The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes that appear elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements reflecting our current expectations that involve risks and uncertainties. Actual results and the timing of events may differ significantly from those projected in forward-looking statements due to a number of factors, including those set forth in Part I, Item 1A - "Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2007 and in

This Quarterly Report on Form 10-Q in Item 2 - "Management's Discussion and Analysis of Financial Condition and Results of Operations" and in other sections includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. In some cases, you can identify these statements by forward-looking words such as "may", "might", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential", "intend" or "continue", the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to risks, uncertainties and assumptions about us, may include expectations as to our future financial performance, which in some cases may be based on our growth strategies and anticipated trends in our business. These statements are 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 the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. In particular, you should consider the numerous risks outlined in Part I, Item 1A - "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007 and in Part II, Item 1A - "Risk Factors" of this Quarterly Report on Form 10-Q.

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 are under no duty to update any of these forward-looking statements after the date of this filing to conform our prior forward-looking statements to actual results or revised expectations, except as required by Federal securities law.

Forward-looking statements include, but are not limited to, the following:

· Our statement in Part I, Item 1 - "Unaudited Condensed Consolidated Financial Statements" and in Part I, Item 2 - "Management's Discussion and Analysis of Financial Condition and Results of Operations" that, with respect to an aggregate of $26.9 million of remaining commitments we have made to unaffiliated funds, we currently anticipate transferring these commitments to funds sponsored by us.

· Our statement in Part I, Item 1 - "Unaudited Condensed Consolidated Financial Statements" that as of September 30, 2008 there was $45.3 million of total unrecognized compensation expense related to non-vested restricted stock unit awards that is expected to be recognized over a weighted-average period of 2.8 years, and our statement in Part I, Item 2 - "Management's Discussion and Analysis of Financial Condition and Results of Operations" that as of September 30, 2008, there was (i) $2.3 million of unrecognized compensation expense related to non-vested restricted stock unit awards made in connection with our initial public offering and that this cost is expected to be recognized over a weighted-average period of 0.3 years, and (ii) $43.0 million of unrecognized compensation expense related to non-vested restricted stock unit awards made subsequent to our initial public offering and that this cost is expected to be recognized over a weighted-average period of 2.9 years, in each case because these statements depend on estimates of employee attrition in the future.

· Our statement in Part I, Item 1 - "Unaudited Condensed Consolidated Financial Statements" that our lease loss liability was estimated as the net present value of the difference between lease payments and receipts under expected sublease agreements.

? Our statements in Part I, Item 2 - "Management's Discussion and Analysis of Financial Condition and Results of Operations" that -

o one of our strategies is to expand our trading in Canadian securities as our energy and mining analysts begin to make a greater impact on our U.S. and European accounts, and we currently plan to hire U.S. based energy bankers and analysts to capitalize on our capabilities in these sectors;

o we currently plan to continue to selectively upgrade our talent pool, particularly in revenue generating areas;

o we may carry out repurchases of our common stock from time to time in the future and our Board of Directors may authorize additional repurchases in the future, in each case for the purpose of settling obligations to deliver common stock to employees who have received Restricted Stock Units under our Equity Incentive Plan;

o we expect the electronic trading program to increase our market share of the expanding volume of shares traded by institutional clients through alternative trading platforms; and

o we believe that our current level of equity capital, current cash balances, funds anticipated to be provided by operating activities and funds available to be drawn under temporary loan agreements, will be adequate to meet our liquidity and regulatory capital requirements for the next 12 months.

We are an investment bank focused principally on growth companies and growth investors. Our business is managed as a single operating segment, and we generate revenues by providing financial services that include investment banking, brokerage, research and asset management. We take a comprehensive approach in providing these services to growth companies.

We are exposed to volatility and trends in the general securities market and the economy, and we are currently facing difficult market and economic conditions. Due to the recent downturn in the market and the likelihood of an economic recession, client activity levels have decreased resulting in, among other things, lower overall investment banking activity. It is difficult to predict when conditions will change.

The third quarter of 2008 was a very challenging environment for the capital markets given the unprecedented events on Wall Street that led to increased uncertainty and turmoil in the U.S. economy and global financial markets. We are focused on making the necessary adjustments to our business and adapting to the current environment. We are planning for the remainder of 2008 and all of 2009 to be a continuation of the current year and are focused on the following items:

· Preserving capital and retaining key people in order to emerge as a strong player once market stability returns,

· Reducing compensation and non-compensation expenses in order to operate break-even on a cash basis or better, and

· Enhancing the value of our franchise with opportunistic hires, particularly in the advisory business, to be ready to build market share when stability returns to the capital markets.

