateral consisting of $1.8 million is included in receivable from brokers on the consolidated statement of financial condition. As of September 30, 2010 all derivative contracts were with major financial institutions.

Other investments

As of September 30, 2010 and December 31, 2009, other investments consisted of the following:

Other investments

	As of September 30, 2010		As of December 31, 2009

	(dollars in thousands)
(1) Portfolio Funds, at fair value	$	29,120	$	20,683
(2) Real estate investments, at fair value		1,239		1,077
(3) Equity method investments		7,745		6,521
(4) Lehman claims, at fair value		313		209

	$	38,417	$	28,490

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Cowen Group, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(unaudited)

4. Investments and Fair Value Measurements for Operating Entities and Consolidated Funds (Continued)

The Portfolio Funds as of September 30, 2010 and December 31, 2009, included the following:

Real estate investments at September 30, 2010 and December 31, 2009 are carried at fair value and include real estate equity investments held by RCG RE Manager, LLC ("RE Manager"), a real estate operating subsidiary of the Company, of $0.4 million and $0.2 million, respectively, and real estate debt investments held by the Company of $0.8 million and $0.9 million, respectively.

Equity method investments include investments held by the Company in several operating companies whose responsibilities primarily include the day to day management of a number of real estate funds, including the portfolio management and administrative services related to the acquisition, disposition, and active monitoring of the real estate fund's underlying debt and equity investments. The Company's ownership interests in these equity method investments range from 30% to 55%. The Company holds a majority of the outstanding ownership interest (i.e., more than 50%) in three of these entities: RCG Longview Debt Fund IV Management, LLC, RCG Longview Debt Fund IV Partners, LLC and RCG Longview Partners II, LLC. The operating agreements that govern the management of day to day operations and affairs of each of these three entities stipulate that certain decisions require support and approval from other members in addition to the support and approval of the Company. As a result, all operating decisions made in these three entities require the support of both the Company and an affirmative vote of a majority of the other managing members who are not affiliates of the Company. As the Company does not possess unilateral control over any of these entities, the presumption of consolidation has been overcome pursuant to current accounting standards and the Company accounts for these investments under the equity method of accounting. Also included

4. Investments and Fair Value Measurements for Operating Entities and Consolidated Funds (Continued)

in equity method investments is the investment in CHRP GP (see Note 2b). The following table summarizes equity method investments held by the Company:

As of September 30, 2010, the Company's share of losses in its equity method investment in RCG Longview Partners II, LLC has exceeded the carrying amount recorded in this investee. RCG Longview Partners II, LLC, as general partner to a real estate fund, has reversed previously recorded incentive income allocations and has recorded a current clawback obligation to the limited partners in the fund. This obligation is due to a change in unrealized value of the fund on which there have previously been distributed carried interest realizations; however, the settlement of a potential obligation is not due until the end of the life of the respective fund. As the Company is obligated to return previous distributions it received from RCG Longview Partners II, LLC, it has continued to record its share of losses in the investee including reflecting its share of the clawback obligation in the amount of $6.2 million. All such amounts are included in accounts payable, accrued expenses and other liabilities in the condensed consolidated statements of financial condition.

The Company's income (loss) from equity method investments was $1.5 million and $1.2 million for the three months ended September 30, 2010 and 2009, respectively, and $2.4 million and $(3.1) million for the nine months ended September 30, 2010 and 2009, respectively, and is included in net gains (losses) on securities, derivatives and other investments on the accompanying condensed consolidated statements of operations.

Lehman Brothers International (Europe) ("LBIE"), through certain affiliates, was a prime broker to the Company, and the Company held cash and cash equivalent balances with LBIE. On September 15, 2008, LBIE was placed into administration (the "Administration") in the United Kingdom and, as a result, the assets held by the Company in its LBIE accounts were frozen at LBIE.

4. Investments and Fair Value Measurements for Operating Entities and Consolidated Funds (Continued)

The status and ultimate resolution of the assets under LBIE's Administration proceedings is uncertain. The assets of the Company at LBIE at the time of Administration (the "Total Net Equity Claim") consist of $1.0 million. There can be no assurance that the Total Net Equity Claim value, as determined by the Company, will be accepted by the Administrators, nor does the Company know the manner and timing in which such claim will be satisfied and the ultimate value that will be received.

Given the great degree of uncertainty as to the status of the assets held at LBIE and the process and prospects of the return of those assets, the Company has decided to record the fair value of the Total Net Equity Claim at an approximately 80% discount at December 31, 2009 and a 70% discount at September 30, 2010, which represents management's best estimate at the respective dates of the value that ultimately may be recovered with respect to the Total Net Equity Claim (the "Estimated Recoverable Lehman Claim"). The Estimated Recoverable Lehman Claim was recorded at estimated fair value considering a number of factors including the status of the assets under U.K. insolvency laws and the trading levels of Lehman unsecured debt. In determining the estimated value of the Total Net Equity Claim, the Company was required to use considerable judgment and is based on the facts currently available. As additional information on the LBIE proceeding becomes available, the Company may need to adjust the valuation of the Estimated Recoverable Lehman Claim. The actual loss that may ultimately be incurred by the Company with respect to the pending LBIE claim is not known and could be materially different from the estimated value assigned by the Company.

Securities sold, not yet purchased, represent obligations of the Company to deliver a specified security at a contracted price and, thereby, create a liability to purchase that security in the market at prevailing prices. The Company's liability for securities to be delivered is measured at their fair value as of the date of the financial statements. However, these transactions result in off-balance sheet risk, as the Company's ultimate cost to satisfy the delivery of securities sold, not yet purchased, may exceed the amount reflected in the condensed consolidated statements of financial condition. Substantially all equity securities and options are pledged to the clearing broker under terms which permit the clearing broker to sell or re-pledge the securities to others subject to certain limitations.

