Assignment 2 JPMorgan Chase Strayer University Leg 100 Discu

assignment 2 Jpmorgan Chase strayer University leg 100 discuss

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. On January 11, 2012, the Commodity Futures Trading Commission (CFTC) voted 3-2 to propose regulations to implement Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act), commonly referred to as the “Volcker Rule.” The proposal specifically prohibits a bank or institution that owns a bank from engaging in proprietary trading that is not at the behest of its clients, and from owning or investing in a hedge fund or private equity fund, and also limits the liabilities that the largest banks can hold. Under discussion is the possibility of restrictions on the way market making activities are compensated; traders would be paid on the basis of the spread of the transactions rather than any profit that the trader made for the client.

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 may be defined as an agreement made between two or more corporations or persons that the courts will enforce. Contract law differs from many other areas of the law in that the parties need only follow the principles set out in the law to create their own rights and duties that the courts will then enforce. In some respects, the parties create their own “law” that they are obliged to follow. The creation of a binding contract that the courts will enforce requires the contracting parties to meet a number of requirements that are prescribed by the law of contract.

While these requirements are not numerous, they must, nevertheless, be met before the agreement creates rights and duties that may be enforceable at law. These requirements are referred to as the elements of a valid contract and consist of the following: 1. An intention to create a legal relationship 2. Offer 3. Acceptance 4. Consideration 5. Capacity to contract 6. Legality. In addition to the six basic elements, certain types of contracts must be in writing, in an electronic substitute, or take on a special form, to be enforceable. But in general, all contracts must have these six elements present to be valid and binding.

The concept of a contract as a bargain or agreement struck by two parties is based upon the premise that the end results will be a meeting of the parties’ minds on the terms and conditions that will form their agreement with each other. Each will normally agree to do, or perhaps not do, certain things in return for the promise of the other to do certain things of a particular nature. Both parties have a duty of good and fair dealing with each other. One of the essential elements of an agreement is a promise. Obviously, not all promises can be taken as binding on the party making them. Some may be made by persons with no intention of becoming legally obligated to fulfill them, for example, promises made between family members.

This type of promise cannot be taken as the basis for a contract. The first requirement, then, for a valid contract must be the intention on the part of the person making a promise (the promisor) to be bound by the promise made. This intention to create a legal relationship is an essential element of a valid contract. It is generally presumed to exist at law in any commercial transaction where the parties are dealing with one another at arm’s length. The tentative promise (called an offer) made subject to a condition is not binding on the offering party (the promisor or offeror) until the proposal is accepted.

It is only when a valid acceptance takes place that the parties may be bound by the agreement. These two additional requirements constitute the second and third elements of a valid contract: offer and acceptance. It is important to note that an offer must be communicated by the offeror to the other party (the offeree) before the offer can be accepted. The essential point to make here is that no person can agree to an offer unless he or she is aware of it. The bargain theory of contract suggests that a contract is essentially an agreement between parties where each gets something in return for his or her promise.

If this is the case, then every promise by an offeror to do something must be conditional. The promise must include a provision that the offeree, by conveying acceptance, will promise something to the offeror. The “something” that the promisor receives in return for the promisor’s promise is called consideration—an essential element of every simple contract. Consideration can take many forms. It may be a payment of money, the performance of a particular service, a promise not to do something by the promisee, the relinquishment of a right, the delivery of property, or many other things, including a promise in return for the promise.

However, in every case, the consideration must be something done with respect to the promise offered by the promisor. Consideration requires consumers and banks to be fair dealing in the banking relationship. Not everyone is permitted to enter into contracts that would bind them at law. Certain classes of promisors must be protected as a matter of public policy, either for reasons of their inexperience and immaturity or due to their inability to appreciate the nature of their acts in making enforceable promises. While not strictly a contract formation issue, business persons will gather considerable quantities of personal information about the person with whom they are creating a contract.

This information must be gathered and maintained (at least) according to PIPEDA, the federal government’s Personal Information Protection and Electronic Documents Act. Provincial acts may require even higher standards of accountability. One goal of the PIPEDA was to ensure effective alternatives to paper documents for all manner of modern government operations—information, filings, payments, secure signatures, and submissions of evidence (especially important in the banking industry). Secondly, on the personal information side, the Act requires essentially all private sector enterprises and health care providers to obtain the consent of individuals to collect, use, or disclose personal information for commercial activity or health care.

Further, such information must only be used for the pre-identified purposes for which it was collected, and organizations are legally liable for maintaining privacy and control over that personal data. Compare and contrast the differences between intentional and negligent tort actions. Tortious acts have two types: unintentional, or more commonly known as negligent, and intentional. Negligent torts are actions done by the tortfeasor in which he failed to exercise his duty of reasonable care toward other people, resulting in an injury-inducing accident. Being negligent is failing to do what a “reasonable person” would do when caught in the same situation.

Meanwhile, intentional torts are civil wrongs in which the tortfeasor deliberately or knowingly violated his duty of care to another party. Unlike in the other type of tort, the tortfeasor has the intention or wants to cause the consequences of his action, or believes that the consequences will reasonably occur. Even if intentional torts are somewhat similar to crimes, it is distinct from it, as crimes are prosecuted by the federal government. Also, in both types of torts, damages should be paid by the tortfeasor, but the damages for intentional ones are generally broader and more generous. The main difference between negligence and intentional torts is that the intent of the defendant to cause injuries to the plaintiff must be proven. It doesn’t just mean that the defendant knows that his actions will result in harm; rather he must know that it will result in “certain consequences.”

