- Discuss how administrative agencies like the SEC or the CFTC take action in order to be effective in preventing high-risk gambles in securities, banking, and foundation of the economy.
The financial market is one of the pillars that make the United States economy a strong and stable one. To be able to contribute to the strength and stability of the economy, the financial market has to be strong and stable as well. There are various organizations that have been established to safeguard that strength and stability, two of which include the Securities and Exchange Commission (SEC) and the Commodities Futures Trading Commission (CFTC). There are, of course, other organizations that can be added to this list but the safeguarding role mostly fall on these two organizations’ shoulders. The objective of this paper is to discuss some significant aspects of banking and trading procedures in the U.S. banking and financial industry, or more specifically, focusing on the case of JP Morgan & Chase.
If there is one organization that holds the primary responsibility of monitoring and regulating the trading of stocks, and other forms of securities in the U.S. banking and or financial industry, that organization would be the Securities and Exchange Commission or the SEC. The SEC is a federal organization established based solely on that purpose. The Commodities and Futures Trading Commission or CFTC, on the other hand, is another federal agency that is responsible for the monitoring and regulation of options and futures as stipulated in the Commodity Futures Trading Commission Act of 1974 . These two organizations basically work the same way, only that they operate in two independent markets. The SEC is in charge of securities while the CFTC is in charge of futures and options. These two administrative agencies contribute to the prevention of high risk gambles in the financial market that are often committed by banks and other financial institutions by the issuance of sanctions, and in worse and often repetitive cases of violating the policies of the SEC or the CFTC, depending on the type of market the perpetrator is involved, disqualification from the market. In less serious cases, fines, whose amount is often proportional to the extent of violation committed may also be applied. In the case of stock manipulation and or fraud in the market, for example, fines may be imposed. The SEC and the CFTC has also worked on ways on how to minimize the leverage that financial institutions take whenever they trade in the market by limiting the amount of margined trading capital and their access to trading systems, if indeed necessary .
- Determine the elements of a valid contract, and discuss how consumers and banks each have a duty of good faith and fair dealing in banking relationship.
A contract is basically an agreement between two parties that has to be composed of the following four elements: offer, acceptance, intention of legal consequences, and a consideration. In some cases, any form of agreement between two or more parties that contains the first three elements that have just been mentioned, without the consideration, may already be considered as a contract . Banks often have the responsibility of keeping the deposit money of their clients safe. Any loss of depositors’ money as a result of any untoward incident is often covered by the Federal Deposit Insurance Corporation or FDIC. This, however, applies only to deposit accounts and not to trading and securities-related accounts. In this case, the topic is related to trading accounts and in such cases, the banks are often not liable for the trading losses incurred as a result of trading activities because the clients often sign a disclosure or an agreement informing them about the risks of investing and trading in the financial markets (e.g. capital loss) prior to opening investment and trading accounts. So, even if there are trading losses, the relationship between the financial institution and the clients can still be considered as one that is in good faith as long as the financial institution fully discloses such losses, if any.
- Compare and contrast the differences between intentional and negligent tort actions
Many judicial hearings and disputes are caused by incidents related to tort. Any case of tort may be classified as intentional or negligent. In the most basic sense, intentional tort is one of the many category of torts that describes a civil wrong that is a result of an intentional act of the suspect, the perpetrator of the offense, or in this case, the tortfeasor. Negligent tort, or simply negligence, on the other hand, pertains to a civil wrong that is a result of the failure and or inability of the tortfeasor to prevent damages, changes, and or injuries to another party or a property. Negligent torts often occur when a person fails to provide the proper care or the appropriate (standardized) measures to prevent the damages from occurring. The prevalence rate of tort is often high in the allied medical industry wherein the medical practitioners are often the ones being charged.
- Discuss the tort action of interference with contractual relations and participating in a breach 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.
In this case, there are two violations that can be subject to the terms of the governing body (i.e. the SEC or the CFTC): the interference with contractual relations, and the participation in a breach of fiduciary duty. In this case, it may be safe to assume that the bank JP Morgan & Chase failed to honor their part of the contract. What is unclear however is what part of the contract they failed to honor since in the securities and exchange market, the banks often disclose to their clients and investors that trading in the financial market carries a certain level of risk which may lead to capital losses, something which happened to JP Morgan & Chase’s investment capital, a trading loss worth 5.8 billion USD. If this is indeed the case, then clients and investors who would charge JP Morgan & Chase with interference with contractual relations would not prevail. In the case of the tort action of the breach of fiduciary duty, however, there is a good chance that the court would favor the plaintiffs and not JP Morgan & Chase because full disclosure of accurate financial information is one of the requirements set by the SEC and other regulating bodies whenever preparing for financial reports .
- With the advent of mobile banking, discuss how banks have protected the software that allows for online transaction to occur through automation.
The advent of the internet and other forms of information technology gave rise to the technology now known as internet and mobile banking. The truth about internet and mobile banking is that it operates in a network that is vulnerable to attacks by malicious and possibly fraudulent entities and so the bank’s decision of using it to let their clients execute banking transactions may indeed carry a certain level of risk . Some of the measures that banks use of secured websites and servers using the latest encryption technologies, educating the clients regarding ways how to prevent fraud related to their banking activities, and in more aggressive cases, limiting the number of processes that clients can execute on their mobile banking platforms .
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