SEC Opens Review of JPMorgan

By JEAN EAGLESHAM

http://on.wsj.com/KVGYzW

The Securities and Exchange Commission has begun reviewing J.P. Morgan ChaseJPM -9.28% & Co.’s disclosures related to the $2 billion trading loss announced by the company Thursday, according to a person familiar with the matter.

The review is at an early stage and hasn’t progressed to the status of a formal investigation, this person said. Such reviews are routine after public companies report unexpected losses that send their stock prices sharply lower.

As a regulator, the SEC oversees J.P. Morgan’s disclosures to investors and the New York company’s broker-dealer operations. The Federal Reserve regulates the bank holding company of J.P. Morgan, while the Office of the Comptroller of the Currency oversees its main banking unit.

SEC officials are looking at accounting and disclosure issues related to the trading loss, according to a person familiar with the matter. SEC officials will have to decide if they believe the loss was disclosed to investors soon enough, the person said.

There are no firm guidelines on when projected trading losses become “material” to investors and thus must be disclosed. That could make it much harder for the SEC to file civil enforcement charges against J.P. Morgan.

SEC Chairman Mary Schapiro told reporters Friday that is “safe to say that all the regulators are focused on this,” Fox Business Network reported.

A spokesman for the SEC declined comment.

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