JP Morgan Chase - Valid Contract, Good Faith and Fair Dealing - Essay Example

? JPMorgan Chase This paper aims to discuss the JP Morgan Chase with respect to the trading loss which was faced by the bank in summer 2012. JP Moran Chase is one of the America’s largest banks and their case was primarily dealt by SEC. In addition to this, the paper has also discusses different responsibilities of SEC and CFTC, elements of a valid contract, tort actions, contractual relations, fiduciary duty and the protection procedures of online transactions. Introduction Trading losses are often disclosed to the investigating officers. However, in some cases when there is massive fraud involved in the bank transactions or the investment decisions then the bank managers try to conceal the whole matter through different tactics. Similar thing happened with one of the biggest banks of United States of America i.e. JP Morgan Chase. In this case the bank had undergone a massive monetary loss. The Chief Investment Officer (CIO) at the bank declared a loss of 5.8 billion in summers of 2012. However, when the investigating agencies looked in to the matter then they were not provided with sufficient records or data related to different transactions and the overall investment decisions which JP Morgan Chase had made in the recent times. The Securities and Exchange Commission was basically responsible to investigate this case but they were provided with falsified information from the key executives and the chief investment officer. SEC and CFTC In the contemporary world economies are based upon the productivity and sound performance of financial and banking sectors. However, these sectors are the most sensitive areas and prone to significant gambling due to the involvement of huge monetary amounts. There are several agencies primarily responsible to prevent financial sectors from possible gambling and their subsequent consequences. These include The Securities and Exchange Commission (SEC), The Commodities Future Training Commission (CFTC) etc. These agencies take the first line actions so as to protect the financial processes and also to investigate the cases of gambling such as the one which took place in JP Morgan Chase. Recently SEC and CFTC have developed a cooperative advisory committee in order to effectively and efficiently investigate the regulation issues and the fraud cases. First of all they are required to detect the rising regulatory risks, subsequently followed by evaluation and quantification of these risks and their broad impacts over the financial sector and the overall economy. Moreover they are responsible to advocate investors and the major market players (CFTC-SEC Joint Advisory Committee, 2013). Valid Contract In broader terms contracts are defined as the legal obligation which is constructed between two parties so as to make their agreement associated with the law. In this way both of them are entitled to refrain from breach of contract law and also to pay penalties in case of frauds. Therefore parties willing to enter into a contract are required to fulfill the following requirements (Walston-Dunham, 2011): Involvement of two parties: The contracts are not made on individual basis hence there must be two parties involved in a valid contract. Legal capacity: This indicates the mental and physical abilities of both members to fulfill legal obligations i.e. their age and psychological state must be in accordance with the requirements. Individuals below 18 years of age cannot enter in to a valid contract while on the other hand mental patients are also ineligible. Offer: One of the two parties must make an offer to another party. This offer is regarding the nature of operations they both want to perform under the valid contract. Acceptance: The offer made by the first party must be accepted by the other party so as to prepare a legal contract. Intention: This indicates the real intention of both parties to legally bind their agreement. If either of them fails to represent a clear intention then the contract might not be made. Consideration: In order to verify the intentions of both parties each of them exchange something valuable. This is commonly known as consideration. Approval: Once all these requirements are fulfilled then the contract is approved by the legal authorities and the concerned departments. Good Faith and Fair Dealing The nature of relationship between consumers and banks is highly sensitive due to the involvement of substantial monetary amounts. Therefore this relationship must be based upon good faith and fair dealing in order to build customer loyalty and long term profits. Customers and banks frequently serve each other in monetary transactions which are initiated through signing a valid contract. Consequently they both are obliged to maintain good faith and fair dealing so as to avoid any possible penalties due to the violation of elements of valid contract. Good faiths refer to the mutual understanding and trust whereas fair dealing indicates honesty and no fraudulent activities within the banking sector. Intentional and Negligent Tort Actions Tort actions are greatly condemned by the legal authorities since these represent civil wrong and the activities which basically deviates from law. There are fundamentally two categories of tort actions namely; intentional and negligent tort actions (Pozgar, 2004). Intentional tort action is consciously committed by the offender with a firm belief that the action will generate substantial negative consequences. These actions are often well planned and targeted to different organizations, firms, groups or individuals. Moreover, the basic purpose of intentional tort actions is to harm another party to a certain extent (Pozgar, 2004). Contrary to this, negligent tort actions represent the simple failure to respond to the legal obligations. It does not usually involve actions rather this type of tort can be a result of simple ignorance due to any internal or external factor. These often take place because of poor evaluation of possible consequences (Pozgar, 2004). Contractual Relations and Fiduciary Duty Contractual Relations are highly sensitive in nature and therefore they must be dealt with greater concerns so as to avoid any possible tort actions. Law mentions that the defendant is required to pay off all the harm and damages that have consequently occurred due to the interference in contractual relations. This indicates that the defendant is not questioned about the possible reasons of interference neither he is allowed to give justifications whereas the plaintiff has to verify his argument based on the following essential elements (Walston-Dunham, 2011). The contact between the two parties must be legally verified. Both the parties must be conscious about all the components of the contract. Defendant’s act must be intentional i.e. planned to create interference in contractual relations. The violation of contract or the law must represent a genuine case. Peculiar details of the damage must be provided to the concerned authorities. Fiduciary duty represents the distinctive nature of legal and valid contracts i.e. the banks cannot take any action without a proper permission from their principals (customers). However, in some situation this law is violated which is then tackled on the following basis: There must be two parties involved in the fiduciary duty. Breach of the duty must have taken place. Consequent damage must have a relation to the breach of fiduciary duty. If my bank would ever act similarly to the JP Morgan Chase then I would not show resistance to such a tort action. The relationship between banks and customers is solely based upon trust and mutual understanding however, in case of tort actions trust gets significantly affected which would compel me to withdraw the contractual relationship with this bank. Protection of Online Transactions In the modern times mobile banking has greatly increased however, this is accompanied by serious threats to the online transactions. In this regard the Secure Socket Layers (SSL) is used which is basically a computer software safeguarding the online money transfer. Research indicates that the software was designed by the associates of Bank of America in order to prevent fraudulent activities. There are various benefits of SSL including the most distinctive feature i.e. it does not receive support from ‘protocol used’ which actually signifies its effectiveness in providing immense security to the online monetary transactions. Additionally it creates an extra layer between the application and transport boundaries which further confirms the even transference (Onyszko, 2013). References CFTC-SEC Joint Advisory Committee. (2013). Retrieved May 9th, 2013, from US Commodities Futures Trading Commission. Onyszko, T. (2013, Jan 23). Secure Socket Layers . Retrieved May 9th, 2013, from Windows Security. Pozgar, G. D. (2004). Legal Aspects of Health Care Administration. Jones & Bartlett Learning. Walston-Dunham, B. (2011). Introduction to Law. Cengage Learning. Read More