Law, compliance, and case management – plus the blurred boundary between FERC and CFTC.
Douglas M. Canter and Ronald H. Levine are Principals, and Abraham J. Rein is an Associate, in the Energy Compliance Group of Post & Schell, P.C. The authors express their appreciation to Barbara Rowland, principal at Post & Schell, P.C., and Zachary Halper and Nawa Arsala, law clerks at Post & Schell, P.C., for their research and related assistance with this article. Mr. Canter served previously as a staff attorney with the U.S. Federal Energy Regulatory Commission, while Mr. Levine and Ms. Rowland are former federal prosecutors.
The U.S. Federal Energy Regulatory Commission (FERC or Commission) has made policing against fraud and manipulation in energy markets one of its highest priorities. In the aftermath of the western energy crisis of 2000-2001, Congress provided FERC with broad civil penalty authority and the power both to monitor physical energy markets and prohibit market manipulation. FERC can impose penalties of up to $1 million per market manipulation violation per day.1
Between 2007 and the end of 2014, excluding overturned or pending matters, FERC assessed civil penalties of $602 million and ordered disgorgement totaling almost $300 million.2 The FERC Office of Enforcement has announced that enforcing the rule against fraud and market manipulation will continue to be a priority during 2015.3
Given the possibility of multimillion dollar penalties for violations, this article will touch on four distinct areas:
Case Law. Provide background on FERC's evolving market manipulation law and explain legal risks and exposure, including the Securities and Exchange Commission (SEC) case law precedent on which FERC relies;
Compliance Tips. Offer practical compliance tips for businesses, boards of directors and managers for minimizing the risk of FERC market manipulation allegations;