4. Investments and Fair Value Measurements for Operating Entities and Consolidated Funds (Continued)

As of September 30, 2010 and December 31, 2009, securities sold, not yet purchased, consisted of the following, at fair value:

4. Investments and Fair Value Measurements for Operating Entities and Consolidated Funds (Continued)

At September 30, 2010 and December 31, 2009, investments in Portfolio Funds, at fair value, included the following:

Enterprise LP operates under a "master-feeder" structure with Ramius Enterprise Master Fund Ltd ("Enterprise Master"), whereby Enterprise Master's shareholders are Enterprise LP and RCG II Intermediate, LP. The consolidated investments in Portfolio Funds recorded in other investments on the condensed consolidated statements of financial condition includes Enterprise LP's investment of $270.2 million and $449.2 million in Enterprise Master as of September 30, 2010 and December 31, 2009, respectively. On May 12, 2010, the Company announced its intention to close Enterprise Master. Prior to this announcement, strategies utilized by Enterprise Master included merger arbitrage and activist investing, investments in distressed securities, convertible hedging, capital structure arbitrage, equity market neutral, investments in private placements of convertible securities, proprietary mortgages, structured credit investments, investments in mortgage backed securities and other structured finance products, investments in real estate and real property interests, structured private placements and other relative value strategies. Enterprise Master has broad investment powers and maximum flexibility in seeking to achieve its investment objective. Enterprise Master may invest in equity securities, debt instruments, options, futures, swaps, credit default swaps and other derivatives. Enterprise Master has been selling, and will continue to sell, its positions and return capital to its investors. There are no unfunded commitments at Enterprise LP. See Note 12 for unfunded commitments of Enterprise Master. See Note 5 for further information on the underlying investments of Enterprise Master.

Replication Ltd operates under a "master—feeder" structure with Ramius Alternative Replication Master Fund Ltd. ("Replication Master"), whereby Replication Master's shareholders are Replication Ltd and Ramius Enhanced Replication Fund LLC. The consolidated investments in Portfolio Funds recorded in other investments on the condensed consolidated statements of financial condition includes Replication Ltd's investment of $2 million in Replication Master as of September 30, 2010. Replication Ltd can redeem from or contribute to its investment in Replication Master on a monthly basis at the decision of the investment manager with no prior notice as cash is needed at Replication Ltd. There

4. Investments and Fair Value Measurements for Operating Entities and Consolidated Funds (Continued)

are no unfunded commitments at Replication Ltd. Replication Master's investment objective is to seek to replicate a specific, actively managed hypothetical portfolio by investing its capital in liquid market instruments. Generally, Replication Master expects the trading to be performed on a monthly basis. However, Replication Master is not restricted in terms of the number of trades or frequency of trades that it makes, particularly in cases of abnormal market movements where trading may occur more frequently. Replication Master may invest in exchange traded funds, futures, options, or any other variety of financial instruments or derivative instrument that the investment manager feels is appropriate within the parameters of Replication Ltd.'s offering documentation. See Note 5 for further information on the underlying investments of Replication Master.

The investments of consolidated fund of funds investment companies of $71.5 million and $97.4 million at September 30, 2010 and December 31, 2009, respectively, include the investments of Levered FOF, Multi-Strat FOF and Vintage FOF, all of which are investment companies managed by Ramius Alternative Solutions LLC as well as RTS Global 3x which is managed by Ramius Trading Strategies LLC. Levered FOF's and Multi-Strat FOF's investment objectives are to invest discrete pools of their capital on a leveraged basis among portfolio managers that invest through Portfolio Funds, forming a multi-strategy, diversified investment portfolio designed to achieve returns with low to moderate volatility. Vintage FOF's investment objective is to allocate its capital among portfolio managers that invest through investment pools or managed accounts thereby forming concentrated investments in high conviction managers designed to achieve attractive risk adjusted returns with moderate relative volatility. RTS Global 3x's investment objective is to achieve attractive investment returns on a risk-adjusted basis that are non-correlated with the traditional equity and bond markets by investing substantially all of its capital pursuant to managed futures and global macro-based investment strategies. RTS Global 3x seeks to achieve its objective through a multi-advisor investment approach by allocating its capital among third-party trading advisors that are unaffiliated with RTS Global 3x. However, unlike a traditional "fund of funds" that invests with advisors through entities controlled by third-parties, RTS Global 3x will allocate its capital among a number of different trading accounts organized and managed by the General Partner.

4. Investments and Fair Value Measurements for Operating Entities and Consolidated Funds (Continued)

The following is a summary of the investments held by the four consolidated fund of funds, at fair value, as of September 30, 2010 and December 31, 2009:

4. Investments and Fair Value Measurements for Operating Entities and Consolidated Funds (Continued)

With respect to the aforementioned Lehman claims, the Total Net Equity Claim of Enterprise Master consists of $24.3 million. Included in this claim were assets with a value of $9.5 million, at the time LBIE entered administration, that were returned to Enterprise Master and its affiliated funds in June 2010. Enterprise Master and its affiliated funds sold the returned assets, for an aggregate $10.7 million, and distributed this amount to Enterprise Master's investors in July 2010. As a result, the remaining Net Equity Claim for Enterprise Master is $14.8 million. Enterprise Master is valuing this claim at $7.4 million as of September 30, 2010. The estimated final recoverable amount by Enterprise Master may differ from the actual recoverable amount of the pending LBIE and LBI claims, and the differences may be material.

As a result of Enterprise Master and certain of the funds managed by the Company having assets they held at LBIE frozen in their LBIE prime brokerage account and the degree of uncertainty as to the status of those assets and the process and prospects of the return of those assets, Enterprise Master and the funds managed by the Company decided that only the investors who were invested at the time of the Administration should participate in any profit or loss relating to the Estimated Recoverable Lehman Claim. As a result, Enterprise Master and certain of the funds managed by the Company with assets held at LBIE granted a 100% participation in the Estimated Recoverable Lehman Claims to Special Purpose Vehicles (the "SPVs" or "Lehman Segregated Funds") incorporated under the laws of the Cayman Islands on September 29, 2008, whose shares were distributed to each of their investor funds. Fully redeeming investors of Enterprise LP will not be paid out on the balance invested in the SPV until the claim with LBIE is settled and assets are returned by LBIE.

In addition, Lehman Brothers, Inc. ("LBI") was a prime broker to Enterprise Master and it holds cash balances of $5.3 million. On September 19, 2008, LBI was placed in a Securities Investor Protection Corporation ("SIPC") liquidation proceeding after the filing for bankruptcy of its parent Lehman Brothers Holdings, Inc. The status of the assets under LBI's bankruptcy proceedings has not been determined. The amount that will ultimately be recovered from LBI will depend on the amount of assets available in the fund of customer property to be established by the trustee appointed under the Securities Investor Protection Act (the "SIPA Trustee") as approved by the bankruptcy court as well as the total amount of customer claims that seek recovery from the fund of customer property. Based on court filings by the SIPA Trustee, the total amount of customer claims exceeds the assets that are likely to be in the fund of customer property. In addition, the court filings also indicate that Barclays plc has submitted a substantial claim against LBI relating to an asset purchase agreement entered into by Barclays plc with LBIE near the time of the SIPC liquidation proceeding that could affect the amount of assets that are included in the fund of customer property. As a result of these uncertainties and the timing of any distributions from LBI in respect of the Company's customer claims, management has estimated recovery with respect to the Company's LBI exposure at 47%, which

4. Investments and Fair Value Measurements for Operating Entities and Consolidated Funds (Continued)

represents the present value of the mid point between what management believes are reasonable estimates of the low side and high side potential recovery rates with respect to the Company's LBI exposure.

