The US Federal Trade Commission moved a step closer to addressing petroleum market manipulation on Aug. 13 as it sought public comments for a proposed rule. The notice of proposed rulemaking (NOPR) will assist the commission in determining whether and how it should develop a final rule, which it hopes to accomplish before yearend, FTC said.
The commission said it is exercising authority it received under Section 811 of the Energy Independence and Security Act of 2007 (EISA 2007) and began the process with an advanced NOPR on May 1.
The proposed rule focuses on fraudulent or deceptive conduct that threatens the integrity of wholesale oil markets. FTC said, consistent with Section 811’s language, it has modeled its proposed rule on US Securities and Exchange Commission Rule 10b-5, which that federal agency promulgated under its own long-standing market manipulation authority.
FTC said the proposed rule would make it illegal for anyone, directly or indirectly, in connection with the purchase or sale of oil or oil products at the wholesale level to use or employ any scheme with fraudulent intent; to make any untrue statement or omit to state a material fact concerning a misleading activity; and to engage in act, practice, or course of business that would operate as a fraud or deceit.
“Thus, fraudulent or deceptive acts, including false reporting to private reporting services or misleading announcements by refineries, pipelines, or investment banks, may be covered by the proposed rule,” FTC said. “Similarly, trading practices in physical or futures markets may also be covered. By focusing the proposed rule on fraudulent and deceptive conduct, the commission seeks to avoid discouraging procompetitive or otherwise desirable market behavior that benefits consumers.”
It said the proposed rule would not impose affirmative duties or obligations or record-keeping requirements. EISA 2007 subjects anyone violating a FTC rule promulgated under Section 811 to civil penalties of as much as $1 million per violation per day, in addition to any relief available to the commission under the FTC Act, it said.
Comments on the NOPR will be accepted through Sept. 18.
