FERC-CFTC Memoranda of Understanding

by McNees Wallace & Nurick LLC
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For those clients involved in transactions subject to the jurisdiction of the Federal Energy Regulatory Commission ("FERC") or the Commodity Futures Trading Commission ("CFTC"), please be advised that on January 2, 2014, FERC and CFTC executed two Memoranda of Understanding ("MOUs") clarifying the process by which the two agencies will notify each other in cases of potentially overlapping jurisdiction and establishing information-sharing responsibilities.  The MOUs were entered into pursuant to Section 720 of the Dodd-Frank Wall Street Reform and Consumer Protection Act and became effective immediately. 

 

The MOUs were drafted at the urging of Senators Dianne Feinstein (D-Calif.) and Senator Ron Wyden, (D-Ore.) to facilitate FERC and CFTC working together in oversight of the U.S. energy markets.  The agreed-upon notification and information-sharing procedures are designed to avoid jurisdictional battles between the CFTC's authority over commodity futures markets and FERC's market manipulation enforcement authority.  The types of activity where these issues will most likely arise include trading of electricity and natural gas futures and other non-physical transactions involving electricity and natural gas purchases and sales.

 

In the MOU governing activities involving potentially overlapping jurisdiction, FERC and CFTC agreed that staff of either agency (the "Notifying Agency") will notify the staff contact of the other agency (the "Notified Agency") in the following instances:

  • The Notifying Agency becomes aware that a regulated (or potentially regulated) entity has filed a request for authorization or an exemption to engage in regulated activities.
  • The Notifying Agency independently considers granting an authorization or exemption to engage in regulated activity that may fall within the overlapping jurisdiction of the Notified Agency.

Staff contacts at both agencies will informally consult to determine whether the Notified Agency has any interest in the matter.  Following notification and consultation, the Notified Agency will advise the Notifying Agency as to whether it has an interest.  If interest exists, staff of both agencies will work together to develop an approach meeting both agencies' concerns.  Each agency will issue orders as necessary to address such overlap.  The MOU includes provisions governing dispute resolution that require both agencies to attempt to resolve jurisdictional disputes internally before elevating the matter to both Commissions for resolution.

 

In the MOU regarding information sharing and treatment of proprietary trading information, FERC and CFTC agreed to the following procedures

  • Information requests by FERC:  FERC must provide CFTC with written requests for all information from a designated contract market; registered swap execution facility; registered derivatives clearing organization; or any other board of trade, exchange or derivatives market or swap data repository as those terms are defined in the Commodities Exchange Act.  FERC must also provide written requests to CFTC for any available market participant information.
  • Information requests by CFTC:  CFTC must provide FERC with written requests for information regarding the following FERC-regulated entities: Regional Transmission Organizations ("RTOs"); Independent System Operators ("ISOs"); the independent market monitor of an ISO or RTO; the North American Electric Reliability Corporation; or interstate pipeline and storage facilities.  CFTC must also provide written requests to FERC for any available market participant information.

All information obtained by either agency must be kept confidential.  CFTC and FERC also agreed to avoid duplicative requests to the extent possible and to coordinate investigative and enforcement activities when mutual interests arise.  With respect to treatment of proprietary information, the MOU requires both agencies to establish and maintain safeguards to protect confidentiality and to withhold the release of proprietary material in the absence of the other agency's consent.  FERC and CFTC further agreed that the sharing of material that falls within a state or federal definition of "privileged" does not constitute a waiver of the afforded privileges or protections.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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