Indirect Concentration of the Underlying Investments Held by Consolidated Funds

From time to time, through its investments in the Consolidated Funds, the Company may indirectly maintain exposure to a particular issue or issuer (both long and/or short) which may account for 5% or more of the Consolidated Funds' net assets (on an aggregated basis). Based on information that is available to the Company at September 30, 2010 and December 31, 2009, the Company identified Consolidated Funds that had interests in an issuer for which the Company's pro-rata share exceeds 5% of the Consolidated Funds' net assets (on an aggregated basis). There were no indirect concentrations held by the Company at September 30, 2010. The following table presents such interests, at December 31, 2009, which represent the aggregate of (i) the gross amount of exposure that Consolidated Funds have through their investments held directly and (ii) the gross amount of exposure held indirectly through their investments in any unconsolidated master funds:

4. Investments and Fair Value Measurements for Operating Entities and Consolidated Funds (Continued)

The following table presents the financial instruments recorded at fair value on the condensed consolidated statements of financial condition by caption and by level within the valuation hierarchy as of September 30, 2010 and December 31, 2009:

4. Investments and Fair Value Measurements for Operating Entities and Consolidated Funds (Continued)

The following table includes a rollforward of the amounts for the three months and nine months ended September 30, 2010 and September 30, 2009, for financial instruments classified within level 3. The classification of a financial instrument within level 3 is based upon the significance of the unobservable inputs to the overall fair value measurement.

4. Investments and Fair Value Measurements for Operating Entities and Consolidated Funds (Continued)

All realized and unrealized gains (losses) in the table above are reflected in other income (loss) in the accompanying condensed consolidated statements of operations.

There were no significant transfers between Level 1 and Level 2 assets and liabilities for the three months and nine months ended September 30, 2010.

5. Underlying Investments of Unconsolidated Funds Held by Consolidated Funds

As discussed in Note 4, Enterprise LP's investment in Enterprise Master is equal to Enterprise LP's proportional share of Enterprise Master's net assets; as a result, the investment balances of Enterprise Master reflected below may exceed the net investment which Enterprise LP has recorded. The following tables present summarized investment information for the underlying investments and derivatives held by Enterprise Master at September 30, 2010 and December 31, 2009:

5. Underlying Investments of Unconsolidated Funds Held by Consolidated Funds (Continued)

As discussed in Note 4, Multi-Strat FOF and Vintage FOF's investments in their respective master funds are equal to their proportional share of their master fund's net assets; as a result, the investments in Portfolio Funds of the master funds reflected below may exceed the net investment which Multi-Strat FOF and Vintage FOF have recorded. The following table presents summarized investment information for the underlying Portfolio Funds held by Ramius Multi-Strategy Master FOF LP and Ramius Vintage Multi-Strategy Master FOF LP, at estimated fair value, as of September 30, 2010 and December 31, 2009:

5. Underlying Investments of Unconsolidated Funds Held by Consolidated Funds (Continued)

RTS Global 3X, which commenced operations in March 2010, invests over half of its equity in six externally managed portfolio funds (See Note 4) which primarily concentrate around futures and global macro strategies. The following table presents the summarized investment information, which is primarily receivable/(payable) on derivatives, for the underlying Portfolio Funds held by RTS Global 3X, at fair value, as of September 30, 2010:

As discussed in Note 4, Replication Ltd's investment in Replication Master is equal to Replication Ltd's proportional share of Replication Master's net assets; as a result, the investment balances of Replication Master reflected below may exceed the net investment which Replication Ltd has recorded. Summarized investment information for the underlying investments and derivatives held by Replication Master, at fair value, at September 30, 2010 are comprised of exchange traded funds of which $2.6 million are held long and $0.3 million are held short.

Payable to brokers includes amounts payable for unsettled transactions, monies borrowed and proceeds for short sales (including commissions and fees related to securities transactions) equal to the fair value of securities sold, not yet purchased, which are restricted until the Company purchases the securities sold short. Pursuant to the Company's prime broker agreements, these balances are presented net (assets less liabilities) across balances with the same broker. Payable to brokers was $103.7 million and $3.8 million at September 30, 2010 and December 31, 2009, respectively.

At least annually, and more frequently if warranted, we assess whether the goodwill has been impaired by comparing the estimated fair value of each reporting unit with its estimated net book value. Periodically estimating the fair value of a reporting unit requires significant judgement and often involves the use of significant estimates and assumptions. These estimates and assumptions could have

a significant effect on whether or not an impairment charge is recorded and the magnitude of such a charge. There were no additions or impairment losses to goodwill during the three and nine months ended September 30, 2010.

Non-controlling interests in consolidated subsidiaries and the related net income (loss) attributable to non-controlling interests in consolidated subsidiaries are comprised as follows:

The Company issues share-based compensation under Cowen Holdings' previously established 2006 Equity and Incentive Plan and 2007 Equity and Incentive Plan and the recently established Cowen Group, Inc. 2010 Equity and Incentive Plan with 7,500,000 shares available for issuance (collectively, the "Equity Plans"). The Equity Plans permit the grant of options, restricted shares, restricted stock units and other equity based awards to the Company's employees, consultants and directors for up to 17,725,000 shares of common stock. Stock options granted generally vest over two to five year periods and expire seven years from the date of grant. Restricted shares and restricted share units issued may be immediately vested or may generally vest over a two to five year period. As of September 30, 2010, there were approximately 5.8 million shares available for future issuance under the Equity Plans. On

January 1, 2011, additional shares representing 7.5% of the Company's outstanding shares of stock, less shares available under the 2010 plan will be added to the shares available under the 2010 Equity and Incentive Plan.

In addition to the Equity Plans, certain employees of the Company were issued RCG membership interests by RCG, a related party of the Company, in connection with the Transactions (the "RCG Grants"). The RCG Grants are subject to a service condition and vest to each employee over a period of approximately three years. Any RCG Grants forfeited are redistributed to the remaining stakeholders in RCG, which includes both employees and non-employees. The RCG Grants represent awards to employees of the Company by a related party, as compensation for services provided to the Company. As such, the expense related to these grants is included in the compensation expense of the Company.

The Company measures compensation cost for share-based awards according to the fair value method. In accordance with the expense recognition provisions of those standards, the Company amortizes unearned compensation associated with share-based awards on a straight-line basis over the vesting period of the option or award. In relation to awards under the Equity Plans, the Company recognized expense of $6.5 million and $12.2 million, respectively, for the three months and nine months ended September 30, 2010. The income tax effect recognized for the Equity Plans was a benefit of $2.9 million and $5.5 million, respectively, for the three months and nine months ended September 30, 2010.

