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JPMorgan Chase, in 2012, announced one of the greatest losses through high-risk gambles in securities investments, which are an essential foundation of the U.S. economy. The incidence that occurred in the summer of 2012 resulted in an estimated of $5.8 billion loss in one of the country's biggest banks. The bank's chief investment officer, Jamie Dimon, announced the loss in May 2012. The losses, according to the CIO, resulted from part of its corporate unit that made trades to hedge against risks. The CIO used traders engaged in bad trades by using derivatives hedge against public debt. Shares of JPMorgan considerably dropped following the incident. The case of JPMorgan bank fail is an example among other similar incidences in the U.S. Recent cases include the court case against the U.S. Bancorp unit over the collapse of Peregrine in 2012. Such incidence raises questions about the role of the administrative agencies in guarding the economy by averting high-risk gambles in securities or banking in the U.S.
Administrative agencies are essential in protecting banks or securities from incurring losses from bad trades. The 1934 Securities Exchange Act in America sets out protective roles of administrative agencies. Section four of the exchange act set the Securities and Exchange Commission. The commission is responsible for the protection of investors and maintaining market integrity. It also facilitates capital formation to ensure sound market regulations. Investing in stocks, bonds and other forms of securities is a complex and challenging endeavor that calls for appropriate regulations.
Administrative agencies are influential in implementing the laws that regulate the securities industry in the country. Investment rules and regulations require investors to have prior knowledge of the various securities before deciding on their commitment. All companies investing the securities, as required by the commission, should disclose important information to the public. Investors can make decisions based on their sound understanding of accurate and relevant information.
Administrative agencies support full disclosure of information required to enhance fair dealing and protection against possible fraud. They facilitate timely and reliable exchange of essential information required by the public to decide on investment in securities. This prevents possible failures by investors by enhancing coordination among market participants. Administrative agencies also ensure compliance with laws and all relevant regulations by all major market players in securities investment. Civil enforcement actions against entities that violate market regulations are a vital role of administrative agencies. CFTC, for instance, has an influential role in the apparent case involving the U.S. Bancorp unit.
Prevention of risks in securities investments requires coordination between different institutions. Administrative agencies closely work with other institutions as self-regulatory institutions. The congress and other federal departments play great roles in the enhancing the success and minimization of fraud related to securities investments. State securities coordinate with administrative agencies during investigations. Administrative agencies are intermediaries that enhance coordination of the roles of different institutions to prevent high-risk gambles in securities investments. The NSMI Act of 1996 strengthened the role of administrative agencies in protecting investors in securities (Fein, 2011).
A valid contract implies contentment between the parties engaged that is legally enforceable. Every valid contract has four fundamental elements. First, it must engage legally competent parties. They must not be minors and of sound mind. Secondly, the purpose of the contract must be legal. Any contract based on an illegal activity is null. Offer and acceptance are the third elements of a valid contract. It must have an offer that is acceptable to the binding parties. One party offers to adhere to set conditions or undertake an activity and the other must consent to the offer. Consideration is the fourth element of a valid contract that renders it binding. Consideration is an element of value offered by a party to the other party in a contract. In the banking relationship, consumers and banks sign valid contacts. All the contracts have well-established duty of good faith and fair dealing. Every contract must bear the obligation of good faith and fair-trading. Banks, as the lender, must remain honest in all the provisions of the contracts. Banks must engage the customer in the contract in good faith. Customers, as the borrower in the relationship, must ensure admissible promptness and compliance. Any contract not in good faith is invalid (Bradgate & White, 2007).
A tort refers to a civil misconduct that does not breach any valid contract. There are two notable forms of civil torts. Intentional torts emanate from the defendant's deliberate cause of to a plaintiff (Statsky, 2011). Intentional torts include assault and battery. Forgery of documents or records is a form of intentional torts. Receiving payments for services not delivered is a form of intentional tort. Negligent torts, however, emanate from the defendant's failure to apply reasonable care as a means of protecting the plaintiff, therefore causing injury. To prove a negligent tort, the defendant must prove a breach of duty, obligation, proximate cause and the ultimate harm. The obligation, or duty, is the binding character towards the necessity for the defendant to take reasonable care. The harm is the ultimate loss or damage incurred by the plaintiff. Although intentional and negligent torts are different according to the cause of harm, they depict some commonalities. All the two types of torts are actionable, for instance. A plaintiff can receive compensation for injury inflicted by intentional or negligent torts. However, insurance companies do not cover intentional torts. Negligent torts, in most cases, attract insurance cover.
The UCC outlines different aspects of laws relating to commercial contracts, business torts and breach of agreements (Tepper, 2011). A defendant is legally responsible for all damages in tort actions relating to obstruction of contractual relations of the plaintiff when the defendant's engages with a third party. In common law, the plaintiff has the responsibility to prove that the defendant interfered with the contractual relations. The defendant, however, has no chance to prove the reasons for breach of contract they had with the plaintiff, while dealing with a third party. In the interference claim, the plaintiff should justify notable five elements. The plaintiff must prove prior existence of a valid contract signed by the defendant. The defendant's acknowledgement of the said contract must exist as a proof of its validity and authenticity.
When filing a claim, the plaintiff must have substantial evidence to reveal that the action by the defendant was intentional and improper. This renders the interference considerable as a business tort. Proof that the plaintiff suffered from the defendant's actions of interference with the contractual relations is a vital requirement during the claim. The plaintiff must prove that the defendant's actions disrupted the contract's performance is necessary. Ultimately, the plaintiff must prove the damage incurred from tort actions by the defendant by obstruction of performance of the contract.
A breach of fiduciary duty occurs when a defendant does not act in the best interest of the plaintiff as per the agreements. Fiduciary duty renders the defendant responsible for any act that does not conform to conduct that that expresses the plaintiffs' best interest. The fiduciary should only act in a manner that conforms to the employer's interest. A trustee, for instance, has a fiduciary duty to the concerned beneficiaries. Special trust should exist between the trustee and beneficiary to guarantee fiduciary duty (Rob, 2008). Civil action may qualify as a breach of fiduciary duty. In this case, the claimant only needs to prove that the defendant has a position of trust or the two enjoyed a fiduciary relationship, which the defendant violated. The violation may entail the exploitation of the fiduciary relationship to acquire personal gains, by the defendant. In the case of JPMorgan Chase, the CIO and the bank management were responsible for interference with contractual relations. To prevail under such circumstance would require due process to prove the losses incurred…[continue]
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