United States: Federal Energy Regulatory Commission And Commodity Futures Trading Commission Sign MOUs On Jurisdiction And Information Sharing

Introduction

Signed into law by President Obama in July 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act mandated, among many other things, that the Federal Energy Regulatory Commission ("FERC") and the Commodity Futures Trading Commission ("CFTC") (collectively, "Participating Agencies") enter memoranda of understanding ("MOUs") concerning certain jurisdictional and information sharing matters.1 Approximately three and one half years later, on January 2, 2014, FERC and CFTC signed two MOUs on jurisdiction ("Jurisdiction MOU") and information sharing ("Information Sharing MOU") regarding market surveillance and investigations into potential market manipulation, fraud, and abuse.2 The Jurisdiction MOU establishes procedures whereby FERC and CFTC inform each other of activities that may implicate their overlapping jurisdictions and coordinate with each other to address related concerns. The Information Sharing MOU establishes procedures whereby FERC and CFTC evaluate the other agency's requests to share information of mutual interest related to their market surveillance and investigatory responsibilities and maintain the confidentiality and protection of data. The MOUs are intended to facilitate better coordination between FERC and CFTC, and the key aspects are set forth below. The practical effects the MOUs will have on the Participating Agencies and the targets of their inquiries and investigations remain to be seen.

Jurisdiction MOU

The Jurisdiction MOU establishes procedures for the purposes of (i) applying the Participating Agencies' authorities in a manner to ensure effective and efficient regulation in the public interest, (ii) resolving conflicts regarding the overlapping jurisdiction of the Participating Agencies, and (iii) avoiding conflicting or duplicative regulation to the extent possible.3 The procedures comprise three parts. First, the Participating Agencies agree to notify each other regarding activities that may fall within their respective overlapping jurisdictions. Subsequently, the Participating Agencies will hold informal consultations to determine whether the notified agency has any interest in the matter.4 Second, if the notified agency is interested in the matter, the Participating Agencies will commence discussions. Regarding matters of mutual interest, the agencies agree to "diligently and cooperatively communicate to coordinate and develop an approach that meets both agencies' regulatory concerns."5 Third, if a dispute occurs regarding the implementation of the Jurisdiction MOU, the Participating Agencies will follow the three escalating steps: (i) provide a written statement of the dispute to the other agency in an attempt to resolve the matter; (ii) if no resolution is reached within ten working days of notification, elevate the dispute in writing to the director-level contacts; and (iii) if the director-level contacts can't resolve the dispute within ten working days, elevate the dispute to the Commission.6

Information Sharing MOU

The Information Sharing MOU supersedes a prior MOU and addresses information sharing between the Participating Agencies in connection with market surveillance and investigations into potential manipulation, fraud, or market power abuse to ensure that such information sharing is properly coordinated, both to minimize the duplication of information requests and to manage the treatment of confidential information. In this regard, the Information Sharing MOU establishes procedures governing (i) information requests, (ii) treatment of proprietary information, and (iii) treatment of privileged information.7

First, regarding information requests, the Participating Agencies agree to take all necessary steps to ensure that information provided under the Information Sharing MOU shall be kept confidential and non-public. They also agree to "endeavor to accommodate the policies and regulations of the other [agency] concerning the disclosure of information to third parties."8 To avoid duplicative information requests and to coordinate oversight, investigative, and enforcement activities, the Participating Agencies agree to share information regarding such ongoing activities to determine whether and when they have a mutual interest in matters.9

