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FERC, CFTC Agree on Jurisdiction, Information Sharing

FERC and the Commodity Futures Trading Commission (CFTC) on Thursday signed two memoranda of understanding (MOU) to address overlapping jurisdiction and information sharing in connection with market surveillance and investigations into potential market manipulation, fraud or abuse.

"These memoranda will help lead to better protection of the nation's energy markets and increase cooperation between the agencies," said CFTC Chairman Gary Gensler.

The jurisdiction MOU sets out a process under which the agencies will notify each other of activities that may involve overlapping jurisdiction and coordinate to address the agencies' regulatory concerns. The agencies agreed to notify each other when either "becomes aware that an entity regulated or proposed to be regulated...has filed a request for authorization or an exemption permitting such entity to engage in activities, or the agency is sua sponte considering such an authorization or exemption, which, in either case, may arguably fall within the overlapping jurisdiction of the other agency…”

Such notification will not constitute acknowledgement that the agency being notified has jurisdiction in the matter. The initial contacts at each agency will have 10 days to resolve any dispute over jurisdiction; after that time, remaining issues will be elevated to the Director-level contacts for each agency.

The second MOU establishes procedures through which the Federal Energy Regulatory Commission and CFTC will share information of mutual interest related to their respective market surveillance and investigative responsibilities. Gensler and FERC Acting Chairman Cheryl LaFleur also agreed that the agencies will share data relating to financial markets for gas and electricity.

"These memoranda will further strengthen FERC's ability to perform its market oversight and enforcement responsibilities," LaFleur said. "As FERC's role in overseeing the competitive energy markets has grown since the passage of the Energy Policy Act of 2005, our need to coordinate with the CFTC is increasingly important."

Both MOUs became effective Thursday.

Last April, Sens. Dianne Feinstein (D-CA), Ron Wyden (D-OR) and Lisa Murkowski (R-AK) called on FERC and the CFTC to execute more robust MOUs to resolve their jurisdictional disputes, which the lawmakers said were hampering oversight of the nation's energy markets (see Daily GPI, May 1, 2013). While federal statute divides the jurisdiction of FERC and the CFTC between cash markets and futures markets, respectively, federal law also recognizes that detecting many forms of manipulation in these integrated markets requires the active oversight of both markets in an integrated fashion, the senators said a letter to the heads of both agencies. The Dodd-Frank Wall Street Reform Act directed FERC and CFTC to negotiate an MOU that would integrate market oversight efforts and improve information sharing.

The senators sent the letter after a federal appeals court in Washington, DC, issued a controversial decision that held that FERC lacked jurisdiction in the natural gas futures market, and that its jurisdiction was confined to the physical gas market (see Daily GPI, March 18, 2013).

In September, Feinstein and Wyden mostly faulted the CFTC for delays in executing the MOUs (see Daily GPI, Sept. 9, 2013).

The two federal regulatory agencies have butted heads over jurisdictional issues for several years (see Daily GPI, Nov. 5, 2008).

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