In relation to awards under the RCG Grants, the Company recognized expense of $1.5 million and $5.1 million, respectively, for the three months and nine months ended September 30, 2010. The income tax effect recognized for the RCG Grants was a benefit of $0.5 million and $1.9 million, respectively, for the three months and nine months ended September 30, 2010.

The following table summarizes the Company's stock option activity for the nine months ended September 30, 2010:

As of September 30, 2010, the unrecognized compensation expense related to the Company's grant of stock options was immaterial.

The following table summarizes the Company's restricted share and restricted stock unit activity for the nine months ended September 30, 2010:

The fair value of restricted stock is determined based on the number of shares granted and the quoted price of the Company's common stock on the date of grant.

As of September 30, 2010, there was $20.5 million of unrecognized compensation expense related to the Company's grant of nonvested restricted shares and restricted share units to employees. Unrecognized compensation expense related to nonvested restricted shares and restricted share units granted to employees is expected to be recognized over a weighted-average period of 1.9 years.

The following table summarizes the Company's RCG Grants activity for the nine months ended September 30, 2010:

The fair value of the RCG Grants was determined based on the number of the Company's shares underlying the RCG membership interest and the quoted price of the Company's common stock on the date of the Transactions.

As of September 30, 2010 there was $12.3 million of unrecognized compensation expense related to the Company's RCG Grants. Unrecognized compensation expense related to RCG Grants is expected to be recognized over a weighted-average period of 2.08 years.

There were no restricted stock units awarded and 16,866 vested awards were delivered to non-employee members of the Company's Board of Directors during the three months ended September 30, 2010. As of September 30, 2010, there were 98,054 restricted stock units outstanding for awards to non-employee members of the Company's Board of Directors.

The following amounts relate to the defined benefit plans in aggregate for the three months and nine months ended September 30, 2010 and 2009.

Components of net periodic benefit cost included in employee compensation and benefits

During the three months and nine months ended September 30, 2010, the Company made no contributions to its defined benefit plans. The amount to be contributed to these plans in 2010 will be determined in the fourth quarter.

The taxable results of the Company's U.S. operations are included in the consolidated income tax returns of Cowen Group, Inc. as well as stand-alone state and local tax returns. The Company has subsidiaries that are resident in foreign countries where tax filings have to be submitted on a stand-alone basis. These subsidiaries are subject to tax in their respective countries and the Company is responsible for and, thus, reports all taxes incurred by these subsidiaries. The countries where the Company owns subsidiaries are the United Kingdom, Germany, Japan, Hong Kong, and China.

The Company calculated its U.S. tax provision using the estimated annual effective tax rate methodology. The tax expense or benefit caused by an extraordinary item is recorded in the quarter in which it occurs. The Company used the discrete methodology to calculate its income tax provision for its foreign subsidiaries. Based on these methodologies, the Company's effective income tax rate was (1.53)% and 24.92% for the nine months ended September 30, 2010 and 2009, respectively. During the nine months ended September 30, 2010, the extraordinary items whose tax impact were recorded discretely were tax provisions of the Company's foreign subsidiaries and taxes resulting from prior period adjustments.

For the period September 30, 2010, the effective tax rate differs from the statutory rate of 35% primarily due to an increase in the Company's valuation allowance.

For the period September 30, 2009, the effective tax rate differed from the statutory rate of 35% primarily due to the fact that the Company was taxed as a partnership that was only subject to New York City unincorporated business tax and a deferred tax benefit associated with the purchase of a reinsurance Company in Luxembourg. Pursuant to an Advanced Tax agreement, upon these purchases, the local subsidiary generated deferred tax assets that fully offset the existing deferred tax liabilities.

The Company records deferred tax assets and liabilities for the future tax benefit or expense that will result from differences between the carrying value of its assets for income tax purposes and for financial reporting purposes, as well as for operating or capital loss and tax credit carryovers. A valuation allowance is recorded to bring the net deferred tax assets to a level that, in management's view, is more likely than not to be realized in the foreseeable future. This level will be estimated based on a number of factors, especially the amount of net deferred tax assets of the Company that are actually expected to be realized, for tax purposes, in the foreseeable future. As of September 30, 2010, the Company recorded a valuation allowance against substantially all of its net deferred tax assets.

The Company is subject to examination by the United States Internal Revenue Service, the United Kingdom Inland Revenue Service and state and local and foreign tax authorities in jurisdictions where the Company has significant business operations, such as New York. There are no ongoing income tax audits by any taxing authority. The Company's subsidiary that operates in China concluded its audits for tax years 2005-2008, which resulted in immaterial tax assessments that the Company fully paid by the end of the third quarter of 2010.

The Company has entered into non-cancellable leases for office space and equipment. These leases contain escalation clauses for operating expenses and real estate taxes. The Company records rent expense on a straight-line basis over the lease term, including any rent holiday periods. Net rent expense was $4.1 million and $2.0 million for the three months ended September 30, 2010 and 2009, respectively, and was $12 million and $6.5 million for the nine months ended September 30, 2010 and 2009, respectively.

On August 20, 2010, the Company entered into an amendment to the Company's original lease for offices located at 1221 Avenue of Americas, New York, to surrender a portion of the office space. The Company is required to surrender one floor of the subleased premises no earlier than January 3, 2011 and no later than January 25, 2011. Additionally, the Company has the right to surrender another floor of the subleased premises on at least 60 days notice to the landlord. The Company currently intends to complete both surrenders during the first quarter of 2011.

On August 20, 2010, the Company entered into an amendment to the Company's original lease for offices located at 599 Lexington Avenue, New York, to lease approximately 18,500 square feet of additional office space through August 2022.

At September 30, 2010, future minimum annual lease payments for the Company were as follows:

The Company has entered into agreements to sublease certain of its premises. These subleases expired in May 2010. The Company recorded sublease income related to these leases of $0.5 million during the three months ended September 30, 2009 and $0.8 million and $1.4 million during the nine months ended September 30, 2010 and 2009, respectively

The Company serves as the general partner/managing member and/or investment manager to various affiliated and sponsored funds. As such, the Company is contingently liable for obligations for those entities. These amounts are not included above as the Company believes that the assets in these funds are sufficient to discharge any liabilities.

