The Securities and Exchange Commission has opened an investigation against JP Morgan Chase amid allegations that it hired the children of Chinese officials to help boost its business operations in China.

In one example, JP Morgan hired Tang Xiaoning, the son of a former Chinese banking regulator. Xiaoning now chairs the China Everbright Group, a state-controlled financial conglomerate, according to a confidential U.S. government document obtained by The New York Times. After Xiaoning joined the bank, JP Morgan secured several assignments from Everbright, the Times reported.

In another example, JP Morgan's Hong Kong office reportedly hired Zhang Xixi, the daughter of a former Chinese railway official. JP Morgan hired Xixi at a time when the bank helped the China Railway Group, which builds railways for the Chinese government, raise more than $5 billion when it went public in 2007.

The government document doesn't accuse the bank of any wrongdoing but does put the spotlight on hiring practices common among other companies, including large banks, according to the Times.

JP Morgan issued a statement on Aug. 18 saying, “We publicly disclosed this matter in our 10-Q filing on Aug. 7 and are fully cooperating with regulators.”

Specifically, JP Morgan referenced the SEC probe in a quarterly Form 10-K filing this month. In that filing, JP Morgan said it had received a request from the SEC Division of Enforcement “seeking information and documents relating to, among other matters, the firm's employment of certain former employees in Hong Kong and its business relationships with certain clients.”

More Charges

The news of the latest probe comes in the same month that the government is investigating the bank's $6 billion trading loss in the “London Whale” scandal.

On Aug. 14, the SEC charged two former traders at the bank with fraudulently overvaluing investments in order to hide massive losses in a portfolio they managed.

According to the SEC, Javier Martin-Artajo and Julien Grout were required to mark the portfolio's investments at fair value in accordance with U.S. generally accepted accounting principles and JP Morgan's internal accounting policy.  When the portfolio began experiencing mounting losses in early 2012, however, Martin-Artajo and Grout schemed to deliberately mismark hundreds of positions by maximizing their value instead of marking them at the mid-market prices that would reveal the losses.

Their mismarking scheme caused JPMorgan's reported first quarter income before income tax expense to be overstated by $660 million.

In a parallel action, the U.S. Attorney's Office for the Southern District of New York today announced criminal charges against Martin-Artajo and Grout. “The trading instruments were complex but these traders had a simple rule to follow: tell the truth about their fair value,” said George Canellos, co-director of the SEC's Enforcement Division. “Yet these traders brazenly accumulated a massive position in derivatives with lax oversight and then lied to cover up their massive losses when the market turned against them.”