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SEC requires JPMorgan to show communication with Chinese officials

The US Securities and Exchange Commission (SEC) has ordered JPMorgan to provide it with copies of all communication between the bank and 35 Chinese officials including Wang Qishan, a politburo member, the Wall Street Journal said.28 May 2015

The SEC is looking at whether JPMorgan hired the children of high-ranking Chinese officials to help win business, the Financial Times said. This investigation has been underway since 2013, as the New York Times reported at the time.

The SEC issued a subpoena to the bank, asking it to pass on the correspondence as part of the investigation by US and Hong Kong authorities which also encompasses other Wall Street banks, according to the Wall Street Journal.

Wang leads the Chinese government's anti-corruption campaign. His was the first name on the list, the Wall Street Journal said.

According to 'people familiar with the probe', investigators are focused on the employment of the son of China’s commerce minister, Gao Hucheng, who offered to help the bank if it let his son hold on to his job at JPMorgan, according to emails between JPMorgan bankers, the Wall Street Journal said.

Gao is also on the SEC's list, the paper said, along with minister of public security Guo Shengkun, People’s Bank of China governor Pan Gongsheng, the chairman of state-owned grain trader Ning Gaoning, and a senior executive at state-owned shipping giant Cosco, Sun Jiakang.

The investigation is into the behaviour of the banks and whether there is evidence of improper hiring practices. The Chinese officials are not themselves under investigation, the Wall Street Journal said.

Corporate crime and investigations specialist Neil McInnes of Pinsent Masons MPillay in Singapore, the joint law venture partner of Pinsent Masons, the law firm behind Out-Law.com, said: "Anti-corruption compliance programmes will regularly consider steps to  prevent the risk of monetised bribery – such as cash payments, third party commissions, financial incentives and kickbacks of various kinds."

"These ongoing investigations underline the importance for corporates to scrutinise their wider potential corruption risks, which may sometimes be close to home – such as a company’s own hiring and recruitment practices or the policies it has in place to prevent potential conflicts of interests," he said.

China is developing national anti-corruption legislation to improve the system of sanctions and prevention so that "officials dare not, cannot and do not want to be corrupt". However, it is not clear whether China sees the hiring of family members, as investigated by the SEC, as a problem, the Wall Street Journal said.

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