As of September 30, 2010, the Company had unfunded commitments of $8.3 million pertaining to capital commitments in three real estate investments held by the Company, all of which pertain to related party investments. Such commitments can be called at any time, subject to advance notice. In addition, the Company has committed to invest $42.0 million to the funds managed by Cowen Healthcare Royalty Partners (the "CHRP Funds") as a limited partner of the CHRP Funds and also as a member of CHRP GP, the general partner of the CHRP Funds. This commitment is expected to be called over a two to five year period. The Company will make its pro-rata investment in the CHRP Funds along with the other limited partners. Through September 30, 2010, the Company has funded $17.9 million towards these commitments.

In connection with Cowen Holdings's previous IPO and separation from Société Générale ("SG") in 2006, Cowen Holdings entered into an indemnification agreement with SG under which (1) SG will

indemnify, and will defend and hold harmless Cowen Holdings and each of the Cowen Holdings's subsidiaries from and against certain liabilities assumed or retained by SG; and (2) SG will indemnify Cowen Holdings for known, pending and threatened litigation (including the costs of such litigation) and certain known regulatory matters, in each case, that existed prior to the date of the Cowen Holdings's IPO to the extent the cost of such litigation results in payments in excess of the amount placed in escrow to fund such matters (the "Indemnification Agreement").

The Company is involved in a number of legal and regulatory matters that arise from time to time in connection with the conduct of its businesses. The Company estimates potential losses that may arise out of these matters and records a reserve and takes a charge to income when losses with respect to such matters are deemed probable and can be reasonably estimated, in accordance with FASB accounting standards. To the extent that the Company is indemnified by SG, indemnified legal expenses and liabilities will be paid out of escrow pursuant to an escrow agreement with SG. Although there can be no assurances as to the ultimate outcome, the Company has established reserves for litigation and regulatory matters that it believes are adequate as of September 30, 2010. Estimates, by their nature, are based on judgment and currently available information and involve a variety of factors, including, but not limited to, the type and nature of the litigation, claim or proceeding, the progress of the matter, the advice of legal counsel, the Company's defenses and its experience in similar cases or proceedings as well as its assessment of matters, including settlements, involving other defendants in similar or related cases or proceedings. The Company may increase or decrease its legal reserves in the future, on a matter-by-matter basis, to account for developments in such matters.

Based on information currently available, the Company believes that the amount of reasonably possible losses will not have a material adverse effect on the Company's consolidated financial condition or cash flows. However, losses may be material to the Company's operating results in a future period, depending in part, on the operating results for such period and the extent to which Cowen Holdings is indemnified by SG.

Various claims against the Company may exist in the ordinary course of business. Management of the Company does not believe that any such matter will have a material adverse effect on the Company's consolidated statements of financial condition, condensed consolidated statements of operations or condensed consolidated statements of cash flows.

On June 3, 2009, the Company entered into a collateralized revolving credit agreement with HVB AG, as lender, administrative agent and issuing bank, providing for a revolving credit facility with a $50.0 million aggregate loan commitment amount available, with a $7.0 million letter of credit sub-limit. The first borrowing under this line occurred on June 30, 2009. As of September 30, 2010 and December 31, 2009, the Company had borrowings of $18.0 million and $43.0 million, respectively, under the line of credit portion. The Company also has a letter of credit of $6.7 million at both September 30, 2010 and December 31, 2009. At the Company's election and discretion, borrowings under this collateralized revolving credit agreement bear interest per annum (based on a 360 day year) equal to either: (a) 0.5% plus the greater of (1) the lender's prime rate, (2) the overnight federal funds rate plus 0.5% and (3) the LIBOR rate plus 1.0% or (b) the LIBOR rate plus 2.75%. Due to the variable interest rate on these borrowings, their carrying values approximate fair value. The Company is

required to pay a quarterly commitment fee on the undrawn portion of the revolving credit facility equal to 1.0% per annum of the undrawn amount. For letters of credit, the Company will pay a fee on the stated amount of the letter of credit at a rate equal to 2.75%. The 2009 collateralized revolving credit agreement was to mature on November 2, 2009 but was extended; $25.0 million was extended through January 4, 2010 and $25 million was extended through September 29, 2011. All terms of the extended collateralized revolving credit agreement remain the same except the following: at the Company's election and discretion, borrowings under the extended 2009 collateralized revolving credit agreement bear interest per annum (based on a 360 day year) equal to either: (1) the lender's prime rate plus 1.5% or (2) the 1, 2 or 3 month LIBOR rate plus 3.5%. For letters of credit, the Company will pay a fee on the stated amount of the letter of credit at a rate equal to 3.5%. The 2009 collateralized revolving credit agreement contained financial and other restrictive covenants that limited the Company's ability to incur additional debt and engage in other activities. As of September 30, 2010 and during the period from June 3, 2009 to September 30, 2010, the Company was in compliance with these covenants.

On January 4, 2010, in accordance with the terms of the collateralized revolving credit agreement, the Company remitted $25 million to HVB AG, reducing its revolving line of credit balance.

Interest incurred on the Company's lines of credit (in combination with all previous lines of credit) was $0.2 million and $0.4 million for the three months ended September 30, 2010 and 2009, respectively, and was $0.5 million and $1.1 million for the nine months ended September 30, 2010 and 2009, respectively.

Cash collateral pledged at December 31, 2009, on the condensed consolidated statements of financial condition, represents collateral that was required to be posted for obligations or potential obligations under the letter of credit discussed above pursuant to the lease agreement for the Company's premises in New York City. This collateral was released with the terms of the extended collateralized revolving credit agreement. The Company's investment in Enterprise Master through Enterprise LP has been pledged as collateral under the line of credit portion of the revolving credit agreement discussed above.

As of September 30, 2010 the Company also has four additional irrevocable letters of credit, for which there is cash collateral pledged, including (i) $50,000, which expires on July 12, 2011, supporting workers' compensation insurance with Safety National Casualty Corporation, (ii) $57,000, which expires on May 12, 2011, supporting Cowen Healthcare Royalty Management, LLC's Stamford office lease and (iii) $82,000, which expires on May 12, 2011, supporting the Company's San Francisco office and (iv) $1.2 million, which expires on August 31, 2011, supporting the Company's lease of additional office space in New York. To the extent any letter of credit is drawn upon, interest will be assessed at the prime commercial lending rate. As of September 30, 2010 and December 31, 2009, there were no amounts due related to these letters of credit.

The Company calculates its basic and diluted earnings per share in accordance with FASB accounting standards. Basic earnings per common share is calculated by dividing net income by the weighted average number of common shares outstanding for the period. As of September 30, 2010,

there were 75,423,866 shares outstanding, of which 1,554,124 are restricted. To the extent that outstanding restricted shares are unvested, they are excluded from the calculation of basic earnings per share. The Company has included 98,054 fully vested, unissued restricted stock units in its calculation of basic earnings per share.

