Bear Stearns receives SEC notice, faces FTC probe

NEW YORK (Reuters) - In a matter of weeks Bear Stearns BSC.N will disappear into the arms of JPMorgan Chase & Co (JPM.N), but the hobbled investment bank's legal and regulatory woes will linger.

Bear Stearns, which on Monday said its first quarter was profitable, also revealed that it received a "Wells Notice" in February from the Securities and Exchange Commission. The notice indicated Bear may face civil charges related to anti-competitive bidding for municipal securities.

Bear said regulators are scrutinizing "the bidding process for municipal derivatives that are offered to states, municipalities and other issuers of tax-exempt bonds." Bear Stearns said it is cooperating with the DOJ and the SEC.

Bear's muni market activities since the early 1990s are also under investigation by the Justice Department's antitrust division, Bear said. The SEC and DOJ probes span the securities industry, the company said.

As is standard with Wells notices, Bear will have a chance to persuade the SEC not to file charges.

But Bear's legal woes, to be JPMorgan's after their merger is completed in June, go beyond muni bonds.

In the same filing, Bear disclosed a civil investigation by the Federal Trade Commission into its EMC Mortgage Corp unit seeking documents and information relating to business and servicing practices.

Last month, Bear said, it received notice from FTC saying its investigators believed EMC and Bear violated consumer protection laws in connection with servicing activities. The FTC has offered to let Bear resolve the matter though talks before filing a complaint, the company said.

The filing also noted that liquidators of two Bear Stearns mortgage hedge funds that collapsed last year filed a federal suit earlier this month against the company and auditor Deloitte & Touche. The suit, which seeks to recover more than $1 billion in losses plus punitive damages, accuses the company and Deloitte of failing to fulfill fiduciary and professional duties.

(Reporting by Joseph A. Giannone; Editing by Steve Orlofsky)