* Company went back-and-forth with SEC for months
* Risk model questions followed London Whale loss
By David Henry and Emily Flitter
NEW YORK, March 27 For months after JPMorgan
Chase & Co executives first admitted that they had
wrongly brushed off questions about the "London Whale"
derivatives losses, officials at the U.S. Securities and
Exchange Commission pressed the company to disclose more to
investors about risks it was taking.
The SEC's Division of Corporation Finance, which is charged
with making sure companies provide investors with enough
information to make good decisions, pushed the bank from at
least July to February to revise disclosures about changes it
had made in models used to calculate value it put at risk in its
Correspondence between the SEC and the bank released on
Wednesday shows the bank made incremental changes to increase
its disclosures at the SEC's urging. The highly technical
exchanges were conducted even as JPMorgan vowed to be more
transparent with investors.
A JPMorgan spokesman declined to comment.
An SEC spokeswoman declined to comment.
The correspondence was made public on the SEC's web site on
Wednesday. The letters ended with a Feb. 27 note from the
division saying it had completed its review of JPMorgan's
filings, but was not ruling out actions by the regulator against
In July, the SEC told JPMorgan to expand its future
disclosures about its risk models and to explain further what it
had said earlier in the month about changes it was making in
company risk controls. JPMorgan responded in a letter in August
that described how it tracked risk and noted that it was
disclosing more about its models in its new quarterly financial
The SEC came back with more questions in November about
JPMorgan's response and about the company's views on how much
regulations require it to disclose about details of risk model
changes. JPMorgan responded in December, received the last
questions from the SEC in February and added more disclosure in
its annual report.
Many of JPMorgan's responses were redacted from the letters
made public on Wednesday. The redacted sections appear to have
involved details of the company's risk models.
JPMorgan has disclosed that the SEC and at least seven
other government agencies are probing the company over the
derivatives loss. In May the then head of the agency told a
panel of lawmakers that the agency was investigating JPMorgan's
financial reporting and emphasized that big banks are required
to publicly disclose changes to models they use to measure
CEO Jamie Dimon first said on May 10 that he had been wrong
one month earlier to call press reports about possible losses on
derivatives trades in London a "tempest in a teapot."
The company also said then that a previously undisclosed
change in its risk model early in the year had wrongly made it
seem that risk levels in the office making the trades had not
JPMorgan ultimately acknowledged losing $6.2 billion on the
trades, executed by Bruno Iksil, known in the derivatives market
as the "London Whale," for the size of the positions he took.
The SEC began posting disclosure correspondence with
companies in 2005. Its policy calls for releasing the letters no
earlier than 20 days after the reviews are completed.