Diluted earnings per common share is calculated by adjusting the weighted average outstanding shares to assume conversion of all potentially dilutive nonvested restricted stock and stock options. The Company uses the treasury stock method to reflect the potential dilutive effect of the unvested restricted shares and unexercised stock options. In calculating the number of dilutive shares outstanding, the shares of common stock underlying unvested restricted shares are assumed to have been delivered, and options are assumed to have been exercised, on the grant date. The assumed proceeds from the assumed vesting, delivery and exercising were calculated as the sum of (a) the amount of compensation cost attributed to future services and not yet recognized and (b) the amount of tax benefit that was credited to additional paid-in capital assuming vesting and delivery of the restricted shares. The tax benefit is the amount resulting from a tax deduction for compensation in excess of compensation expense recognized for financial statement reporting purposes. Stock options, restricted shares, and restricted share units outstanding were not included in the computation of diluted net loss per common share for the three months and nine months ended September 30, 2010, as their inclusion would have been anti-dilutive.

In calculating earnings per share for the periods prior to the November 2, 2009 transaction date, the net earnings (loss) amounts represent the results for the former Ramius, and the shares outstanding represents the number of shares received by the former Ramius in the Transactions. The computation of earnings per share is as follows:

The Company conducts its operations through two segments: the alternative investment management segment and the broker-dealer segment (subsequent to the Transactions). These activities are conducted primarily in the United States and substantially all of its revenues are generated domestically. The performance measure for these segments is Economic Income, which management uses to evaluate the financial performance of and make operating decisions for the segment including determining appropriate compensation levels.

The chief operating decision maker uses Economic Income to assess the performance of the segments and make operating decisions for the segments. Economic Income is a pre-tax measure that (i) presents the segments' results of operations without the impact resulting from the consolidation of any of the Consolidated Funds and (ii) excludes goodwill impairment, and (iii) excludes the reorganization expenses for the Transactions and one-time equity awards made in connection with the Transactions.

As further stated below, one major difference between Economic Income and US GAAP net income is that Economic Income presents the segments' results of operations without the impact resulting from the full consolidation of any of the Consolidated Funds. Consolidation of these funds results in including in income the pro rata share of the income or loss attributable to other owners of such entities. This pro rata share has no effect on the overall financial performance for the Alternative Investment Management segment, as ultimately, this income or loss is not income or loss for the Alternative Investment Management segment itself. Included in Economic Income is the actual pro rata share of the income or loss attributable to the Company as an investor in such entities, which is relevant in management making operating decisions and evaluating financial performance.

The following tables set forth operating results for the Company's alternative investment management and broker-dealer segments and related adjustments necessary to reconcile the Company's Economic Income measure to arrive at the Company's consolidated net income (loss):

	As of September 30, 2010		As of December 31, 2009

	(dollars in thousands)
Tapestry Investment Co PCC Ltd	$	1,072	$	2,669
Cowen Healthcare Royalty Partners, L.P.		15,142		17,009
Ramius Global Credit Fund LP		11,651		—
Ramius Value and Opportunity Fund LP		332		639
RCG Special Opportunities Fund, Ltd		158		321
Other affiliated funds		765		45

	$	29,120	$	20,683

	As of September 30, 2010		As of December 31, 2009

	(dollars in thousands)
RCG Longview Debt Fund IV Management, LLC	$	1,477	$	1,651
Cowen Healthcare Royalty GP, LLC*		1,235		—
RCG Longview Partners, LLC		1,976		1,565
RCG Urban American, LLC		819		605
Urban American Real Estate Fund II, L.P.		753		409
RCG Longview Louisiana Manager, LLC		219		400
RCG Longview Equity Management, LLC		434		1,360
RCG Kennedy House, LLC		236		222
Other		596		309

	$	7,745	$	6,521

	As of September 30, 2010		As of December 31, 2009

	(dollars in thousands)
Investments of Enterprise LP	$	270,192	$	449,160
Investments of Replication Ltd		2,002		—
Investments of consolidated fund of funds investment companies		71,483		97,366

	$	343,677	$	546,526

	As of December 31, 2009

	Shares/ Principal Amount (in local currency)		Fair Value
	(amounts in thousands)
Harvest Energy Trust 7.875% October 2011	$	3,415	$	3,441
Harvest Energy Trust 6.4% - 7.5% October 2012 - May 2015	C$	29,202		28,169
Burlington Northern Sante Fe (common stock shares)		358		35,314
U.S. Treasury notes, 0.75% - 8.75%, due September 2011 - August 2020, including futures	$	181,230		185,220
U.S. Treasury notes, 1.375% - 3.625%, due April 2012 - November 2019, including futures	$	83,090		(82,034	)

		Liabilities at Fair Value as of September 30, 2010

		Level 1			Level 2			Level 3		Total
		(dollars in thousands)
Securities sold, not yet purchased and derivatives
	US Government securities	$	(235,574	)	$	—		$	—	$	(235,574	)
	Common stocks		(65,588	)		—			—		(65,588	)
	Corporate bonds		—			(1,419	)		—		(1,419	)
	Futures		(572	)		(330	)		—		(902	)
	Equity swaps		—			(164	)		—		(164	)
	Options		(3,593	)		—			—		(3,593	)

		$	(305,327	)	$	(1,913	)	$	—	$	(307,240	)

	As of September 30, 2010		As of December 31, 2009

	(dollars in thousands)
U.S. Government securities(a)	$	235,574	$	—
Common stocks		65,588		14,307
Corporate bonds(b)		1,419		—
Options		3,593		505

	$	306,174	$	14,812

	As of September 30, 2010		As of December 31, 2009

	(dollars in thousands)
Government sponsored securities*	$	6,650	$	—
Corporate bonds*		3,186

	$	9,836	$	—

	As of September 30, 2010		As of December 31, 2009

	(dollars in thousands)
(1) Portfolio Funds	$	343,677	$	546,526
(2) Lehman Claims		5,909		3,881

	$	349,586	$	550,407

		September 30, 2010

		Ramius Levered Multi-Strategy FOF LP		Ramius Multi-Strategy FOF LP		Ramius Vintage Multi-Strategy FOF LP		RTS Global 3x Fund LP		Total
	Strategy	Fair Value		Fair Value		Fair Value		Fair Value		Fair Value
		(dollars in thousands)
Ramius Multi-Strategy Master FOF LP*	Multi-Strategy	$	—	$	31,152	$	—	$	—	$	31,152	(a)
Ramius Vintage Multi-Strategy Master FOF LP*	Multi-Strategy		—		—		26,667		—		26,667	(a)
Tapestry Pooled Account V LLC*	Credit-Based		642		—		—		—		642	(b)
Independently Advised Accounts*	Futures & Global Macro		—		—		—		9,139		9,139	(c)
Externally Managed Portfolio Funds	Credit-Based		572		—		—		—		572	(b)
Externally Managed Portfolio Funds	Event Driven		2,708		—		—		—		2,708	(d)
Externally Managed Portfolio Funds	Hedged Equity		35		—		—		—		35	(e)
Externally Managed Portfolio Funds	Multi-Strategy		511		—		—		—		511	(f)
Externally Managed Portfolio Funds	Fixed Income Arbitrage		57		—		—		—		57	(g)

