The Dodd-Frank Wall Street Reform and Consumer Protection Act signed by President Obama in July 2010 (“Dodd-Frank Act”) mandated that the Federal Energy Regulatory Commission (“FERC“) and the Commodity Futures Trading Commission (“CFTC“) enter into a memorandum of understanding (“MOU”) by January 2011 outlining how the two agencies can exercise their authority, share information, and cooperate in investigations without encroaching upon one another.
On January 2, 2014, three years after the deadline established in the Dodd-Frank Act, FERC and the CFTC have entered into two MOUs establishing: (1) a process for resolving overlapping jurisdictional issues (“Jurisdictional MOU“), and (2) a process for sharing information of mutual interest while maintaining confidentiality (“Information Sharing MOU“). These 2014 MOUs come after the retirement of former FERC Chairman Wellinghoff and after the decision of the D.C. Court of Appeal in Hunter, which affirmed the CFTC’s exclusive jurisdiction with respect to transactions conducted on futures markets.
- 1. The Jurisdictional MOU
The Jurisdictional MOU establishes three procedures for resolving overlapping jurisdictional issues. First, there is a notification procedure where the agencies commit to inform each other of activities that may arguably fall within the overlapping jurisdiction of the other agency. This commitment to notify the other agency is triggered when each agency, either acting sua sponte or upon filing by an entity, is considering an authorization or an exemption to engage in activities that fall in areas of potential overlapping jurisdiction. Such jurisdictional grey areas are not described in the MOU.
The MOU’s notification process does not convey acknowledgement of jurisdiction by either agency. Instead, there is a second procedure for resolving overlapping jurisdiction matters where the agencies commit to meet, coordinate, and develop an approach that meets both agencies’ regulatory concerns on case-by-case basis. The MOU does not establish jurisdictional presumptions. If the agencies cannot agree on a common approach to resolve an overlap, the MOU establishes a dispute resolution procedure escalating up to final decision by the agencies’ respective Commissions.
The MOU is, by its terms, “strictly for internal management purposes” and does not create, expand, limit or otherwise alter any existing legal obligations of the agencies under their governing statutes or regulations.
- 2. The Information Sharing MOU
The Information Sharing MOU establishes procedures concerning information that may be requested by FERC or the CFTC in connection with markets subject to their oversight or regulation. The purpose of the MOU is to ensure that such information requests are properly coordinated and not duplicated and to address the treatment of confidential information.
The MOU’s procedure for information requests by FERC targets: (1) designated contract markets, registered swap execution facilities, registered derivatives clearing organizations, or any other board of trade, exchange, or derivatives market or swap data repository; and (2) market participant information in the possession of CFTC. The MOU’s procedure for information requests by the CFTC targets: (1) the following entities regulated by FERC: a Regional Transmission Organization (“RTO”) or Independent System Operator (“ISO”), the independent market monitor of the RTO or ISO, the North American Electric Reliability Corporation (“NERC”), or interstate pipelines and storage facilities; and (2) market participant information in the possession of FERC.
The MOU also establishes procedures concerning the sharing of information protected by privilege or proprietary information and disclosure of such privileged or proprietary information. Notably, the agencies commit to refer any FOIA requests relating to information shared under the authority of this MOU, for disposition by the agency initially holding the information.
Both MOUs became effective on January 2, 2014.