JPMorgan Chase

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JPMorgan Chase

Introduction

JPMorgan Chase refers to a multinational banking corporation in America, of securities retail and investment.  This bank is of date the largest banking corporation in America.  The banking corporation provides financial services to the population with the highest asset base in the country.  Furthermore, the company provides retail banking activities to the Canadian country and the United States.  Currently the corporation boasts a combination of several banking companies in the United States.  The structure of the bank comprises of the following small subsidiaries Chase Bank USA, JPMorgan Chase Bank, National Association, Dearborn, Custodial Trust Company and Trust Bank.

The JPMorgan Chase trading loss happened in the summer of 2012 due to the falsified reports that were provided to the Securities Commission in the first quarter.  This loses were incurred due to the fact that pervasive and substantial deficiencies that were later found in the internal environmental control, internal audit and the integrity in the security position pricing.  The risk supervision and expertise at the board level as well as oversight by the senior management of the company were deficient (Wilmarth & Arthur, 2007).  These coupled with  inadequate control mechanisms in the external and internal financial reports were blamed for the biggest loss ever.

Discuss how administrative agencies like the SEC or the CFTC takes action in order to be effective in preventing high-risk gambles in securities/banking, a foundation of the economy.

The securities and Exchange Commission being the federal agency has many responsibilities that it takes to protect the gamble4s in the banking sector. The agency is required by the law to effectively enforce the securities law at the federal level and furthermore, regulate the securities sector, the options and stock exchange in the United States market.  This responsibility of the  commission allows them to control all the securities in the country including those on the electronic application.  This means that the commission can, from time to time request the securities in the country to comply with the requirements of the law so that there is efficient flow and reduce incidences of gambling in the industry.

Moreover, the commission is mandated by the constitution to enforce all securities acts and statutes.  The commission bestowed with the power to regulate and at the same time license the stock exchanges, the brokers in the industry and the companies trading on the securities exchange.  This implies that the commission can revoke the licenses of the companies that do not comply with these requirements.  This in turn ensures that there is a fair play in the industry, a foundation for economic sustainability and growth.  The power to provide traders with licenses means that the dealers who do not observe their responsibility can make the commission to impose sanctions on those dealers as well as revoking their licenses.

Another crucial action that can be taken by the Securities Commission to control the high risk gambles in the country is by enforcing its statutory requirement.  The statutory requirement requires that all public companies including the JPMorgan, make a quarterly and annual submission of reports regarding the situations in the company.  This requires that the companies conclusively provide a narrative account for the yearly operations of the company. This will give the commission an overview of the progress of the company and how it is faring.  This action facilitates the leveling of playing grounds for all investors.  In addition, the commission provides an online database of all the information given by the companies so that interested groups can access this information at any given opportunity.

The commission is also given the enforcement authority, which allows the commission to bring civil action against companies and individuals who gives incorrect information, commits accounting fraud and other trading violations under the securities law.  The commission is furthermore mandated by law to work closely with criminal enforcement agencies in the country so that they can prosecute the violators of the securities law (Frank & Richard, 2011).  This action by the commission helps in reducing the incidents of high risk gambling since all the players know the consequences that await them.

The annual and quarterly reports ensure that the commission provides the public with credible information about companies.  This mandatory disclosure of information facilitates public scrutiny on the companies thereby significantly reducing or minimizing fraud and insider trading. Ultimately this action helps the commission in making the securities industry a foundation for economic growth.

Determine the elements of a valid contract, and discuss how consumers and banks each have a duty of good faith dealing in the banking relationship

A contract refers to an agreement between two or more parties. A valid contract thus is the agreement between two or more parties that can be enforceable before a court of law.  For a contract to be valid it should have the following elements offer and acceptance, intention to create a legal relation, consideration, legal capacity and mutual agreement.

This implies that a valid contract the parties should agree to contract and there should be something of value, legal consideration, that is exchanged between the parties and it is usually used to induce the parties to the contract.  Furthermore the parties need to have a legal objective so that it is enforceable in court. Parties should also consent without any influence before they enter into a contract and the an offer need be made and accepted by the other party to a contract to be valid.

