Bloomberg Anywhere Login


Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.


Financial Products

Enterprise Products


Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000


Industry Products

Media Services

Follow Us

JPMorgan Joins Goldman in Disclosing Threat of SEC Enforcement

Feb. 29 (Bloomberg) -- JPMorgan Chase & Co., Goldman Sachs Group Inc. and Wells Fargo & Co. are among banks warned by federal regulators that they may face civil claims tied to sales of mortgage-backed securities.

JPMorgan said in a filing today that the Securities and Exchange Commission warned in January it may bring complaints stemming from two investigations into mortgage securitizations. Goldman Sachs and Wells Fargo also said yesterday they received so-called Wells notices from the SEC, warning that agency staff may recommend enforcement.

“It’s a big deal given the level of anticipation that has been in the markets about whether there would be further actions,” said Jacob Frenkel, a former SEC lawyer now with Shulman Rogers Gandal Pordy & Ecker PA in Potomac, Maryland. “These cases were complicated and time-consuming and the government has said for a long time that its investigations were continuing.”

The SEC has issued such notices to multiple banks in probes focusing on mortgage securities, said people with knowledge of the matter who asked not to be identified because the communications weren’t public.

Almost four years after mounting mortgage defaults prompted unprecedented government bailouts of the financial system, regulators are still examining how banks packaged and sold home loans to investors. The SEC is looking for evidence that firms failed to disclose underlying credit weaknesses in mortgage pools and delinquencies, Jason Anthony, special counsel for the agency’s structured products unit, said last week. He didn’t identify companies under scrutiny.

Goldman Sachs

JPMorgan said one inquiry focuses on due diligence and disclosures in two securitizations by a subsidiary. The other probe relates to “settlements of claims against originators” involving loans included in securitizations handled by Bear Stearns Cos., which JPMorgan acquired in 2008, according to the filing.

Goldman Sachs got a Wells notice Feb. 24 relating to disclosures for a late-2006 offering of $1.3 billion in subprime residential mortgage-backed securities, the company said in an annual report. The New York-based firm said it “will be making a submission to, and intends to engage in a dialogue with, the SEC staff seeking to address their concerns.”

Fair Lending

Goldman Sachs paid $550 million in 2010 to settle SEC claims that it misled investors on a mortgage-linked investment in 2007. In that case, the company said it made a “mistake” in omitting disclosures.

Wells Fargo, which revealed the SEC’s warning in an annual report yesterday, said the government has been examining whether it properly described facts and risks in offering documents.

The notices show SEC enforcement staff concluded that violations occurred, Frenkel said. John Nester, a spokesman for the agency, declined to comment on the investigations.

Government agencies are also looking at whether San Francisco-based Wells Fargo may have violated fair-lending laws or other regulations when making home loans, the firm said.

The SEC said in January it will help form a state and federal working group that will share information and coordinate inquiries involving residential mortgage-backed securities.

“We already have issued scores of subpoenas, analyzed more than approximately 25 million pages of documents, dozens and dozens of witnesses, and worked with our industry experts to analyze the terms of these deals and the accuracy of the disclosures made to investors,” the agency’s enforcement director, Robert Khuzami, said at the time.

Wells Fargo was among five mortgage servicers that agreed this month to a $25 billion settlement of state and federal probes into shoddy foreclosure practices. The deal allowed regulators to continue pursuing the industry over claims regarding the packaging of loans into securities.

To contact the reporters on this story: Michael J. Moore in New York at; Dakin Campbell in San Francisco at; Christine Harper in New York at

To contact the editor responsible for this story: David Scheer at

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.