Specifically, during the fourth quarter of 2008, we will reduce our total headcount by approximately 60 employees which will bring our 2008 total headcount reduction to approximately 200 employees, or 27%, compared to our headcount on January 2, 2008. The reductions are primarily in underperforming areas of our business as well as non-revenue producing departments. As of September 30, 2008 we had approximately 610 employees and we expect to have approximately 550 employees at the beginning of 2009. We will continue to selectively hire to upgrade our talent pool, particularly in revenue generating areas, and make additional key hires as appropriate.

In addition to the headcount reductions noted above, we will reduce base salaries for employees with titles of Vice President and above by 10% as of January 1, 2009.

During the nine months ended September 30, 2008, we executed on the following initiatives:

· Acquisition and Integration of Westwind - On January 2, 2008, we completed our acquisition of Westwind. Integrating Westwind has been a primary focus during 2008 and will continue to be a focus during the remainder of the year. One of our strategies has been to expand our trading in Canadian securities as our energy and mining analysts begin to make a greater impact on our U.S. and European accounts, and we currently plan to hire U.S. based energy bankers and analysts to capitalize on Westwind's capabilities in Canada. In Europe, where we integrated our offices in early 2008, we have combined our sales forces and are marketing the combined companies' products and expertise.

In September 2008, our two U.K. broker-dealer subsidiaries, Thomas Weisel Partners International Limited and Thomas Weisel Partners (UK) Limited, successfully merged into one entity. The combined entity will retain the name Thomas Weisel Partners International Limited.

· Repurchase of Common Stock - During the nine months ended September 30, 2008, we repurchased a total of 1,517,247 shares of our common stock. The shares were classified as treasury stock upon repurchase, and we intend to use these shares to settle obligations to deliver common stock in the future to employees who have received Restricted Stock Units under our Equity Incentive Plan. These repurchases were executed pursuant to an authorization by our Board of Directors to repurchase up to 2,000,000 shares of common stock for the purpose of settling obligations to deliver common stock to employees who have received Restricted Stock Units under our Equity Incentive Plan. Additional repurchases pursuant to this authority may be carried out and our Board of Directors may authorize additional repurchases in the future.

· Key Producer Restricted Stock Unit Plan - As part of a special retention and incentive program, we granted restricted stock unit equity awards to senior employees of the Company as a means of incentivizing and retaining our key producers. An aggregate of 2,970,000 restricted stock units were granted to employees in August 2008 and vest after the end of a three-year period. In addition, we granted 550,000 performance-based awards to certain members of the Executive Committee that vest upon the attainment of the Company's long-term performance goals.

Our results of operations depend on a number of market factors, including market conditions and valuations for growth companies and growth investors, as well as general securities market conditions. Trends in the securities markets are also affected by general economic trends, including fluctuations in interest rates, flows of funds into and out of the markets and other conditions. In addition to these market factors, our revenues from period to period are substantially affected by the timing of investment banking transactions in which we are involved. Fees for many of the services we provide are earned only upon the completion of a transaction. Accordingly, our results of operations in any individual year or quarter may be affected significantly by whether and when significant transactions are completed.

Notwithstanding this exposure to volatility and trends, in order to provide value to our clients, we have made a long-term commitment to maintaining a substantial, full-service integrated business platform. As a result of this commitment, if business conditions result in decreases to our revenues, we may not experience corresponding decreases in the expense of operating our business.

The following table provides a summary of our results of operations (dollar amounts in thousands):

                           Three Months Ended                               Nine Months Ended
                              September 30,                                   September 30,
                           2008           2007          % Change           2008           2007         % Change

Net revenues            $   49,046      $  63,712           (23.0 )%    $  157,984      $ 212,140          (25.5 )%
Income (loss) before
taxes                     (119,479 )       (2,114 )            nm (1)     (162,817 )       17,197             nm
Net income (loss)         (109,179 )         (800 )            nm         (137,111 )       11,203             nm

Net income (loss) per
share:
Basic net income
(loss) per share        $    (3.41 )    $   (0.03 )                     $    (4.22 )    $    0.43
Diluted net income
(loss) per share        $    (3.41 )    $   (0.03 )                     $    (4.22 )    $    0.42

(1) Not meaningful.

