Sample Business Essay Paper on JP Morgan Chase

JP Morgan Chase

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.

U.S Securities and Exchange Commission (SEC) was established in 1934 with the mandate of protecting investors, and ensuring and facilitating fair, methodical, and efficient transactions in the capital market. The formation of SEC followed the “great depression” of 1929 when investment agencies lost shareholders money in worthless investments. Since then, the government in the public interest gave SEC the regulatory and oversight powers that required public investment agencies to divulge all important information to the public. Companies should file the information with SEC and the information is made available through EDGAR database and through the commission’s website where investors can scrutinize before making investment decision with security agencies. Such transparency promotes good faith and fair dealing in the securities market. SEC has an enforcement division that together with law enforcement agencies can investigate and prosecute companies for breach of securities laws, for example, when an investment agency provides falsified information about its securities (U.S SEC, 2014).

Commodity Futures Trading Commission (CFTC) was formed in 1974 with the “regulatory authority over commodity futures and exchange market” to protect investors and the public from fraud, exploitation, and illegal abusive deals. CFTC provides a hedge to investors by lowering systemic risks by fostering transparent and safe financial deals. CFTC “enforces Commodity Exchange Act and also has an oversight over swaps market” (U.S CFTC, 2014). It arbitrates disagreements and recommends for reparations in case of damage claims. Therefore both SEC and CFTC act to protect the public and government from high- risk gambles in securities or banking for economic security (U.S CFTC, 2014).

  1. 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.

A contract is a legally binding agreement between two parties that outlines the obligations of each party. The following are the basic features of a valid contract:  Firstly, a contract must be made with the intention to create a legal relationship, where promises made are legally bound. Secondly, there must be an offer and acceptance, that is the offerer or proposer must present an act or omission, which the promisee has to accept to do or not to do. Thirdly, a contract should have a consideration, which refers to consequences of fulfilling or breaching the contract. It is the bargain theory of contract that there must be a benefit, loss or compensation for fulfilling or breach of contract. Finally, the parties signing the contract must have the competence to do so for it to be legally binding (MacMillan & Stone, 2012). Good faith and fair dealing are essential obligations of parties to a contract, which according to Uniform Commercial Code (UCC) implies that both parties must act honestly and fairly when performing their contractual duties and in within the law (Wilson &Kerman, n. d). For example, a bank must protect the customer’s private information or data whereas the customer should also safeguard personal identification information to avoid theft through fraudulent transactions.

  1. Compare and contrast the differences between intentional and negligent tort actions.

A tort is a civil wrong that is not a breach of contract but involves situations in which one party is wrongfully harmed or injured by another party either intentionally or unintentionally. The unintentional tort is referred to as negligence and occurs when a party fails to act reasonably in order to prevent harm or injury to the other person or organization.  On the other hand, intentional torts are unlawful actions done with certainty or deliberate cause of harm and include civil wrongs such as assault, trespass and battery.  In the case of negligence, the plaintiff has to prove that the defendant was liable and the negligence caused the harm. In the intentional tort, the plaintiff has no burden of proof to show that defendant acted with intent (White, 2003).

  1. 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.

Interference with contractual relations occurs when a person intentionally damages the plaintiff’s contractual or other business relationship with a third person. The plaintiff is entitled to compensation of damages upon showing that the defendant interfered with contractual dealings provided the breach and damages is shown and the contract was valid. Breach of fiduciary duty occurs when a party entrusted to act for the benefit of another does not do so, for example failure to act in good faith and fair dealing (Weigand, 2004). The fiduciary duty is, therefore, a substantial ground for tort action.

  1. With the advent of mobile banking, discuss how banks have protected the software that allows for online transaction to occur through automation.

In order to protect customers from online fraudsters, banks have protected their software against hacking. The good faith and fair dealing requirement impose objective duty to banks in protecting customers’ money and illegal transactions. Bank of America has for example installed encryption technology that passes on information between the customer and the bank whenever there is a transaction through its Secure Socket Layer (SSL).  The safety measures carried out include; Authentication of the user then the transaction data is encrypted to maintain online confidentiality and finally the verification and checking of any interference during transactions. In case of interference, the transaction is canceled and the user disconnected from the system.

References

Weigand, T.A.(2004). The Duty of Good Faith and Fair Dealing in Commercial Contracts in Massachusetts. Massachusetts Law Review,88(4), n. p. Retrieved from http://www.massbar.org/publications/massachusetts-law-review/2004/v88-n4/the-duty-of-good-faith

Wilson, M. E and Kerman, J.D. (n. d). What is good faith? Subjective and objective standards for banks accepting payment orders. Retrieved from http://apps.americanbar.org/buslaw/committees/CL130000pub/newsletter/201203/wilson-kerman.pdf

MacMillan, C., & Stone, R. (2012). Elements of the law of contract. University of London. Retrieved from http://www.londoninternational.ac.uk/sites/default/files/programme_resources/laws/ug_subject_guides/elements_law_contract-subjectguide4chapters.pdf

US Securities and Exchange Commission. (2014)  The Investor’s Advocate: How the SEC Protects Investors, Maintains Market Integrity, and Facilitates Capital Formation retrieved from http://www.sec.gov/about/whatwedo.shtml#.VAMCm5RdVNN

U.S Commodity Futures Trading Commission .(2014). Mission and Responsibilities. Retrieved from http://www.cftc.gov/About/MissionResponsibilities/index.htm

White, E. G. (2003) Tort Law in America: An Intellectual History. Oxford University Press, Inc.

Bank of America. (2014). Online Banking Security from Bank of America. Retrieved from https://www.bankofamerica.com/privacy/online-mobile-banking-privacy/online-banking-security.go