JPMorgan Chase

Assignment 2, JPMorgan Chase

(Toronto-Dominion Bank (TD))

 

Assignment 2, JPMorgan Chase

(Toronto-Dominion Bank (TD))

JP Morgan Chase is the leading bank in the United States, in 2012, the bank announced trading losses of $5.8 billion. The bank went further to assert that the CIO (Chief Investment Officer) made unwise decisions that led to the huge losses, which were hidden by presenting falsified reports to  the SEC (Securities & Exchange Commission). This an example of unethical accounting practices that are punishable by law. This paper considers Toronto-Dominion Bank (TD) which was intercepted by the SEC in 2011/2013 following the Rothstein Ponzi scheme (Brinkmann, 2013).

TD Bank Group

TD bank is a multinational bank with the headquarters in Toronto, Canada; the organization offers financial services to the target customers. The bank is the second largest in Canada and also the sixth in North America (Brinkmann, 2013). The bank came into existence after Dominion Bank and Bank of Toronto formed a merger. The bank employs more than seventy nine thousand employees with more than nineteen million customers. Forbes Global 2000 according to the 2010 listing placed the bank at position eighty six. According to the Canada’s Top 100 Employers in 2008, the bank was placed among the top employers in Canada (Brinkmann, 2013).

According to the TD bank operations in the United States, the bank was intercepted by the SEC due to the Rothstein Ponzi Scheme. Federal agencies charged Frank Spinosa who was the former Vice President in the organization at TD bank with violating the laws of the securities (Brinkmann, 2013). In the same way that it happened in JP Morgan Chase. It was noted that the $1.4 billion loss was named as Ponzi scheme. Former Attorney Scott Rothstein was disbarred from the public office and sentenced to fifty years in jail (Brinkmann, 2013).

The fines directed at TD Bank amounted to 52.5 million in total, with $37.5 million by bank regulators and $15 million by the SEC. The bank was charged for failing to report the crimes committed by Rothstein, and that the bank lied to the investors.  It was argued that the bank and Rothstein conspired in giving false information to SEC. TD bank was expected by the law to file SARS (Suspicious Activity Reports). Financial Crimes Enforcement Network and OCC (Office of the Comptroller of the Currency) are responsible in investigating cases related to SARs (Brinkmann, 2013).

SEC acts as the Wall Street watchdog in protecting the rights of investors, maintaining order, enhancing fairness, making sure that the markets are efficient and facilitating the formation of capital markets (Bothwell, 2005). The operations of SEC demands that public organizations to disclose financial reports that are meaningful to the general public. The information is believed to assist investors in making informed decisions on whether to hold, sell or buy security (Bothwell, 2005). SEC is the overseer of participants dealing with securities, with the inclusion of investment advisers, security dealers, security brokers, securities exchanges and mutual funds. SEC has been influential in actions of civil enforcements against companies and individuals that violate the laws of securities; with the inclusion of accounting fraud, insider trading, misleading information and false information on securities (Bothwell, 2005).

CFTC (United States Commodity Futures Trading Commission) is part of the American government and an independent agency regulating the option and futures markets. CFTC was created after the 1974 Community Futures Trading Commission Act in replacing United States Department of Agriculture’s Commodity Exchange Authority (Bothwell, 2005). The mission of CFTC is in protecting the public and users of the market from manipulation, fraud and abusive practices in relations to financial and commodity options and futures in fostering competitive, open and financially relevant option markets and markets of the futures. CFTC and SEC have been necessary in addressing high risk gambles that are related to the securities. Banking industry is critical in the economy of United States and beyond, regulatory authorities has been sensitive in reducing the risks associated with securities (Bothwell, 2005).

Banks and consumers have the responsibility of ensuring that the contracts are valid and characterized with fair dealing and good faith in enhancing the banking relationship. A contract between the banks and the consumers are enforceable by the courts of law. It has been noted that enforcement of the contract is critical, in making sure that the two parties in one way or another honor the contract (Plimpton, 2007). There are number of issues to consider while drafting a valid contract, identifying with: engaging an attorney, making sure that the subject matter as contained in the contract is lawful, making sure that both parties involved in the contract have mental capacity and legal capacity in engaging in contracts, making sure that consent to the contract is agreed and making sure that the contract is in writing for future references in case of clarity and disagreement (Plimpton, 2007).