		$	4,525	$	31,152	$	26,667	$	9,139	$	71,483

	Operating Entities																					Consolidated Funds

	Common stock		Restricted common stock		Corporate Bonds			Options			Warrants and Rights			Portfolio Funds			Real estate			Lehman claim		Portfolio Funds			Lehman claim
Balance at June 30, 2010	$	334	$	5,000	$	1,333		$	971		$	404		$	16,208		$	1,159		$	313	$	84,735		$	14,582
Transfers in (out)		—		—		—			—			—			—			—			—		382,004	(a)		—
Purchases		—		—		—			3,897			—			193,763			75			—		3,633			—
Sales		—		—		(1,634	)		(4,042	)		—			(194,177	)		(47	)		—		(135,649	)		(8,547	)
Realized gains (losses)		—		—		419			145			—			820			—			—		755			—
Unrealized gains (losses)		—		—		(118	)		87			(90	)		(561	)		52			—		6,197			(126	)

Balance at September 30, 2010	$	334	$	5,000	$	—		$	1,058		$	314		$	16,053		$	1,239		$	313	$	341,675		$	5,909

Balance at June 30, 2009	$	—	$	—	$	—		$	—		$	—		$	1,818		$	1,587		$	209	$	125,372		$	3,881
Transfers in (out)		—		—		—			—			—			—			—			—		—			—
Purchases		—		—		—			—			—			—			—			—		1,166			—
Sales		—		—		—			—			—			(1,458	)		—			—		(32,019	)		—
Realized gains (losses)		—		—		—			—			—			—			—			—		3,595			—
Unrealized gains (losses)		—		—		—			—			—			4			(104	)		—		(438	)		—

Balance at September 30, 2009	$	—	$	—	$	—		$	—		$	—		$	364		$	1,483		$	209	$	97,676		$	3,881

Balance at December 31, 2009	$	334	$	—	$	—		$	—		$	—		$	17,370		$	1,077		$	209	$	97,366		$	3,881
Transfers in (out)		—		—		—			—			1,356			(2,866	)		—			—		382,004	(a)		—
Purchases		—		5,000		1,215			10,897			—			195,863			189			—		20,685			—
Sales		—		—		(1,634	)		(11,042	)		(402	)		(195,463	)		(100	)		—		(165,939	)		(8,547	)
Realized gains (losses)		—		—		419			145						820			—			—		3,142			—
Unrealized gains (losses)		—		—		—			1,058			(640	)		329			73			104		4,417			10,575

Balance at September 30, 2010	$	334	$	5,000	$	—		$	1,058		$	314		$	16,053		$	1,239		$	313	$	341,675		$	5,909

Balance at December 31, 2008	$	—	$	—	$	—		$	—		$	—		$	1,970		$	1,605		$	209	$	157,513		$	3,881
Transfers in (out)		—		—		—			—			—			—			—			—		—			—
Purchases		—		—		—			—			—						132			—		2,181			—
Sales		—		—		—			—			—			(1,678	)		—			—		(70,350	)		—
Realized gains (losses)		—		—		—			—			—			—			—			—		4,367			—
Unrealized gains (losses)		—		—		—			—			—			72			(254	)		—		3,965			—

Balance at September 30, 2009	$	—	$	—	$	—		$	—		$	—		$	364		$	1,483		$	209	$	97,676		$	3,881

	September 30, 2010					December 31, 2009

	Securities owned		Securities sold, but not yet purchased			Securities owned		Securities sold, but not yet purchased
	(dollars in thousands)
Bank debt	$	—	$	—		$	1,646	$	—
Commercial mortgage backed securities		—		—			2,723		—
Common stock		17,232		(2,207	)		182,447		(47,151	)
Convertible debt		712		—			123,060		—
Corporate bonds		7,594		—			181,402		(1,541	)
Exchange traded funds		—		(1,264	)		—		(5,549	)
Foreign government debt		—		—			10,374		(10,660	)
Loans		—		—			812		—
Options—put		14		(16	)		6,052		(84	)
Options—call		54		(44	)		2,335		(3,048	)
Over-the-counter foreign currency call option		—		(116	)		5		(1	)
Preferred stock		2,433		—			4,558		(198	)
Private debt		63		—			—		—
Private equity		—		—			107		—
Restricted stock		3,148		—			6,172		—
Rights		2,143		—			1,950		—
Trade claims		128		—			128		—
US Treasury Notes		8,205		(7,784	)		185,118		(82,004	)
Warrants		87		—			6,831		—

	$	41,813	$	(11,431	)	$	715,720	$	(150,236	)

Description	As of September 30, 2010			As of December 31, 2009

	(dollars in thousands)
Asset swaps	$	2		$	295
Credit default swaps—protection purchased		(4	)		(574	)
Credit default swaps—protection sold		—			432
Currency forwards		(13	)		691
Equity swaps—long exposure		—			(1,001	)
Futures		63			(822	)
Interest rate call swaption—long exposure		—			105
Interest rate call swaption—short exposure		—			(127	)
Interest rate swaps—long exposure		—			40
Total return swap		—			2,123

	$	48		$	1,162

			September 30, 2010				December 31, 2009

	Strategy		Ramius Multi-Strategy Master FOF LP		Ramius Vintage Multi-Strategy Master FOF LP		Ramius Multi-Strategy Master FOF LP		Ramius Vintage Multi-Strategy Master FOF LP
			(dollars in thousands)
Ramius Hedged Equity FOF LP*		Hedged Equity	$	—	$	—	$	6,725	$	—
Ramius Vintage Multi-Strategy Master FOF LP*		Multi Strategy		1,632		—		5,394		—
Tapestry Pooled Account II, LLC*		Hedged Equity		—		3,396		—		5,642
Tapestry Pooled Account V, LLC*		Credit-Based		1,322		1,412		1,612		1,720
Externally Managed Funds		Credit-Based		6,445		880		4,084		1,158
Externally Managed Funds		Event Driven		8,192		6,611		9,117		13,912
Externally Managed Funds		Fixed Income Arbitrage		82		—		81		—
Externally Managed Funds		Hedged Equity		6,603		4,879		5,461		5,453
Externally Managed Funds		Multi Strategy		7,686		4,605		11,564		14,647
Externally Managed Funds		Other		—		—		47		—
Externally Managed Funds		Global Macro		2,089		2,016		2,081		5,321
Externally Managed Funds		Opportunistic Equity		—		2,318		—		2,825
Externally Managed Funds		Managed Futures		2,376		—		2,256		1,278

