Introduction
The Securities and Exchange Commission has put American banks and other securities as well as financial institutions under tight scrutiny since 2012 when JPMorgan’s was involved in the provision of false information regarding the trade losses it incurred during the first quarter of the year. Citi Bank as one of the financial institutions has stepped up to be more transparent in its dealings and relationship with its clients and investors.
Prevention of high-risk gambles in banking
Commercial banks have a duty to develop banking strategies to counter different risk dimensions (Saunders & Cornett, 2010). The Security Exchange Commission supervises the activities of banks and other institutions that take part in mutual trading and offer consumers financial services. The commission is involved in this for the main reason of preventing fraud and deliberate deceit as well as misrepresentations.
By supervising the institutions and banks, there exists openness into the dealings of the banks and this allows investors to get full information about the banks before investing. The unexpected changes in the stock market would then become outdated, as there would be no hidden information about the institutions or banks. The commission would eventually safeguard the investors’ interest when buying stock and trading in other mutual funds.
There are rules, policies, and regulations put in place by The Security Exchange Commission under the Security Act of 1933 and the Security Exchange Act of 1934 that guide the industry. It is the right of all investors to get information about a particular institution or bank before making a decision to venture into it. The acts state that all public companies and institutions are required under the law to provide their financial as well as other information for investors to scrutinize. The commission regulates the environment under which stock market trades by making sure that all players know their obligations, rules, and policies concerning the industry. The commission is accountable to the public through their office of public affairs.
The commission has various divisions. Notably is the division of enforcement. This division is responsible for the starting of investigations on any player in the industry that it deems has violated the law and consequently gives its recommendations for prosecution in the court of law, which could be civil or administrative. The office is also responsible for issuing new rules and inspecting of investment advisers, security firms, and brokers.
Elements of a valid contract between banks and customers
The elements of a valid contract may include an offer, acceptance, intention of legal consequences, and consideration depending on the context of the contract, which contains the basic agreements between banks and their customers.
The first element is the offer. There must be willingness and readiness by both parties to accomplish what they have agreed upon in the contract. This offer by both parties could only end if the acceptance expires. There is also the element of acceptance. Both parties must undertake the offer without giving any conditions. The acceptance has terms and conditions which may be done in writing or by word of mouth.
The other element of a valid contract is the intention of legal consequences. The parties need to be sure that their agreement is legal and that the contract that binds them is enforceable by law. This ensures that one party would be able to sue the other if it does not adhere to the provisions in the agreement. The last element could be a consideration. This explains the price agreed upon by the parties in the contract for the promises made by one party to the other party.
The courts in most cases analyze good faith and dealing to establish from the contract if there is any sole discretion by the lender. Loan agreements always give the bank the discretion to determine whether the customer is repaying the loan satisfactorily, but the law states that the bank should exercise the discretion in good faith. This varies with the terms in the agreement, expectations between the bank and the customer as well as whether the bank, which lends the customers, acted in bad or good faith. Banks need to transact their businesses with their customers in honesty. The preliminary agreements between the two parties should play a big role in their expectations.
This is because, in the agreement, each party has its expectations. The bank or customer would claim a breach of good faith if the deliberate act by the offender negatively affects the other party considering the agreed purpose.
Intentional Vs Negligent torts
An intentional tort is generally committed when one party’s conduct or actions injures another party or destroys another party’s property with knowledge of the offender. This could be done with the purpose of causing damage to the other party. The party that is involved in intentional tort is always aware that the result could cause a harmful effect on the other party but fails to avert the situation (Cheeseman, 2010).
Negligence torts occur in a situation whereby one party fails to perform its obligation of taking care of the other party as stipulated in the contract. Due to this act by the offender, the other party may suffer injuries and even property damage. In order to differentiate between negligent and intentional torts, it is important to find out if the offender was aware of the outcome of the risk or not.
Some of the examples of intentional torts may include assault, battery, forging of documents, and land trespass. When one party assault the other, it is clear that the party committing the offense is aware that he might cause injury to the second party. The same applies to the battery. Negligent torts, on the other hand, maybe committed by a bank. For instance, a bank may decide to recruit a number of customers that it is not able to give high-quality service because of a lack of capacity to do so.
In this case, the bank will have committed a negligent tort against the customer. Drunk driving could be a negligent tort, as the driver is well aware of the illegality of driving under the influence of alcohol and the repercussions of risking others’ lives. For one party to sue for negligent tort, it must be able to prove that there is a legal obligation in the agreement that the other party has neglected.
Interference with a contractual relationship and breach of fiduciary duty
There exists a fiduciary relationship between two parties when one party is under the obligation to offer direction to the advantage of the other party in relation to their contract. Interference with a contractual relationship could be because of one party inducing the partner to breach the agreement with a third party while acting with the knowledge of the agreement. For example, a person may come between two parties’ mutual agreement to make them not achieve their goal. The elements of tortious interference may include the existence of a contract between two parties, the knowledge of the contract by a third party, the intention of the third party to conspire with one party to breach the contract, breach of the relationship and damage or injury to the plaintiff.
Participating in a Breach of Fiduciary duty has five elements, which include proof of the Fiduciary duty, proof that one party owed the complainant the duty, breach of the duty, and the injury. Fiduciary duties are in most cases intended to prevent parties from being unfaithful to each other in terms of contractual relationships (Bagley, 2013).
Citi Bank is one of the biggest and respected banks in the world. Involving itself in such activities would amount to a breach of fiduciary duties. This would have a negative effect on its reputation worldwide. A huge percentage of its respected customers would not associate themselves with it and as a result, the bank would end up losing its customers and investors, which are vital to its survival in the market.
Mobile banking and online transactions
The security and protection of the customers’ information should be one of the most important factors considered in mobile banking and online transactions by banks. Security policies and rules put up by a bank would determine the level of security of the bank network. Most banks have applied several security technologies that prevent viruses from getting into the banks’ networks using antivirus. One of the strategies would be deploying strict security rules at all levels and securing the bank’s network (Mann, 2012).
There is customer education. It is the duty of the customer to follow the right communication channels established by the banks to report any suspected fraud in their accounts to prevent them from falling victims. The customers are also educated on the importance of passwords, updating of operating systems, and other applications they use in relation to online banking transactions.
The banks also emphasize to the customers that the application and devices they use for mobile banking must ensure secure protocols like HTTP for authentication purposes. Vendor management is also another area used by banks to protect the software. The banks ensure that they test the mobile payment solutions developed by third-party vendors before they decide to implement the application. This ensures the security of the application at all levels.
There is also fraud management by banks as a way of protecting the software. There is strong protection of fraud by educating customers on authentication of their accounts, strict account set up procedures, using secure mobile applications, as well as having twenty-four-hour customer support and real-time detective services.
References
Bagley, C. E. (2013). Managers and the legal environment (7th ed.). Mason, OH: South-Western Cengage Learning.
Cheeseman, R. (2010). The Legal Environment of Business and Online Commerce: Business Ethics, E-Commerce, regulatory, and International Issue (2nd ed.). University of South Carolina, USA: Prentice Hall.
Mann, Ian. (2012). Hacking the Human: Social Engineering Techniques and Security Countermeasures. Aldershot: Gower Publishing.
Saunders, A., & Cornett, M. (2010). Financial Institutions Management: A Risk Management Approach (4th ed.). McGraw-Hill Ryerson.