Jefferies & Co. (JEF) is slashing its workforce amid a sharp drop in its share price as investors question whether it can remain an independent investment bank or be forced to either merge with another player, the FOX Business Network has learned.

People inside the firm say the cuts are occurring most heavily in Jefferies' equities division, and according to traders inside the firm, they could total as much as 11% of the entire firm when the job cutting is complete.

A spokesman for the New York based Jefferies had no immediate comment on the size of the cuts; he would not deny that job reductions are taking place.

Shares of Jefferies have declined more than 50% over the past year, with some of the sharpest declines coming in the aftermath of the MF Global implosion, and eventual bankruptcy filing in November.

At issue for investors: Whether mid-sized brokerage firms like MF Global, Jefferies and even Morgan Stanley (MS), the smallest of the big banks, which take  trading risk in various markets have the balance sheets and access to funding to survive turbulent market zigzags. Investors bet MF Global didn't and after learning about its exposure to sovereign debt of troubled European countries, they began selling shares while lenders began yanking lines of credit leading to the firm's eventual demise.

Following MF Global's bankruptcy, shares of Jefferies began to fall as well, though in recent weeks they've begun to stabilize after company officials, including chief executive Richard Handler, began telling investors that Jefferies wasn't as highly "leveraged" as MF Global, meaning it didn't borrow as much to finance its trades, and that the firm's exposure to risky assets was well hedged against market swings.

Jefferies also benefited from a series of positive analyst reports about its exposure to risky assets.

That said, many investors still don't believe Jefferies is completely safe from further swings in its stock price and say the firm will be forced to reduce risk even further. Handler, people tell the FOX Business Network, is even weighing a business model change in which the firm reduces its risk taking dramatically, merges with another player, or sells itself to a big bank.

The cost cutting underscored in the recent round of layoffs is being seen by some on Wall Street as an indication that the firm is both reacting to the decline in its share price, and the possibility that it may have to pare costs ahead of a potential sale.

Charles Gasparino joined FOX Business Network (FBN) in February 2010 as Senior Correspondent.