UPDATE 1-US SEC: more than 4 dozen subprime cases underway

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WASHINGTON, July 15 (Reuters) - Securities regulators have more than four dozen subprime investigations under way that involve subprime lenders, investment banks, credit rating agencies and insurers, the chairman of the U.S. Securities and Exchange Commission said on Tuesday.

The investigations also involve banks and broker dealers who sold mortgage-backed securities to the public.

"We are investigating whether mortgage lenders properly accounted for the loans in their portfolios, and whether they established appropriate loan loss reserves," SEC Chairman Christopher Cox said in remarks prepared for delivery to the Senate Banking Committee.

The SEC is focused on whether lenders disclosed risk profiles of underlying loans, whether they valued their portfolios appropriately and whether they made adequate risk disclosures to investors.

The investor protection agency has already filed civil fraud charges against two Bear Stearns managers for allegedly misleading investors about the financial state of the bank's two biggest hedge funds before they collapsed in 2007.

The former hedge fund managers were also arrested and indicted on conspiracy and securities fraud charges.

"These cases, and others like them in the subprime area, are making it clear that vigorous investor protection extends to hedge funds, which are by no means unregulated when it comes to fraud," Cox said.

The number of investigations is up from earlier this year, when the SEC had some 36 cases under way. The FBI is also investigating the mortgage industry and is looking at issues including all phases of the process of securitizing loans, insider trading and whether firms properly disclosed the value of their assets.

Cox said companies have improved disclosure of how they account for hard-to-price securities, such as those linked to subprime loans, in response to an SEC request. "Financial institutions have improved their disclosures in subsequent public filings."

The SEC is the primary supervisor of the country's four largest investment banks -- Goldman Sachs (GS.N), Lehman Brothers LEH.N, Merrill Lynch MER.N and Morgan Stanley (MS.N).

Cox said there are discussions about the investment banks' longer term funding plans, including their plans for selling risky assets and raising new capital.

The SEC has also stepped up efforts to crackdown on false rumors that threaten financial firms and is examining whether broker dealers and investment advisers have controls in place to prevent market manipulation.

Cox said the agency has investigations underway concerning the possible manipulation of securities prices though false rumors and short selling.

"Those who commit fraud at the expense of investors will always be the target of a relentless SEC," Cox said. (Reporting by Rachelle Younglai; Editing by Tim Dobbyn)