SEC investigates ex-JP Morgan employees over debt trades

Under reviewThe Securities and Exchange Commission is reported to have launched an investigation into government debt trades made by two former JPMorgan Chase & Co employees while they were at the investment bank.

The investigation comes as greater regulatory scrutiny is being placed on the opaque $13 trillion (€11.4 trillion) US treasuries market.

The former employees, Andrew Lombara, then JPMorgan’s head of US treasury trading, and Chi Lee, a junior treasury trader, left in January amid a row with the bank’s valuations committee over the amount of reserves taken for certain treasury trades known as ‘strips’, according to the Financial Times.

The Financial Industry Regulatory Authority, the industry watchdog, has already said that it is looking into the traders’ termination.

Banks create strips to allow investors to trade interest payments derived from treasury securities separately from the principal. Both Lombara and Lee are understood to have wanted to increase the size of the reserve and went around the valuations committee to do so.

It is unclear whether any action will be taken by either regulator and JPMorgan Chase & Co refused to comment. The SEC was not available for comment.

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