On January 2, 2014, the Federal Energy Regulatory Commission (FERC) and the Commodity Futures Trading Commission (CFTC) executed two Memoranda of Understanding (MOU) addressing issues concerning overlapping jurisdiction and information sharing procedures regarding their respective anti-manipulation enforcement powers. The agencies signed the memoranda to satisfy a mandate in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) that required the negotiation of an MOU within 180 days of the July 24, 2010 enactment of Dodd-Frank. The CFTC and FERC had been operating under a 2005 MOU that provided for coordination of investigative and enforcement activities but did not specifically reference any overlapping anti-manipulation authority. FERC Acting Chairman Cheryl LaFleur and former CFTC Chairman Gary Gensler pledged that the agencies would work together to better protect the nation’s energy markets based on each agency’s market oversight and enforcement responsibilities.
The jurisdictional MOU establishes procedures for applying the respective authorities of the CFTC and FERC while avoiding duplicative regulation and conflicts concerning overlapping jurisdiction. To accomplish this objective, the two agencies have agreed to notify each other after becoming aware of a potential overlap in jurisdiction where (i) an entity regulated or proposed to be regulated by that agency has filed a request for authorization or an exemption permitting such entity to engage in activities, or (ii) the agency, on its own motion, considers such an authorization or exemption. The notified agency will then determine and alert the notifying agency if it has an interest in the matter or if it wishes to engage in a specific procedural step before deciding whether it has an interest in the matter. Where both agencies have an interest in the matter, the staff of each agency will work together and share information to coordinate an approach that meets both agencies’ regulatory concerns. The CFTC and FERC have also provided for dispute resolution procedures concerning the implementation of the MOU.
Information Sharing MOU
The Information Sharing MOU sets forth procedures by which information held by one agency may be shared with the other agency to assist with each agency’s market surveillance and investigation activities concerning potential manipulation, fraud, or market power abuse. The MOU allows FERC to request that the CFTC provide such information from (1) designated contract markets, swap execution facilities, derivatives clearing organizations or other exchanges or repositories; and (2) market participant information in the possession of the CFTC. The MOU also allows the CFTC to request that FERC provide information from (1) Regional Transmission Organizations (RTOs), Independent System Operators (ISOs), independent ISO/RTO marketers, the North American Electric Reliability Corporation, or interstate pipelines and storage facilities; and (2) market participant information in the possession of FERC. The CFTC and FERC have committed to share information concerning ongoing oversight and investigation activities in order to avoid duplicative information requests. The CFTC and FERC will also endeavor to accommodate each other’s policies and regulations concerning the disclosure of information to third parties while taking actions to maintain all privileges and claims of confidentiality related to non-public information provided pursuant to the MOU.
An End to the Jurisdictional Turf Battles?
It remains to be seen whether the newly signed MOUs will quiet the jurisdictional tussles between FERC and the CFTC concerning their respective anti-manipulation authorities. The agencies have shared a history of jurisdictional turf battles, which came to a head in March 2013 before the D.C. Court of Appeals, where the CFTC successfully challenged FERC’s authority to prosecute Brian Hunter for manipulation of the Natural Gas Futures market. Nonetheless, the tone of the MOUs appear to promise a spirit of cooperation for the future.