JP Morgan has confirmed that US federal regulators are investigating whether it allowed a hedge fund to improperly choose assets for a $1.1 billion mortgage securities deal. The allegations run along similar lines to claims made earlier this year about the behaviour of Goldman Sachs, which eventually paid out a large sum to settle civil claims.

A JP Morgan spokeswoman said the bank was "cooperating fully with the inquiry" by the Securities and Exchange Commission, according to news reports.

The SEC inquiry was reported earlier in the day by ProPublica, an independent investigative news organisation.

In the summer, Goldman Sachs agreed to pay $550 million to settle civil fraud charges of misleading buyers of mortgage-related investments — one of the biggest fines in the SEC's history. The issue raised the question of how banks and other institutions handle a potential conflict of interest in assembling such investments. Both Goldman Sachs and JP Morgan operate wealth management businesses.