			$	36,427	$	26,117	$	48,422	$	51,956

	As of September 30, 2010

	(dollars in thousands)
Bond Futures	$	(3	)
Commodity Forward		(92	)
Commodity Future		1,401
Currency Forward		218
Currency Future		452
Index Future		86
Interest Rate Future		67

	$	2,129

			Weighted Average Exercise Price/Share		Weighted Average Remaining Term		Aggregate Intrinsic Value(1)

					(in years)		(in thousands)
Balance outstanding at December 31, 2009	892,782		$	15.06		3.81	$	—
Options granted	50,001			4.89
Options acquired	—			—
Options exercised	—			—
Options forfeited	—			—
Options expired	(133,858	)		16.00

Balance outstanding at September 30, 2010	808,925		$	14.28		3.22	$	—

Options exercisable at September 30, 2010	758,924		$	14.90		3.12	$	—

			Weighted-Average Grant Date Fair Value

Balance outstanding at December 31, 2009	2,554,182		$	6.90
Granted	5,121,461			4.73
Vested	(1,601,352	)		5.59
Forfeited	(538,413	)		5.28

Balance outstanding at September 30, 2010	5,535,878		$	5.43

			Weighted-Average Grant Date Fair Value

Balance outstanding at December 31, 2009	2,859,426		$	7.30
Granted	—			—
Vested	(91,502	)		—
Forfeited	(129,846)	(*)		—

Balance outstanding at September 30, 2010	2,638,078		$	7.30

	Minimum Lease Payments

	Equipment Leases		Facility Leases
	(in thousands)
Remainder of 2010	$	3,893	$	4,558
2011		14,386		18,202
2012		10,255		17,578
2013		6,942		16,112
2014		5,182		11,859
Thereafter		2,679		69,944

	$	43,337	$	138,253	(a)

			Three Months Ended September 30, 2010

												Adjustments
			Alternative Investment Management			Broker-Dealer			Total Income			Funds Consolidation			Other Adjustments			US GAAP
												(dollars in thousands)
Revenues
	Investment banking		$	—		$	7,199		$	7,199		$	—		$	—		$	7,199
	Brokerage			—			26,020			26,020			—			—			26,020
	Management fees			11,548			—			11,548			(607	)		(2,663	)		8,278
	Incentive income			1,784			—			1,784			—			888			2,672
	Investment Income			14,428			(296	)		14,132			—			(14,132	)
	Interest and dividends			—			—			—			—			4,270			4,270
	Reimbursement from affiliates			—			—			—			(98	)		1,478			1,380
	Other Revenue			509			118			627			—			(5	)		622
	Consolidated Funds			—			—			—			1,761			—			1,761

		Total revenues		28,269			33,041			61,310			1,056			(10,164	)		52,202
Expenses
	Employee compensation and benefits			19,788			26,128			45,916			—			2,078			47,994
	Interest and dividends			(52	)		298			246			—			1,053			1,299
	Non-compensation expenses—Fixed			6,774			17,076			23,850			—			(23,850	)		—
	Non-compensation expenses—Variable			980			4,743			5,723			—			(5,723	)		—
	Non-compensation expenses			—			—			—			—			29,707			29,707
	Reimbursement from affiliates			(1,478	)		—			(1,478	)		—			1,478
	Consolidated Funds			—			—			—			1,245			—			1,245

		Total expenses		26,012			48,245			74,257			1,245			4,743			80,245
Other income (loss)
	Net gain (loss) on securities, derivatives and other investments			—			—			—			—			8,810			8,810
	Consolidated Funds			—			—			—			2,218			3,988			6,206

		Total other income (loss)		—			—			—			2,218			12,798			15,016

		Income (loss) before income taxes and non-controlling interests		2,257			(15,204	)		(12,947	)		2,029			(2,109	)		(13,027	)

Income taxes				—			—			—						299			299

		Economic Income (Loss) / Net income (loss) before non-controlling interests		2,257			(15,204	)		(12,947	)		2,029			(2,408	)		(13,326	)
	Less: (Income) loss attributable to non-controlling interests			—			—			—			(2,029	)		—			(2,029	)
		Economic Income (Loss) / Net Income (loss) available to Cowen Group Inc. stockholders	$	2,257		$	(15,204	)	$	(12,947	)	$	—		$	(2,408	)	$	(15,355	)

			Three Months Ended September 30, 2009

						Adjustments
			Alternative Investment Management			Funds Consolidation			Other Adjustments			US GAAP
			(dollars in thousands)
Revenues
	Investment banking		$	—		$	—		$	—		$	—
	Brokerage			—			—			—			—
	Management fees			12,035			(968	)		(2,093	)		8,974
	Incentive income			(10	)		—			187			177
	Investment Income			13,675			—			(13,675	)		—
	Interest and dividends			—			—			47			47
	Reimbursement from affiliates			—			(216	)		2,558			2,342
	Other Revenue			63			—			514			577
	Consolidated Funds			—			4,345			—			4,345

		Total revenues		25,763			3,161			(12,462	)		16,462
Expenses
	Employee compensation and benefits			21,830			—			253			22,083
	Interest and dividends			430			—			5			435
	Non-compensation expenses—Fixed			9,045			—			(9,045	)		—
	Non-compensation expenses—Variable			721			—			(721	)		—
	Non-compensation expenses			—			—			11,178			11,178
	Reimbursement from affiliates			(2,558	)		—			2,558			—
	Consolidated Funds			—			5,311			—			5,311

		Total expenses		29,468			5,311			4,228			39,007
Other income (loss)
	Net gain (loss) on securities, derivatives and other investments			—			—			1,274			1,274
	Consolidated Funds			—			9,728			9,628			19,356

		Total other income (loss)		—			9,728			10,902			20,630

		Income (loss) before income taxes and non-controlling interests		(3,705	)		7,578			(5,788	)		(1,915	)

Income taxes				—			(2,289	)		(3,640	)		(5,929	)

		Economic Income (Loss) / Net income (loss) before non-controlling interests		(3,705	)		9,867			(2,148	)		4,014
	Less: (Income) loss attributable to non-controlling interests			(32	)		(9,867	)		—			(9,899	)
		Economic Income (Loss) / Net Income (loss) available to all Members	$	(3,737	)	$	—		$	(2,148	)	$	(5,885	)