Second, regarding proprietary information, the Participating Agencies agree to preserve, protect, and maintain all privileges and confidentiality claims regarding non-public information provided under the Information Sharing MOU. In this regard, each agency agrees not to disclose information provided by the other agency without such agency's prior written consent. Furthermore, the Participating Agencies agree to certain procedures regarding the protection of non-public information. One, Participating Agencies agree to establish and maintain safeguards to protect the confidentiality of non-public information. Two, Participating Agencies agree to (i) notify the providing party in writing of a demand for the disclosure of such information, (ii) provide the providing party with a reasonable opportunity to respond to such demand, and (iii) assert applicable legal exemptions or privileges on behalf of the providing party. Three, Participating Agencies agree not to grant a demand for the disclosure of non-public information provided by the other agency without the prior written consent of the providing agency. Four, Participating Agencies agree to consent to the intervention of the providing agency in actions in which it intervenes solely for the purpose of asserting privileges or confidentiality claims regarding non-public information.10

Third, the Participating Agencies agree that the sharing of privileged information with respect to matters of common interests does not constitute a waiver of any applicable privileges or protections. Furthermore, when sharing information identified as "Privileged Material", the Participating Agencies agree to certain procedures. One, the receiving agency shall not disclose Privileged Material to a third party, subject to certain exceptions. Two, the receiving agency shall take all reasonable, necessary, and lawful steps to prevent the disclosure of Privileged Material to third parties. Three, the receiving agency shall promptly notify the other agency of requests for disclosure of Privileged Material. Four, the receiving agency shall provide the other agency with an opportunity to object to the disclosure of Privileged Material prior to any such disclosure to a third party. Five, sharing Privileged Material between the Participating Agencies does not prevent either agency from pursuing its own separate interests and does not establish an attorney-client relationship between FERC and CFTC or their respective counsels.11

Conclusion

Despite the delay in finalizing the MOUs, officials from both agencies have indicated that the cooperation contemplated by the MOUs is routine, so the practical effect of the change may be hard to discern. It is noteworthy, however, that FERC and CFTC executed the MOUs during a time of significant turnover at both agencies. In particular, FERC Chairman Wellinghoff and CFTC Chairman Gensler recently retired from their respective chairmanships.

Footnotes

1 See Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376 (2010) ("Dodd-Frank Act").

2 See "Memorandum of Understanding between the Federal Energy Regulatory Commission and the Commodity Futures Trading Commission" (issued Jan. 2, 2014) ("Jurisdiction MOU"), available at https://www.ferc.gov/legal/mou/mou-ferc-cftc-jurisdictional.pdf "Memorandum of Understanding between the Commodity Futures Trading Commission and the Federal Energy Regulatory Commission Regarding Information Sharing and Treatment of Proprietary Trading and Other Information" (issued Jan. 2, 2014) ("Information Sharing MOU"), available at https://www.ferc.gov/legal/mou/mou-ferc-cftc-info-sharing.pdf See also CFTC Letter "Operation of the Memorandum of Understanding between the Commodity Futures Trading Commission and the Federal Energy Regulatory Commission Regarding Information Sharing and Treatment of Proprietary Trading and Other Information" (issued Jan. 2, 2014), available at https://www.ferc.gov/legal/mou/mou-cftc-ferc-Letter.pdf. The Information Sharing MOU supersedes the one executed by the Participating Agencies in 2005. See "Memorandum of Understanding between the Federal Energy Regulatory Commission (FERC) and the Commodity Futures Trading Commission (CFTC) Regarding Information Sharing and Treatment of Proprietary Trading and Other Information" (issued Oct. 12, 2005) ("2005 MOU"), available at http://www.ferc.gov/legal/mou/mou-33.pdf.

3 See Jurisdiction MOU at 1.

4 See id. at 1, Section II.A.3.

5 Id. at 2, Section II.B.2.

6 See id. at 3, Section II.C.

7 The Information Sharing MOU adds a section specifically addressing privileged materials, whereas the 2005 MOU does not contain an analogous section. Compare Information Sharing MOU with 2005 MOU.

8 Information Sharing MOU at 3, Section II.C.1. See also id. at 2-3, Sections II.A-B (discussing procedures for information requests by FERC and CFTC).

9 See id. at 3, Section II.C.2.

10 Id. at 4-5, Section II.D.

11 Id. at 5-7, Section II.E.

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