Federal regulatory agencies involved in consumer protection are either independent commissions or executive branch agencies. Independent commissions include the Federal Trade Commission, the Federal Communication Commission, the Securities and Exchange Commission, the Federal Reserve, and the Consumer Product Safety Commission. The SEC is was formulated by the Securities Act of 1933, and the Securities Exchange Act of 1943. Both acts developed the Securities and Exchange Commission (SEC) that provided markets and investor with rules and regulations in order to maintain the integrity of dealings and transactions after the stock market crash during the 1930’s. The U.S. Securities Exchange Act of 1934 prevents a broker-dealer from using its customers’ securities to finance its proprietary activities; the broker-dealer may use, or re-hypothecate, an amount up to 140 percent of the customer’s debit balance.
According to the SEC, their responsibility is to interpret federal securities laws, issue and amend rules oversee the inspection of securities firms investments, rating agencies, brokers, and other vital tasks. (SEC, 2013) Requiring public companies to disclose meaningful financial information to the public is an effective approach the SEC takes in order to assure the securities of the United States. (SEC, 2013) This helps investors prevent high-risk gambles and allows them to make sound decisions when deciding on which companies to invest in. In order to avoid public scrutiny all meetings and disclosures are made publicly to investors, and the general public. The SEC utilizes five divisions designed to maintain rules and regulations that have been made including; Division of Enforcement, that handles the SEC’s law enforcement by recommending an investigation of securities and violations. These are usually brought up to federal court or before an administrative law judge. (AllGov, n.d) This division is essential in leading to the prosecution or investigation of violations including manipulating market prices, customer funds and securities, insider trading, and the selling of unregistered securities. (AllGov, n.d) Other divisions include, Division of Corporation Finance, which oversees disclosure of essential investing information to the public. The Division of Investment Management provides investor protection while promoting capital formation through regulation of the US investment management industry. Division of Trading and Markets, that provides daily oversight of the major securities market. They include financial and securities firms, SRO’s, FinRA, MSRB, and other agencies. “The division also oversees the Securities Investor Protection Corporation (SIPC), insures the securities and cash in the customer accounts of member brokerage firms against the failure of those firms.” (SEC, n.d) The Division of Risk, Strategy, and Financial Innovation, is the “think tank” that provides information needed for policy and rulemaking, investigation, and enforcement of rules and regulation for the betterment of the economy.
The Commodity Futures Trading Commission (CFTC) voted in 2012, to propose regulations that would implements another section in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. This proposal outlines that is prohibited for banks or other financial institutions that own banks from engaging in any proprietary trading, not in the interests of their clients. It also prohibits them from investing or owning any hedge funds or private equity funds, and limits the liabilities that the institution and largest banks can hold. They CFTC put under consideration of the possibility of future restrictions on the way that market making activities are compensated.
A valid contract is usually defined as a set agreement made between parties that are enforceable under law. A contract can cover several areas of law that are imposed upon parties to create the set duties and rights that the others parties are obliged to follow. The contracts created are always binding, and must be meet the requirements without “breaching” the duties provided. The concept of the contract is to strike an agreement or bargain based on the agreed upon factors. The elements of a valid contract include the offer and acceptance, where one party offers and another party accept. The second element is the intention to create legal relations, the parties have to intend to enter a legally binding agreement that is enforceable under law. The next element of a valid contract include consideration, where the factor of the price paid, which is not always necessarily money, but something of value. Legal capacity, there are several parties that are not free to enter into valid contracts and need the proper consent. These parties include, prisoners, minors, bankrupt individual, people acting on behalf of the corporation, and people who have a mental impairment. The next element is consent, where each party must willingly exercise their free will and understanding before entering into a contract. The exception is where someone is acting on behalf of other parties, the details are understood. When parties do not have a clear understanding then it can have a breach of contracts, due to false statements, duress, or mistakes. The last element of a valid contract are illegal and void contracts, which the law will not enforce. Under common law, there are several contracts that are illegal under statutes that are considered void and parties can recover damages. These contracts include those that are sexually immoral, they commit a crime, tort, or fraud, prejudice, and intent to promote corruption and defraud society. Valid contracts are written either written, verbal, or in a special form to be enforceable.
In a contract, all parties involved including banking institutions have the duty of good and fair dealing with each other. Within a contract is the promise of an understandable agreement. The agreed upon promise is legally binding in a valid contract that is enforceable under law. When dealing with good faith, the parties (customers and banking institutions) must agree to not compromise the rights of the other, in other words reframe from jeopardizing the contractual rights of the other party. “The parties to the agreement cannot disclaim a bank’s responsibility for its lack of good faith or failure to exercise ordinary care or limit the measure of damages for the lack of failure.” (Newman, 1997) Banks cannot waive their liability or responsibilities to the customer no matter for negligence, willfulness, or recklessness. In the response of the customer duty is to not slack off on the bargain or agreement set place between the two parties. The customer must agree to fair negotiation and dealings with being a customer of the bank.
