The decision by JPMorgan traders to hide their losses has instigated debate on the effectiveness of legal and regulatory bodies in the United States. In this paper, the effectiveness of SEC and CFTC in preventing high-risk gambles in the banking and securities has been analyzed. The paper also evaluates the elements of a contract and the duty to fair dealing and good faith between banks and consumers. Besides, it compares JPMorgan with Wells Fargo & Co in relation to tort actions.
The fundamental task of organizations such as Securities and Exchange Commission or Commodities Future trading Commission relates to the formulation of policies and guidelines for trading within areas of jurisdiction. It is, therefore, their responsibility to ensure investors are protected by guaranteeing fair and efficient operations of the markets as well as capital formation. Securities and Exchange Commission provides for compulsory disclosure of company financial information to the public. The move helps the investors to make wise decisions in choosing the companies to invest in (Dembinski, 2005). The commission also conducts periodic evaluation of public companies as well as ensures strict adherence to the rules and regulations governing the conduct of entities within the industry. It is empowered to take disciplinary measures in case of breach of those regulations. On the other hand, Commodities Futures Trading Commission protects players in securities from fraudulent, abusive practices, and manipulation. It seeks to promote an efficient, competitive, and sound future markets. It, therefore, ensures that individuals, players, investors and the entire industry are safe for operation.
A contract refers to a valid agreement between two parties that is legally abiding. The parties create their duties and rights in regards to the principles specified in the law, and those enforced by the courts. The bargain between the two parties enables them to come up with terms and conditions that constitute the agreement with each other. Both parties have a duty to fair dealings with each other (Johnson, 2013). A binding contract must contain five essential elements. The first one is the intention to enter into a legally binding contract. Therefore, one party can sue the other one in instances where one party does not fulfill their part of the bargain. The promise made during the bargain, therefore, should be respected and one should become legally contracted to it. The contract should also be undertaken as a creation of the legal relationship between the two parties. In commercial transactions, these relationships exist in laws established by the state. The second element is an offer. This implies that each party is ready to make unconditional acceptance to the agreement. The third element relates to acceptance. In this element, the person to whom the offer is being made must accept it in order to become legally abiding. The proposal must be communicated and understood by the other party. The underlying premise in this element is that one cannot accept an offer until he or she is conversant with it. The fourth one is consideration where there is a detriment to the person who committed him or herself to the promise (Johnson, 2013). Consideration requires the banks and consumers to engage in fair dealings. As a result, each party has an opportunity to benefit from the other without any party taking advantage of the other. Each party must acquire something in return for the promise made. The last one is capacity. Therefore, the person should be above 18 years and should be mentally capable.
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Tort actions refer to the compensation offered to individuals injured by the unreasonable actions of others. These actions are based upon the state law, and the underlying premise is that the concerned parties are directly responsible for their conduct. There are two types of torts, which are intentional and negligent tort actions. Intentional torts are committed by individuals intentionally. The tortfeasor intentionally deliberately neglects his duty of care to the other party. On the other hand, negligent torts relate to actions, in which a person fails to perform duties of care to the other persons thereby causing injury - inducing accident. These actions are neither intentional nor intended (Dembinski, 2005).
Tort of interference with contractual relations refers to a legal platform, which allows complainant to recover damages on the premise that the respondent interfered with the complainant’s contractual relations. The tort has several principles, which include a legally binding contract between the complainant and the third party as well as the respondent knowledge of the breach of the contract. There should also be the respondent intentional acts intended to bring about breach of the contractual relationship and the actual breach of the contractual relationship together with the ensuing damage. However, these actions must prove that the actions were beyond free expression and fair competition (Johnson, 2013).
On the other hand, a fiduciary duty refers to a legal obligation imposed by the one acting as a fiduciary. This duty is imposed by the law. The duty is imposed on persons who fail to fulfill their legal obligations for the benefit of the other. JPMorgan was found guilty of violating the fiduciary duty thereby being forced to pay $20 million dollars (Dembinski, 2005).
If Wells Fargo & Co were to undergo such tort actions, it would certainly survive. This is because the bank has perfected its core businesses and continues to perform well in terms of stock valuations. The bank has a promising future given the strategies currently in place (Weill, 2004).
There are various measures put forward to protect software for online banking. These include individualized passwords one is compelled to create a username and password in order to access his account. The banks also maintain firewalls that run 24 hours in order to prevent unauthorized access. Other measures include security questions, timed log-offs as well as encryption measures (Weill, 2004).