UPDATE 4-Alabama county hails SEC action versus JPMorgan

* SEC to take action against JPMorgan over county loans

* Jefferson County commissioner welcomes SEC decision (Adds comment from Republican party)

By Melinda Dickinson

BIRMINGHAM, Ala., May 8 (Reuters) - Jefferson County, Alabama on Friday hailed a U.S. Securities and Exchange Commission decision to file an enforcement action against JPMorgan Chase (JPM.N) over bond swap sales to the county.

The SEC decision was disclosed by JPMorgan on Thursday.

County commissioners Jim Carns and Sheila Smoot, part of a five-person body, welcomed the decision as did Republican U.S. Representative Spencer Bachus of Alabama, the ranking member of the House Financial Services Committee.

"I am extraordinarily encouraged by the SEC approval of an enforcement action against JPMorgan Chase & Co for securities law violations over bond and swap sales for Jefferson County," said Carns.

Smoot said the precise impact of the move was hard to gauge, adding: "I do hope it brings us some relief."

Jefferson County has spent more than a year fighting to stave off what would be the largest municipal bankruptcy in U.S. history over its $3.2 billion sewer debt.

The county accumulated the debt to JPMorgan and seven other creditors through interest and credit swaps earlier this decade but it has spiraled since February 2008 when ratings agencies downgraded Jefferson's insurers, prompting county bonds to plummet.

JPMorgan said late Thursday the SEC is planning to take action against the bank for alleged violations of securities rules in the sale of bond and interest swaps to Jefferson County in 2002 and 2003.

In a regulatory filing, JPMorgan said the enforcement action also alleges that it violated rules created by the Municipal Securities Rulemaking Board, the main regulator for the municipal bond market.

"The firm has been engaged in discussions with the SEC Staff in an attempt to resolve the matter prior to litigation," said the filing.

Jefferson County is negotiating with creditors, including JPMorgan, to restructure its debt.

REVENUE PLANS THWARTED?

How far any charges affect talks depends in part on the nature of the charges, said Melissa Woodley, assistant professor of finance at Samford University in Birmingham.