Revenues


The following table sets forth our revenues, both in dollar amounts and as a
percentage of net revenues (dollar amounts in thousands):

                           Three Months Ended                            Nine Months Ended
                             September 30,                                 September 30,
                           2008          2007          % Change         2008           2007         % Change

Revenues:
Investment banking      $   17,531     $  25,542           (31.4 )%   $  51,966      $  94,439          (45.0 )%
Brokerage                   33,652        30,344            10.9        104,646         85,426           22.5
Asset management            (2,329 )       6,714          (134.7 )         (115 )       26,711         (100.4 )
Interest income              1,828         3,799           (51.9 )        6,701         12,686          (47.2 )
Other revenue                    -             -              nm              -            920         (100.0 )

Total revenues              50,682        66,399           (23.7 )      163,198        220,182          (25.9 )
Interest expense            (1,636 )      (2,687 )         (39.1 )       (5,214 )       (8,042 )        (35.2 )

Net revenues            $   49,046     $  63,712           (23.0 )%   $ 157,984      $ 212,140          (25.5 )%

Percentage of net
revenues:
Investment banking            35.7 %        40.1 %                         32.9 %         44.5 %
Brokerage                     68.6          47.6                           66.2           40.3
Asset management              (4.7 )        10.5                           (0.1 )         12.6
Interest income                3.7           6.0                            4.3            6.0
Other revenue                    -             -                              -            0.4

Total revenues               103.3         104.2                          103.3          103.8
Interest expense              (3.3 )        (4.2 )                         (3.3 )         (3.8 )

Net revenues                 100.0 %       100.0 %                        100.0 %        100.0 %

Investment Banking Revenue

Our investment banking revenues include (i) management fees, underwriting fees, selling concessions and agency placement fees earned through our participation in public offerings and private placements of equity and debt securities, including convertible debt, (ii) fees earned as strategic advisor in mergers and acquisitions and similar transactions and (iii) the value of warrants received as partial payment for investment banking services. Investment banking revenues are typically recognized at the completion of each transaction. Underwriting revenues are presented net of related expenses. Unreimbursed expenses associated with private placement and advisory transactions are recorded as non-compensation expenses.

With the significant decline in market conditions and capital raising activity during the three months ended September 30, 2008, we focused our efforts towards our strategic advisory businesses which resulted in strategic advisory revenues representing 77% and 51% of investment banking revenues during the three and nine months ended September 30, 2008 as compared to 60% and 46% of investment banking revenues during the three and nine months ended September 30, 2007.

The following table sets forth our investment banking revenues and the number of investment banking transactions (dollar amounts in thousands):

                           Three Months Ended                           Nine Months Ended
                             September 30,                                September 30,
                           2008          2007         % Change          2008          2007         % Change

Investment banking
revenue:
Capital raising         $    3,962     $  10,103          (60.8 )%   $   25,204     $  51,194          (50.8 )%
Strategic advisory          13,569        15,439          (12.1 )        26,762        43,245          (38.1 )

Total investment
banking revenue         $   17,531     $  25,542          (31.4 )%   $   51,966     $  94,439          (45.0 )%

Investment banking
transactions:
Capital raising                  8            10                             53            42
Strategic advisory               5             5                             15            13

Total investment
banking transactions            13            15                             68            55

Average revenue per
transaction (1)         $    1,349     $   1,702                     $      764     $   1,717

(1) Revenue per investment banking transaction is generally higher in the U.S. than in Canada.

Capital raising revenue accounted for approximately 23% and 40% of our investment banking revenue in the three months ended September 30, 2008 and 2007, respectively. Capital raising revenue decreased $6.1 million to $4.0 million in the three months ended September 30, 2008. Our average revenue per capital raising transaction decreased to $0.5 million during the three months ended September 30, 2008 from $1.0 million in 2007. During the three months ended September 30, 2008 and 2007 we closed eight and ten capital raising transactions, respectively

Strategic advisory revenue accounted for approximately 77% and 60% of our investment banking revenue in the three months ended September 30, 2008 and 2007, respectively. Strategic advisory revenue decreased $1.9 million to $13.6 million in the three months ended September 30, 2008. Our average revenue per strategic advisory transaction decreased to $2.7 million during the three months ended September 30, 2008 from $3.1 million in 2007. We closed five strategic advisory transactions during both the three months ended September 30, 2008 and 2007.

Nine Months Ended September 30, 2008 versus 2007 - Investment banking revenue decreased $42.5 million in the nine months ended September 30, 2008 from 2007. Our average revenue per transaction decreased to $0.8 million during the nine months ended September 30, 2008 from $1.7 million in 2007. As noted above, revenue per investment banking transaction is generally higher in the U.S. than in Canada. During the nine months ended September 30, 2008 and 2007 we closed 68 and 55 investment banking transactions, respectively. The change in our average number of transactions and revenue per transaction is primarily due to our acquisition of Westwind which, historically, has completed a larger number of smaller sized transactions. In addition, during the nine months ended September 30, 2007 our investment banking revenue included $13.4 million in revenue generated from a single strategic advisory transaction. During the nine months ended September 30, 2008 and 2007, approximately 27.8% and 28.1%, respectively, of our investment banking revenue was earned from the five largest transactions during the respective periods.

