Lenders from JPMorgan Chase & Co. to Bank of America Corp. that sold $51 billion of securities backed by equity derivatives the past two years are being pushed by regulators to disclose that the banks valued the debt as much as 10 percent less than customers paid, Bloomberg News reported yesterday. Banks are being given 10 days to tell the U.S. Securities and Exchange Commission whether they will comply with rules intended to increase transparency in the structured-notes market, the SEC said in a letter sent to some banks this month. Goldman Sachs Group Inc., Bank of America and Royal Bank of Canada began disclosures as early as May on securities sold at prices that were typically 2 to 4 cents on the dollar more than where the banks valued them, data compiled by Bloomberg show. Regulators are increasing oversight of equity-linked note sales that have soared 39 percent the past two years as investors buy them as an alternative to traditional bonds with record-low yields. The securities generally are sold to individuals who lack pricing models employed by banks to value the securities, which use derivatives to boost yields.
