The US Commodity Futures Trading Commission isn’t standing around, waiting to resolve market manipulation jurisdiction questions with the Federal Energy Regulatory Commission. It’s still “the cop on the beat, protecting consumers,” Commissioner Bart Chilton told the American Public Gas Association’s board meeting Nov. 6 in Memphis.
Nov. 7 agreements under which five current and former Coral Energy traders agreed to pay $1 million in penalties in Houston and a former Mirant Americas Energy Marketing trader agreed to pay a $200,000 fine in Atlanta to settle charges of falsely reporting and attempted manipulation of natural gas prices seemed to emphasize his point.
An Oct. 31 CFTC complaint Alleged that Saxon Financial Services Inc., Atlanta, fraudulently solicited customers in Canada and Europe to trade in off-exchange oil, gas, and foreign currency options with affiliates purportedly based in Switzerland since July 2006.
In one case, CFTC said, a Saxon broker told a Canadian regulatory investigator posing as a prospective customer that he could expect a 300% return on recommended gasoline options in 3 months.
Jurisdiction question
The jurisdiction question began in July when CFTC and FERC both filed enforcement actions against Amaranth Advisors and its chief trader, Brian Hunter, alleging, respectively, violations of the Commodities Exchange Act and the 2005 Energy Policy Act for alleged manipulative activity on the New York Mercantile Exchange.
Amaranth asked a federal court in CFTC’s proceeding to stay FERC’s action on the ground that its jurisdiction does not extend to futures markets. Judge Denny Chin rejected the request on Nov. 1 and ordered Amaranth to pay a $291 million fine that FERC had imposed. He also urged the two agencies to coordinate their efforts more closely.
Three US Senate Democrats said CFTC and FERC should begin to resolve jurisdiction questions by Dec. 15. “It’s now become clear that what started out as a cooperative and coordinated investigation and enforcement effort has become one of conflict, to the potential detriment of the natural gas customers our federal laws were designed to protect,” said Maria Cantwell (Wash.), Dianne Feinstein (Calif.), and Ron Wyden (Ore.) on Nov 1.
Broaden arrangement
“A jurisdictional battle between FERC and CFTC is compromising both agencies’ enforcement authorities,” the senators said. Recent events suggest that the agencies’ memorandum of understanding needs to be broadened, they said as they asked the regulators to begin talks soon and report on progress within 45 days.
In a Nov. 13 address to the Futures Industry Association’s Law and Compliance Division in New York, CFTC Commissioner Jill Sommers observed that the jurisdiction question “has generated considerable interest from some members of Congress, but so far there has been no talk of a legislative response.”
Acting CFTC Chairman Walter Lukken and FERC Chairman Joseph T. Kelliher have spoken several times, Sommers said, as she expressed hope that the agencies will cooperate to resolve the matter.