Capital raising revenue accounted for approximately 49% and 54% of our investment banking revenue in the nine months ended September 30, 2008 and 2007, respectively. Capital raising revenue decreased $26.0 million to $25.2 million in the nine months ended September 30, 2008. Our average revenue per capital raising transaction decreased to $0.5 million during the nine months ended September 30, 2008 from $1.2 million in 2007. During the nine months ended September 30, 2008 and 2007 we closed 53 and 42 capital raising transactions, respectively.

Strategic advisory revenue accounted for approximately 51% and 46% of our investment banking revenue in the nine months ended September 30, 2008 and 2007, respectively. Strategic advisory revenue decreased $16.5 million to $26.8 million in the nine months ended September 30, 2008. Our average revenue per strategic advisory transaction decreased to $1.8 million during the nine months ended September 30, 2008 from $3.3 million in 2007. The decrease in our average revenue per strategic advisory transaction was primarily due to a single strategic advisory transaction which resulted in $13.4 million of revenue during the nine months ended September 30, 2007. During the nine months ended September 30, 2008 and 2007, we closed 15 and 13 strategic advisory transactions, respectively.

Brokerage Revenue

Our brokerage revenues include (i) commissions paid by customers from brokerage transactions in equity securities, (ii) spreads paid by customers on convertible debt securities, (iii) trading gains and losses which result from market making activities from our commitment of capital to facilitate customer transactions and from proprietary trading activities relating to our convertible debt and special situations trading groups, (iv) advisory fees paid to us by high-net-worth individuals and institutional clients of our private client services group, which are generally based on the value of the assets we manage and (v) fees paid to us for research.

Three and Nine Months Ended September 30, 2008 versus 2007 - Brokerage revenue increased by $3.3 million and $19.2 million in the three and nine months ended September 30, 2008 from 2007. This increase is primarily due to our acquisition of Westwind in January 2008. Brokerage revenues during the three and nine months ended September 30, 2008 of $1.9 million and $11.6 million, respectively, were generated from former Westwind clients. The remaining fluctuation in brokerage revenues is due to increases in our institutional trading business, partially offset by decreases in trading volumes in our convertible debt trading business.

The combined average daily volume on the New York Stock Exchange, Nasdaq and the Toronto Stock Exchange was approximately 3.6 billion and 4.3 billion shares during the three and nine months ended September 30, 2008, a decrease of 9.9% and an increase of 7.7%, respectively, from the comparable periods in 2007. Our combined average daily customer trading volume increased 49.7% and 41.7% for the three and nine months ended September 30, 2008, respectively, from 2007 primarily due to our acquisition of Westwind.

Asset Management Revenue

Our asset management revenues include (i) fees from investment partnerships we manage, (ii) allocation of the appreciation and depreciation in the fair value of our investments in the underlying partnerships, (iii) fees we earn from the management of equity distributions received by our clients, (iv) other asset management-related realized and unrealized gains and losses on investments not associated with investment partnerships and (v) realized and unrealized gains and losses on warrants received as partial payment for investment banking services.

The following table sets forth our asset management revenues (dollar amounts in thousands):

                           Three Months Ended                            Nine Months Ended
                              September 30,                                September 30,
                           2008           2007         % Change          2008          2007         % Change

Asset management
revenue:
Management fees         $     3,754     $   3,928           (4.4 )%   $   10,883     $  11,990           (9.2 )%
Investments in
partnerships realized
and unrealized gains
and losses-net               (2,375 )       2,976         (179.8 )        (4,133 )      14,233         (129.0 )
Other securities
realized and
unrealized gains and
losses-net                   (3,708 )        (190 )           nm          (6,865 )         488             nm

Total asset
management revenues     $    (2,329 )   $   6,714         (134.7 )%   $     (115 )   $  26,711         (100.4 )%

Three Months Ended September 30, 2008 versus 2007 - Investments in partnerships realized and unrealized gains and losses were as follows (dollar amounts in thousands):

                                                        Three Months Ended
                                                           September 30,
                                                        2008           2007         % Change

Investments in partnerships realized and
unrealized gains and losses:
Thomas Weisel Healthcare Venture Partners            $   (1,079 )    $   2,122         (150.8 )%
. . .