U.S. SEC chief offers regulatory guide to JPMorgan

WASHINGTON Mon Jun 18, 2012 5:47pm EDT

Commuters are reflected in stone as they walk past the JP Morgan headquarters in New York May 22, 2012. REUTERS/Eduardo Munoz

Commuters are reflected in stone as they walk past the JP Morgan headquarters in New York May 22, 2012.

Credit: Reuters/Eduardo Munoz

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WASHINGTON (Reuters) - U.S. Securities and Exchange Commission Chairman Mary Schapiro will sketch a regulatory roadmap to JPMorgan Chase & Co's recent huge trading loss, but will stop short of discussing the specifics of her agency's investigation with lawmakers on Tuesday.

In testimony prepared for the House Financial Services Committee hearing, Schapiro lists relevant regulatory authorities ranging from rules against misleading investors to regulations that require public companies to clearly lay out their risks.

Tuesday will be the second time that U.S. financial regulators, as well as JPMorgan Chief Executive Jamie Dimon, have appeared before lawmakers to answer questions about how a hedging strategy using credit derivatives suddenly led to at least $2 billion in losses.

Dimon's testimony prepared for the House hearing is nearly identical to that which he delivered to the Senate Banking Committee last week. At that hearing, Dimon declined to defend the losses but remained critical of regulatory efforts to curb Wall Street.

Schapiro has previously told the Senate Banking Committee that the SEC's investigation is generally focused on whether JPMorgan's financial disclosures were adequate [ID:nL1E8GM5ZM].

Although Schapiro's latest testimony still does not say explicitly which rules may be at the center of the SEC probe, her list of relevant regulations provides a more detailed window into the SEC's thinking.

One set of rules, for instance, targets companies who may have compensation practices that materially impact the company by requiring them to annually disclose risk management policies and the board's role in overseeing risk.

Another rule, known as "Item 303 of Regulation SK," requires management to discuss trends or events that may impact the company's bottom line, including trading losses that are different from past experiences.

"The examination and review of the causes and implications of the JPMorgan Chase trading losses are ongoing," Schapiro said. "Once we have a fuller understanding of these issues, we will be in a better position to determine whether any additional regulatory or legislative action is appropriate."

Dimon told the Senate panel last week he could not publicly share too many details about the trades because it would risk exacerbating the losses while the bank is still trying disentangle itself from the transactions in question.

JPMorgan is expected to provide more details when it announces its second-quarter earnings in mid-July.

The bank's losses, which stem from a hedging strategy in a London office that went awry, were first announced in a May 10 conference call.

In addition to Schapiro, other regulators who will testify include Comptroller of the Currency Thomas Curry, Federal Reserve General Counsel Scott Alvarez, Commodity Futures Trading Commission Chairman Gary Gensler, and Federal Deposit Insurance Corp Acting Chairman Martin Gruenberg.

(Reporting By Sarah N. Lynch and Dave Clarke; Editing by Tim Dobbyn)

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