Intentional torts are actions relating to battery and assaults among others while negligent torts identifies with cases of automobile accidents among others. It has been noted that intentional torts happens if the defendant acts intentionally in causing injury or harm directed at the plaintiff. Assault is subjecting an individual to possible battery in the future while battery relates to the actual beating or physical contact, hence causing harm (Plimpton, 2007). On the other side, negligent torts are caused when individual’s causes harm by not applying reasonable care. Elements in negligent torts identify with breach of duty when causing proximate harm. The plaintiff is injured as a result of the failed care in reasoning uprightly (Plimpton, 2007). There are some cases when negligent tort is committed on purpose, after the defendant fail to honor the duty.

Intentional and negligent torts are subject to the courts of law, where the defendant may face the charges, and both torts are compensable. The challenge is that in most cases, the insurance companies fail to offer the security services. Examples of intentional torts identify with trademark infringement, defamation, copyright infringement, unfair competition, false imprisonment, wrongful termination and employment discrimination among others (Plimpton, 2007). Most negligent torts are covered by insurance like automobile insurance, general liability insurance in business and homeowners insurance. Plaintiff gets paid by the defendant’s insurance.

Interference with contractual relations and participating in a breach of Fiduciary duty is considered as intentional tort. In such a case, the plaintiff must prove that the defendant’s actions resulted to damages, there existed a valid contract, the defendant must be aware of the contract, there must be a disruption of the contract  and the acts of the defendant must be intentional and intended to disrupt the mutual relationship between the defendant and the plaintiff (Plimpton, 2007).

UCC (Uniform Commercial Code) or the code is part of the uniform acts promulgated in harmonizing laws relating to commercial transactions and sales within United States. UCC has been sensitive in unifying commercial transactions and sales within the fifty states that forms United States (Bothwell, 2005). UCC deals mainly with movable and personal properties. UCC has been working closely with the common laws in making sure that the consumers are wholly protected from illegal exploitations.

In this case, TD Bank behaved in the same way as JP Morgan Chase by providing falsified information to the SEC. the parties involved were the SEC and the TD bank, in which TD bank was the defendant and SEC was the plaintiff, and the contract between TD bank and SEC was defaced by the falsified information (Brinkmann, 2013). This can be classified as intentional tort, since the TD bank was involved in unethical and illegal practices. TD bank faced fines while the employees involved in the fraudulent activities were jailed for committing the crimes.

The world is facing changes with globalization, which has diversified technological advancement and socialization. Banks in the twenty first century are offering online banking or E-banking or internet banking (Knowledge@Wharton and Ernst & Young, 2013). TD bank has produced personalized products and services directed at the target market. Online banking has allowed customers within TD bank to conduct diverse financial transactions through the secure website that the financial institution has developed.

Customers are allowed to assess the institution’s website through their personal networks, with passwords used in verifying the customer (Knowledge@Wharton and Ernst & Young, 2013). TD bank allocates specific numbers to the customers critical in accessing online banking within the system. Persons without the codes cannot access online banking unless they hack the systems, which is illegal entry to the systems according to the laws in the United States. TD Banks argues that security at the online banking is critical, and that the online banking can never operate on a breached platform. Banks use secured websites, PIN/TAN systems and signatures among other security models and devices (Knowledge@Wharton and Ernst & Young, 2013).

 

References

Bothwell, J. L. (2005). Financial market regulation benefits and risks of merging SEC and CFTC. New York: The Office The Office.

Brinkmann, P. (2013, September 23). TD Bank charged by SEC in Rothstein Ponzi scheme. Retrieved October 30, 2013, from Bizjournals.com: http://www.bizjournals.com/southflorida/blog/picking_up_the_pieces/2013/09/td-bank-charged-by-sec-in-rothstein.html?page=all

Knowledge@Wharton and Ernst & Young. (2013). Mobile Banking: Financial Services Meet the Electronic Wallet. Philadelphia, Pennsylvania: Knowledge@Wharton.

Plimpton, L. (2007). Business Contracts : Turn Any Business Contract to Your Advantage. New York: Entrepreneur Press.

 

 

 

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