In the summer of 2012, JPMorgan Chase, the biggest U.S. bank, announced trading losses from investment decisions made by its Chief Investment Office (CIO) of $5.8 billion. The Securities and Exchange Commission (SEC) was provided falsified first quarter reports that concealed this massive loss.
Use the Internet or Strayer databases to research a different bank of your choosing.
Write a three to four (3-4) page paper in which you:
1.Discuss how administrative agencies like the Securities and Exchange Commission (SEC) or the Commodities Futures Trading Commission (CFTC) take action in order to be effective in preventing high-risk gambles in securities / banking, a foundation of the economy.
2.Determine the elements of a valid contract, and discuss how consumers and banks each have a duty of good faith and fair dealing in the banking relationship.
3.Compare and contrast the differences between intentional and negligent tort actions
4.Discuss the tort action of “Interference with Contractual Relations and Participating in a Breach of Fiduciary duty” and, if the bank you’ve chosen were to behave as JP Morgan did, would you be able to prevail in such a tort action.
5.With the advent of mobile banking, discuss how banks have protected the software that allows for online transaction to occur through automation.
6.Use at least three (3) quality references. Note: Wikipedia and other Websites do not quality as academic resources.
Your assignment must follow these formatting requirements:
•Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow APA or school-specific format. Check with your professor for any additional instructions.
•Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.
The specific course learning outcomes associated with this assignment are:
•Describe the legal environment of business, the sources of American law, and the basis of authority for government to regulate business.
•Describe the elements of a contract and explain the basic provisions of contract law relative to offer, acceptance, capacity, legality, fraud, third-party rights, performance, and breach of contract.
•Explain the components of the Uniform Commercial Code (UCC) relative to sales and lease contracts and the basic provisions of the UCC addressing sales / lease contracts, title, risk, insurable interests, and the performance and breach of contracts.
•Use technology and information resources to research issues in business law.
•Write clearly and concisely about business law using proper writing mechanics.
In 2012, U.S. bank, JPMorgan became a subject of huge trading losses worth $5.8 billion. Sources indicated that the Chief Investment Officer made inefficient investments that accrued to the loss. The Securities Exchange Commission indicated that the bank provided fabricated first quarterly financial reports that concealed massive financial information (New York Times, 2012).
America became also became a subject of criticism in 2010. The U.S. government accused the bank for defrauding hospitals schools, and dozens of local government and state entities through illegal activities and misconducts involving sales of municipal bonds (Bloomberg L.P, 2014).The paper will examine how administrative agencies would prevent the Bank of America from incurring risks related to security transactions.
HOW SEC and CFTC Could Protect Bans Becoming Victim of High-Risk Gamble
The U.S. Securities and Exchange Commission has a primary role of protecting investors , facilitating capital formation, and maintaining efficient, orderly, and fair markets. The agency can use its power to establish sound market regulations. This way, the agency would be contributing to establishing the common interest of the entire Americans as far as improving standards of living, providing job opportunities and protecting value of Americans savings are concerned. The SEC accomplishes the objective by monitoring how entities form their capital base (US SEC, 2014).
Moreover, the agencies provide laws and regulation aimed at governing how security industries based in the United States should abide. Therefore, the SEC requires every public entity to make an effort of disclosing meaningful financial information to the public. The objective is to provide a common pool where entire investors would get a chance of making a sound judgment on whether to purchase particular security.
Similarly, the U.S, Commodity Futures Trading Commission has a primary objective of protecting the public and market participants from manipulation, abusive practices, systematic risk, and fraud. The agency can prevent the Bank of America becoming a victim of high-risk gamble regulating the capital market. The agency has the authority of promoting market integrity, protecting customer funds and fostering transparencies in issues related to security exchange (Hillman, 2014).
Element of a Valid Contract
A valid contract includes elements such as; offer, acceptance, capacity, legality, and consideration (Miller & Jentz, 2008). Banks and consumers are obliged to comply with the elements in order to demonstrate fair dealings and good faith in the relationship of banking. The customer should establish a mutual agreement when establishing deals such as custodian services. The customer should make an offer to banking and the bank on the other end bank would consider accepting the contract upon agreeing on rules and regulations. By accepting the contract, the bank would demonstrate that it is willing to safe guard properties of the customer in good faith.
The customer would then consider providing a consideration to the bank in form of cash payments.This way, the bank would express commitment on safeguarding the property of customers knowing very well that the customer will be ready to meet the cost of bailing. The contract will be valid when the two contracting parties consider legal relations. In other words, the interest of the two parties should be enforceable by law. To elaborate, the customer and the bank should desist from establishing a fraudulent contract that would be prejudicial to the public such as bailing illegal drugs and weapons.
Additionally, the bank would put in consideration if the customer has a contractual capacity to make a sound decision. The deal will be termed as fair if the customer is a major and sane to understand the terms of contracts related to banking.
Negligent Tort and Intentional Tort
Negligent tort differs from intentional tort in the sense that it happens when an entity or an individual fails to demonstrate reasonable responsibility to another person. In other words, it refers to damage accused out of failure to fulfil an owed duty. On the other hand, intentional tort refers to civil wrong that is intentional in nature. The key difference between negligence and intentional tort is the fact that plaintiff is obliged whether the defendant had specific intent of causing the damage. To elaborate, the jury should ascertain whether the defendant has mental capacity to decide whether to cause an injury to the plaintiff. The two forms of torts are similar in the sense that they both cause injury to the plaintiff (Buckley & Okrent, 2004).
In essence, individuals obliged to foresee fiduciary relationships such as directors, brokers, and agents have responsibilities of performing certain duties to their clients (Birks & Pretto, 2002). In other words, fiduciary duty issues exist when the two parties establish a relationship of good faith. Therefore, the fiduciary acts imply that parties responsible to provide the duty should desist from engaging in acts demonstrating conflicts of interest.
Technically, it would have been a big challenge for the Bank of America to prevail in the participation of breach of fiduciary issues, as it was the case with JP Morgan. The plaintiff would be granted to gain from the breach once the court declares the bank guilty of breach of breach of the fiduciary issues.
Some banks such as the Bank of America have put safety measures to ensure that it protects software that provides online transaction. The bank indicted that it is committed to make online transaction protected and secure from fraudulent acts. The bank secures financial information of its clients and takes initiative of covering the time processing of payments of customers. The service is convenient in the sense that it enables customers detect fraud early in their accounts (Bank of America Corporation, 2014).
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