This week’s enforcement update covers:
- CFTC orders Deutsche Bank Securities Inc. to pay $70 million penalty for attempted manipulation of ISDAFIX benchmark;
- CFTC and DOJ announce spoofing charges against banks and individuals;
- FERC files amended complaint in case against Powhatan and Chen;
- Judge grants joint motion on summary judgment procedure in FERC case against Silkman/CES;
- FERC OE files answer to BP motion seeking dismissal based on statute of limitations;
- FERC Chairman testifies on grid performance during recent weather events; and
- FERC Commissioner Rich Glick stresses importance of FERC enforcement regime.
In this enforcement update, we cover:
- CFTC’s enforcement division issues new advisories on cooperation;
- FERC and ETRACOM file briefs regarding scope of review in district court;
- FERC revises PJM FTR forfeiture rule and discusses cross-product manipulation;
- Citigroup Global Markets Inc. settles spoofing charges with the CFTC;
- DOJ settles with Duke Energy for violating premerger notification and waiting period requirements; and
- TOTAL files motion for leave to respond and response in FERC proceeding.
Happy New Year! In our first enforcement update of 2017, we cover:
- FERC increases maximum civil penalties for violations for 2017;
- City Power and FERC file joint stipulation requesting referral to mediation; and
- TOTAL files supplemental authority and FERC responds in declaratory judgment action in Fifth Circuit.
On December 6, the Supreme Court unanimously affirmed a Ninth Circuit decision involving the scope of “personal benefit” required to find insider trading under the securities laws. Salman involved an investment banker who provided inside information about pending mergers to his brother, intending that the brother would benefit from the information. The brother traded on the tips and (without his brother’s knowledge) tipped additional friends – including Salman – who also traded. The Court determined the facts of this case fell within the language of the 1983 Dirks decision, which found that a tipper breaches a fiduciary duty by making a gift of confidential information to a “trading relative.” The Court did not agree with Salman’s position that only a clear pecuniary benefit to the tipper should trigger liability.
On December 7, a group of ten administrative law professors filed a brief of amici curiae in the Powhatan/Chen proceeding in the U.S. District Court for the Eastern District of Virginia, which criticizes FERC’s position on what constitutes de novo review under Section 31(d) of the Federal Power Act (FPA). The brief is substantially similar to the brief filed last month on behalf of Barclays in the U.S. District Court for the Eastern District of California, which was denied by Judge Nunley. According to the brief, “Amici have grave concerns about the legal and policy implications of FERC’s apparent view of what constitutes a district court’s ‘de novo review’ of an agency’s civil penalty assessment.” The professors argue that FERC’s position runs counter to the traditional understanding of court enforcement actions for civil penalties and cannot be squared with the FPA’s civil penalty assessment mechanism, which gives a defendant the choice of challenging FERC’s penalty assessment in a full trial-type proceeding before either an administrative law judge or a federal district court.
In our final enforcement update for 2016, we cover:
- TOTAL files reply brief in declaratory judgment action against FERC in Fifth Circuit;
- Trial concludes in the CFTC’s case against DRW and Wilson; and
- Judge holds scheduling conference and orders briefing in ETRACOM proceeding.
This week’s enforcement update covers the following:
- FERC Staff issues notice of alleged violations against GDF SUEZ;
- FERC files motion to affirm civil penalties against ETRACOM; and
- FERC files brief in TOTAL appeal proceeding in Fifth Circuit.
The bench trial in the CFTC’s case against DRW is underway. On November 28, Judge Richard Sullivan denied the motions to strike testimony filed by the CFTC in its market manipulation case against defendants DRW Investments, LLC and Donald R. Wilson pending in the U.S. District Court for the Southern District of New York. In denying the motion, Judge Sullivan noted that the CFTC failed to submit its motion by the November 4 deadline to file motions in limine and failed to request leave to file this motion at the pretrial conference. In addition, on November 29, the CFTC filed its response to the defendants’ motion to exclude portions of a CFTC expert declaration, which Judge Sullivan granted in part. The trial in this proceeding began on December 1. The parties gave opening statements, and the court heard testimony from a number of DRW traders, including Wilson.
On November 22, PJM’s Independent Market Monitor (IMM) filed a complaint regarding a rule change to PJM’s capacity market approved by the PJM Markets and Reliability Committee (MRC). At the November 17 MRC meeting, the MRC approved—over objections from the IMM—changes to PJM’s Manual 18 to delete language that imposed conditions on early replacement transactions. In response, the IMM filed a complaint at FERC arguing that the modified rules are unjust and unreasonable, inconsistent with competitive markets, and allow behavior that defeats a well-functioning market. The IMM argues that the modified rules “provide incentives to offer paper capacity in the PJM capacity market and to suppress market prices for actual physical capacity in the PJM market.” According to the IMM, “The modified rules allow behavior that would otherwise be considered prohibited market manipulation because behavior permitted under the modified rules defeats PJM’s well functioning market for physical capacity.”
Also on November 22, PJM’s IMM filed a complaint requesting a market participant, American Electric Power Service Corp. (AEP), to provide the IMM with certain information that AEP allegedly refused to provide in response to information requests. According to the complaint, the IMM requested that AEP provide the data from which AEP calculates the variable operations and maintenance expense component of its cost-based offers, which was requested in order to determine whether the level of AEP’s cost inputs for cost-based offers raise market power concerns. The IMM claims that it is unable to obtain such information from an alternative source, so the IMM requests that FERC require AEP to provide the requested information within two weeks.