NEW YORK CITY— US banking giant JPMorgan Chase said Thursday it is facing parallel civil and criminal investigations over its sale of mortgage-backed securities before the financial crisis.
JPMorgan disclosed in a securities filing that in May it was notified by the civil division of the US Attorney’s Office for the Eastern District of California stating that it had preliminarily concluded that the bank “violated certain federal securities laws” in connection with the subprime mortgage-backed securities offered over 2005-2007.
The filing described a federal criminal inquiry in parallel to the civil investigation, but did not provide further details.
The filing went on to say that JPMorgan was responding to “a number of subpoenas and informal requests for information from other federal and state authorities” over its sale of mortgage-backed securities from the same period.
The probes signal that JPMorgan, the nation’s largest bank by revenue, continues to face tough regulatory scrutiny amid increased political debate on whether some giant banks are “too big to fail.”
The company last week agreed to pay $410 million to resolve US charges that it manipulated power prices in California and the Midwest.
The probes were also the latest sign the big banks are still not clear of fallout from the housing bust and subsequent financial crisis. US regulators Tuesday sued Bank of America for fraud over its sale of $850 million in mortgage-backed securities that caused huge losses for investors.
In the filing, JPMorgan reiterated that it is “currently experiencing an unprecedented increase in regulation and supervision” and that the change in environment “could have a significant impact on how the firm conducts business.”
JPMorgan expects additional “formal enforcement actions against the firm,” including consent orders, rather than “informal supervisory actions or criticisms” from government agencies.
The bank, which also faces private litigation related to the demise of the MF Global brokerage and the Bernie Madoff scandal, among other matters, said second-quarter litigation expenses rose to $678 million in 2013 from $323 million in 2012.
It raised its estimate for total possible legal costs in excess of legal reserves to $6.8 billion compared with $6.0 billion in the previous quarter.
JPMorgan shares were off 0.7 percent at midday.