The embarrassing slip-up in proprietary trading that Jefferies Group ( JEF) disclosed on Monday came as the New York-based boutique broker run by CEO Rich Handler is seeking to challenge the dominance of its much larger rivals. Jefferies rang up $51 million in losses from trading and asset management that got upended by a dicey trading and credit environment that already has unsettled the likes of Morgan Stanley ( MS), Lehman Brothers ( LEH) and Bear Stearns ( BSC). The firm is expected to report fourth-quarter results Jan. 23. For the fourth quarter of last year, the New York-based company expects to report a net loss of $24 million , or 17 cents a share. Sales at the firm will be in the range of $345 million to $365 million. The loss is particularly vexing for Jefferies, which only recently had been driving hard at building up its proprietary trading operation to leverage its expertise in small- to mid-cap companies and vying for market share in those areas largely ignored by Morgan Stanley and Goldman Sachs ( GS). Jefferies' Handler said the firm lost a combined $32 million in two principal trading groups. "They got caught up in the meltdown and the money was gone," said Handler, during the analyst call. Most embarrassing is that those proprietary trading strategies were kicked off in July. Proprietary trading at investment banks and brokers is an area that is meant to generate profits for the firm by using its own money and savvy to benefit from trading opportunities. For midtier firms like Jefferies, such strategies were significant, because fees from other business lines had been thinning out.