Banker and consumers good faith

It is ethically not fair or good practice for the bankers to require that customers move their accounts to another place, needless, some banks still practice this.  This situation happens in places where there exists mistrust in the relationship of bankers and customer.  This can occur due to a bank suspecting that there is fraud or money laundering by the customers.  In this case the bankers have a right to terminate the existing relationship since they will be acting in good faith and pursuant to criminal proceedings regarding money laundering.

Bankers have the responsibility to act in good faith whenever they intend to terminate the relationship with their customers.  This should be done on clear and fair grounds so that the customers do not fell they are targeted nor take issue with the decision. This could further be in good faith if the bankers give a notice to the affected clients stating the reasons for termination.

The relationship between the bankers and customers is in a way a contractual agreement and the parties have a duty to uphold on the good faith covenant.  This means that customers have to totally refrain from practicing anything that would render the relationship impossible.  The customers should therefore act in a manner that aligns with the presupposes of the contract between them and the bankers. In addition, the customers have a duty to read and understand the terms of the contract that they sign with the bankers as they start their relationship.  This will help the clients to understand their duties and responsibilities and that of the bank.  Great care needs to be taken by the customers to routinely review the terms of the relationship with their banks.  On the same note, the banks need to act in good faith by providing information to the customers from time to time.  Since good faith is honest in transaction, and conduct, the banks has to observe reasonable business standards of just and fair dealing.  This can ensure that the customers get their financial statements.

Compare and contrast the differences between intentional and negligent tort actions

Negligence means that the individual did not exercise care of which a reasonable person under same situation would while intentional tort refers to the individual having the intent to harm. In the case of negligence torts the individual caused injury without intent but was careless.  This individual should be held responsible for his/her action.  On the other hand the intentional tort, an individual purposefully and knowingly commits an act that causes injury to the victim and is held responsible (Canals,1997). In both the cases, the plaintiff is hurt and the defendants in both negligence tort and intentional tort are held liable for the injury caused to the plaintiff.  Intentional tort may include acts like libel, assault, infliction of distress and slander. In contrast, to negligence tort, intentional tort can result in criminal acts.  Another difference between the two torts is that in the case of a negligent tort, defendants can litigate using their insurance while in intention tort insurance do not cover for the damages.

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

This usually happens when an individual or company intentionally damages contractual or business relations.  In this case the defendant is required by law to litigate damages for interference with the relations. The closing of the second party in the contract not to relate in business wit the third party is what amounts to this tort.  The prevailing in the case will depend on the justification of the tortuous interferences.  This because there existed beneficial relationship between the Bank and customers and both parties had the knowledge of the relationship.  In this case the JPMorgan bank breached contractual relationship by not disclosing all the information and the third party did not have privileges in the process.

The company failed to act in good faith by not disclosing all the information in the quarterly reports.  The company was not honest and did not meet its obligation in the JPMorgan case.  The case will prevail since the company was in a position of trust and breached this fiduciary duty.

Mobile banking

The security of customers’ financial information is crucial.  Bankers have put in measure to protect their customers by reducing unauthorized access to information . The banks use PIN system so that the customers are the only holders to this password for access.  This is given using browser secure connections to improve security.  Another form of online protection is where banks use signature and encryption system so that it is only the signature holder can access online transactions.  This could be encrypted on smart cards or key signature generation.  Another way is where banks use challenge questions, preselected images and device information for online transaction to reduce fraud.

References

Canals, J. (1997). Universal Banking: International Comparisons and Theoretical Perspectives. New York: Clarendon Press.

Frank, S., & Richard, B. (2011). The sleeping watch dog: aka the Securities and Exchange Commission. Journal of Financial Regulation and Compliance, 19 (3), 208 – 221.

Wilmarth, J., & Arthur, E. (2007). Walmart and the Separation of Banking and Commerce. Connecticut Law Review 39 (4): 1539–1622.

 

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