3 Questions JPMorgan's Jamie Dimon Still Needs to Answer (Update 1)

(Updated with results of the annual meeting, Jamie Dimon comments.)

NEW YORK ( TheStreet) -- JPMorgan Chase ( JPM) Chairman and CEO Jamie Dimon successfully concluded the bank's annual shareholder meeting, devoid of any protests or drama.

Dimon was facing shareholders for the first time since he disclosed the bank's surprise $2 billion trading loss last week, which caused the stock to lose about $15 billion in market capitalization over two trading sessions.

While the total financial impact on the bank from unwinding the trades is yet to be determined- right now estimated to be "manageable" at $3 billion or more- the disclosure has delivered a blow to the credibility of both the bank and its outspoken CEO.

JPMorgan, long considered the bastion of financial stocks because of its fortress balance sheet stands to lose its "safe haven status."

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Most analysts expect the stock to stay under pressure in the near term as the bank deals with possible regulatory investigations and headline risks through the course of the year.

Questions on how losses accumulated so quickly at the bank when only a month ago Dimon called the press reports about the Chief Investment Office's trading activities a "tempest in a teapot" have been circulating in the press.

Already, the outspoken critic of regulation is facing backlash from politicians including Massachusetts Senate candidate Elizabeth Warren, who is calling for Dimon's resignation from the New York Federal Reserve board.

Some shareholders did raise the issue at the meeting, but Dimon maintained that he served on the "advisory" and not "supervisory" board of the New York Fed. "I cannot even vote for the President of the New York Fed."

He also rejected criticism that he was against regulation, directing attention to his annual letters over the past four years that said the bank supported most financial regulations and even the intent behind the Volcker rule to the extent that it focused on proprietary trading and not hedging.

He, however, acknowledged that hedging should not morph into something that is so complex that it becomes so risky as was the case at the Chief Investment Office more recently.

Still, it appears that shareholders of JPMorgan seemed to be in a rather forgiving mood, with only 40% voting in favor of a proposal that would have stripped Dimon off his chairman title.

The CEO even earned praise for his "outstanding" leadership from one investor.

Still, long-term shareholders were left with more questions than answers after the meeting. Here's a quick update on some of the key issues troubling shareholders.

1. Will there be clawbacks?

More than 90% of the shareholders voted Tuesday to approve the compensation packages of its top executives, including a $23 million package for Dimon.

Dimon was spared the fate of Citigroup's Vikram Pandit, who was denied his $15 million pay package by shareholders after a disastrous stock performance in 2011 and the bank's failure to win approval from the Fed to return capital.

Shareholders also did not raise questions on the clawback of compensation of Ina Drew, who headed the bank's Chief Investment Office, and resigned Monday, following the trading fiasco.

According to the proxy statement, Drew was awarded $14 million in total compensation for her performance in 2011, comprising $4.7 million in cash incentives, $7.05 million in restricted stock units that vest in two equal installments in 2014 and 2015 and $1.5 million in stock appreciation rights that are exercised over a five-year period.

In 2010, the executive was awarded $15 million in annual compensation.

JPMorgan has recovery provisions in place in its compensation plan and has "additional risk-related recovery provisions that apply to awards to the Operating Committee and to a group of senior employees we refer to as Tier 1 employees with primary responsibility for risk positions and risk management."

In addition, the bank also instituted "protection-based vesting provisions to equity awards" to Tier 1 Employees that are designed to be effective in the event of "material losses or earnings substantially below the firm's potential."

The firm also says it has the right to cancel unexercised, unvested awards and require repayment of a certain value of shares if an employee engages in conduct that causes "material financial or reputational harm" to the business, among other criteria. Members of the operating committee and Tier 1 Employees are also subject to such clawbacks for failure to "to identify, raise, or assess, in a timely manner and as reasonably expected, risks and/or concerns with respect to risks material to the Firm or its business activities."

Dimon said Monday that Drew had been a "valuable partner" to the company and that her "vast contributions" to the company should not be overshadowed by recent trading losses.

2. Who Oversees the CIO?

JPMorgan is best known for navigating the crisis through sound risk management so the latest trading incident has suddenly raised questions about the firm's risk management practices and checks and controls.

CLSA analyst Mike Mayo notes that the losses took place in the "risk mitigation" unit and not at a risk-taking one. "The bigger issue is who was watching the CIO office? We think this raises issues about checks and balances at a $2tn bank that has performed better than peers."

A Bloomberg report on Monday suggested that Dimon had pushed the Chief Investment Office to transform itself from a risk managing unit to a profit seeking one, citing five former executives.

Questions on how Dimon as CEO could claim he was unaware of the losses till recently will likely be a focus for regulators in the coming weeks. Some are concerned that the firm's risk models underestimated the proportion of the losses, while worries that the London unit may have understated losses earlier are also likely to be raised.

The AFSCME Employees Pension Plan proposal that the bank's board of directors to adopt an independent board chair did not get enough votes.

Meanwhile, shareholder group CtW Investment Group, which represents pension funds that collectively hold 6 million shares in the bank, said it will send a letter Monday afternoon to J.P. Morgan's presiding director Lee Raymond and other board members calling for J.P. Morgan to replace James Crown as chairman of the board's Risk Policy Committee, and remove Ellen Futter, a director who is a member of the risk committee, according to a Wall Street Journal report.

3. What happens to Buybacks?

For shareholders who have just seen about $20 billion of the company's market value eroded, there is nothing quite as comforting as the idea that JPMorgan will step in to buy back stock and shore up its stock price.

After all, it has the Fed's approval to repurchase upto $12 billion in 2012.

JPMorgan Chase: Don't Hit the Panic Button >>

Dimon said in the conference call last week that the latest losses were unlikely to affect its capital return plans as its JPMorgan's fortress balance sheet could absorb such "surprises".

At the shareholder meeting Tuesday, the CEO said he did not anticipate that the board will make any cuts to the dividend. "We are strong, sound and profitable. I do not want to make light of a $2 billion trading loss but it needs to be seen in context of our fortress balance sheet," Dimon told shareholders.

Still analysts expect the bank to curtail its buybacks in 2012.

Sterne Agee analyst Todd Hagerman said in a note "the outsized trading loss and break-down in internal controls could potentially place JPMorgan under some form of supervisory action down the road following the completion of various regulatory reviews of the loss and associated enterprise risk management processes/controls," and that "the ongoing review and/or the possibility of supervisory action could possibly curtail, or even cease the company's capital buyback abilities sooner rather than later."

Citigroup's Keith Horowitz expects the bank to buy back about $5 billion in 2012, much lower than the approved $12 billion.

Dimon had said in his annual letter to shareholders that the firm was less inclined to buybacks given that the stock traded above tangible book value. The stock decline might be more attractive, but given the uncertainty surrounding trading losses associated with unwinding of the massive trades, the bank may still choose to be conservative.

--Written by Shanthi Bharatwaj in New York
Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.