JPMorgan Chase & Co. was pressed by U.S. regulators to strengthen investor disclosures on proprietary trading almost a year before a wrong-way bet on credit derivatives cost the bank at least $6.2 billion.
The Securities and Exchange Commission asked Chief Financial Officer Douglas Braunstein to provide information about the bank's so-called principal transactions revenue and proprietary trading, according to letters between the agency and the company from June 15 of last year through Feb. 17 that were made public yesterday. Proprietary trading, in which banks make bets with their own money, would be restricted under a Dodd-Frank Act provision known as the Volcker rule.
"It is not clear how much of this revenue was generated from your proprietary-trading business, hedge-fund activity and private-equity funds that would be affected by the Volcker rule," Suzanne Hayes, assistant director of corporation finance at the SEC, wrote in the initial letter. JPMorgan disclosed in a previous filing that it liquidated proprietary holdings within the equities unit and "it is not clear if this was the extent of your proprietary-trading business," she wrote.
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