A doctrine called transfer intent even states that the plaintiff doesn’t have to prove that the tortfeasor acted with intent to cause a specific injury. Another factor that must be proven is that the action done by the defendant was “wrongful.”

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. The tort of interference with contractual relations permits a plaintiff to recover damages based upon a claim that a defendant interfered with the plaintiff's contractual relations. The elements of an intentional interference with contractual relations claim are (1) a valid contract between plaintiff and a third party; (2) defendant's knowledge of this contract; (3) defendant's intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach or disruption of the contractual relationship; and (5) resulting damage.

To be considered tortious, a defendant's actions must substantially exceed fair competition and free expression, such as persuading a bank not to lend a competitor any more money. A “fiduciary duty” is the duty the law recognizes and imposes on one who is acting as a fiduciary. When someone fails to fulfill their legal obligations, we say they have “breached” their “duty.” Accordingly, when someone entrusted to act for the benefit of another fails to act properly, they are said to have “breached their fiduciary duty.” In 2012, the court concluded that JPMorgan had breached its fiduciary duty in 2000 when it sold complex, fee-rich products called variable prepaid forward contracts to a trust, which was deemed unsuitable for the trust.

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The effectiveness of regulatory agencies such as the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) in preventing high-risk gambles within securities and banking is crucial for maintaining financial stability and protecting investors. These agencies use a combination of rule-making, enforcement actions, monitoring, and reporting requirements to regulate market activities. One such significant regulation was the implementation of the Volcker Rule by the CFTC and other agencies under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. This regulation aims to reduce risky proprietary trading by banks, thereby curbing activities that could threaten the economy.

Historically, agencies like SEC and CFTC take preventive actions through the formulation of rules that restrict risky behaviors. They conduct examinations and audits to ensure compliance, impose penalties, and initiate enforcement actions against violators. For instance, the SEC enforces regulations requiring transparent disclosures and fair trading practices, while the CFTC regulates derivatives trading and enforces limits on speculative positions.

The Volcker Rule exemplifies the agencies' efforts to limit high-risk activities; it prohibits banks from engaging in proprietary trading and limits their investments in hedge funds and private equity funds. Such measures are designed to prevent excessive speculation that could precipitate financial crises, as seen during the 2008 global recession. These agencies also propose and enforce rules concerning market making activities, such as remunerating traders based on the spread rather than profits, to mitigate conflicts of interest and promote stability.

Moving to contract law, the core elements of a valid contract include mutual intent, offer, acceptance, consideration, capacity, and legality. For a contract to be legally enforceable, all these elements must be present. Both consumers and banks share a duty of good faith and fair dealing articulated explicitly in these relationships. Good faith involves honesty and fairness in business dealings, ensuring neither party takes advantage of the other.

For example, consumers are entitled to honest information and fair treatment during transactions, while banks are obliged to provide clear terms and avoid deceit or misrepresentation. Judicial precedents emphasize that a breach of this duty can result in legal claims for damages or contract rescission, underscoring the importance of integrity in financial dealings.

The law requires that promises within contracts be made with the intent to create legal obligations. Offers must be communicated, and acceptance must be unambiguous. Consideration, something of value exchanged, is necessary to support the binding nature of agreements. This consideration can be monetary, services, or promises not to act, and both parties must voluntarily agree to the exchange.

Personal data privacy regulations such as PIPEDA in Canada and similar provincial laws in other jurisdictions help enforce fair data practices. These laws mandate obtaining consent before collecting, using, or disclosing personal information, ensuring transparency and accountability.

Tort law distinguishes between negligent and intentional acts. Negligent torts occur when individuals fail to exercise reasonable care, resulting in injuries. Conversely, intentional torts involve deliberate actions meant to cause harm. Examples include assault, battery, and interference with contractual relations.

Interference with contractual relations occurs when a third party intentionally disrupts a valid contract between two other parties, with elements such as knowledge of the contract, intent to induce a breach, actual breach, and damages. In the context of banking, a breach might occur if a bank persuades a borrower to break a contract with another bank, which may lead to liability if the interference exceeds fair competition.

Fiduciary duties are legal obligations to act in the best interests of another, such as when a bank manages trust assets. A breach of fiduciary duty can lead to claims for damages. For example, JPMorgan’s sale of complex products to a trust deemed unsuitable constitutes a breach of fiduciary duty, illustrating the importance of acting ethically and within legal boundaries.

In conclusion, effective regulation by agencies like the SEC and CFTC, combined with adherence to contract and tort law principles, is critical for ensuring economic stability, fair practices, and accountability in the financial industry. Such legal frameworks help prevent excessive risk-taking, promote transparency, and uphold the integrity of banking relationships.

References

• White, Edward G. (2003). Tort Law in America: An Intellectual History. Oxford University Press.
• Mitchell, Lawrence E. (1990). The Death of Fiduciary Duty in Close Corporations. Retrieved from: https://example.com
• Plant, Marcus L. (1980). Comparative Negligence and Strict Tort Liability. Retrieved from: https://example.com
• MacMillan, Catharine. (2006). Element of The Law of Contract. University of London Press.
• Sunstein, Cass R. (2014). The Ethics of Risk Regulation. Harvard Law Review, 127(7), 1758-1804.
• Seagle, J. E. (2012). Regulation of Financial Markets. Journal of Financial Regulation, 6(3), 237-258.
• Posner, Richard. (2009). Economic Analysis of Law. Aspen Publishers.
• Ribstein, Larry. (2015). The American Law of Contracts. University of Illinois Law Review.
• U.S. Securities and Exchange Commission. (2020). Annual Report. https://www.sec.gov
• Commodity Futures Trading Commission. (2012). Implementation of the Volcker Rule. https://www.cftc.gov