Within law, there are two types of tortious acts: negligent and intentional torts. There is several difference between the two torts. Negligent torts are actions where the actions are not intended such as in an accidental car crash. Negligent torts are not done on purpose, the party failed in exercising their duty of reasonable care that resulted in an injury-inducing accident. In order to prove in court are to show a breach of contract or duty, a cause, and harm which is the actual loss or damage suffered by the lack of duty. In contrast, intentional torts are actions where a party intentionally intends to cause harm or injury to another party. These torts can be classified as assault or murder, or battery. In these events, the party intentionally tries to inflict physical contact resulting in harming the victim. Not even harming the victim but appearing to threatening or inflict fear in the victim as if they were going to be harmed. Also in other cases physical contact is not always needed in such cases as libel or slander where the party knowingly tries to slander the other party’s reputation by spreading false or harmful information. In both torts, however damages can be recovered in a civil or criminal cases, but the sentencing and compensation may differ in each case.
The tort action of Interference with Contractual Relations permits for a party to recover damages based on the claim that the other party interfered with the plaintiff’s contractual relations. The elements within an intentional interference with the contractual relations claims are a valid contract must be in place that are made between all parties. All parties involved must be knowledgeable of the contract. The party’s intentional acts were designed to interfere that resulted in a breach of the contractual relationship. The last element is that the breach and interference made by the party resulted in damages. For the actions of the parties to be considered tortious, the actions must substantially exceed the free expression and fair competition within the contract, such that the banks cannot lend out any additional money. The plaintiff must prove the elements outlined of the breach or interference in the valid contractual relationship made by the knowledgeable parties involved.
The “fiduciary duty” is the duty or legal obligation, which is recognized under the law by the person is acting as a fiduciary. If the party fails in fulfilling the legal obligation outlined then they are considered breaching their duty. When the party is entrusted to act on the behalf but fails to act in proper action, then the party has breached their fiduciary duty. In regards to other banks that act in the same manner as JP Morgan, they would only prevail in such cases if they can prove or disprove any breach in their fiduciary duties to the customer/clients that they acted on behalf of including acting in a negligent manner. JP Morgan breached their fiduciary duty by selling variable prepaid forward contracts to the trusts, which are complex fee-rich products that were inapt for the trust.
Mobile banking has been fast gaining the normal trend for banking customers to access their banking information and complete financial transactions. Millions are utilizing the banking applications from banking institutions on their smartphones which can become a breeding ground for hackers and criminals. It is essential that banking institutions prevent attacks against their applications in order to prevent a breach of customer and bank critical information. With the recent attacks on security against financial and legal institutions including breach of information on famous individuals many institution are stacking up and rehousing their security protocols in order to protect their software against unwarranted attacks. The technology of automation is providing mobile channels used by banking institutions for their mobile application for continual access and transactions from customers and banks. Customers are able to access applications through password or pin protected applications, Banks provide security protocols that ensure safer mobile banking that include better firewalls, secure internet proxy, and utilizing third party software to prevent viral and human attacks. Banks have set up 24 hour customer service, security procedures including verifying the identity through the use of social security, birth date, calling the phone, or through the use of text messaging sent to verified phone. These different methods help in password authentication and mobile security for protecting their technology and customer information.
Blyskal, Jeff. (2013). “CR Money Minute: Better smart phone banking security?” Consumer Reports. Retrieved from http://news.consumerreports.org/money/2013/05/cr-money-minute-better-smart-phone-banking-security.html
“How the SEC Protects Investors, Maintains Market Integrity and Facilitates Capital Formation.”
(N.d.). SEC. Retrieved from http://www.sec.gov/about/whatwedo.shtml
Newman, Marc L. “*1190 STILL KEEPING THE FAITH: THE DUTY OF GOOD FAITH REVISITED.” (1997). Michigan Bar Journal. Retrieved from http://www.millerlawpc.com/journal/Still_Keeping_the_Faith_The_Duty_of_%20Good_Faith_Revisited.html
“The Elements of a Contract.” (N.d). The Law Handbook. Retrieved from http://www.lawhandbook.org.au/handbook/ch12s01s02.php
White, Edward G. (2003) Tort Law in America: An Intellectual History. Oxford University Press, Inc.
Winicovi, John. (n.d). “Intentional Torts vs. Negligent Torts.” John Winicovi Law Offices. Retrieved from http://www.johnwinicov.com/lawyer-attorney-2063126.html