On Friday, March 15, 2013, the United States Court of Appeals for the D.C. Circuit held that “[b]ecause manipulation of natural gas futures contracts falls within the CFTC’s exclusive jurisdiction and because nothing in the Energy Policy Act clearly and manifestly repeals the CFTC’s exclusive jurisdiction,” the FERC lacked jurisdiction to prosecute Brian Hunter, a former Amaranth Advisor’s trader. Slip Op. at 2. The court’s decision is very broad and may severely constrain FERC’s ability to prosecute alleged manipulations of transactions subject to the CFTC’s exclusive jurisdiction even if the alleged manipulation affects FERC-jurisdictional markets.
Based upon its analysis of the statutory text, the court concluded that “[b]y CEA section 2(a)(1)(A)’s plain terms, the CFTC has exclusive jurisdiction over the manipulation of natural gas futures contracts.” Id. at 7. According to the court, “the CFTC’s jurisdiction is exclusive with regards to accounts, agreements, and transactions involving commodity futures contracts on CFTC-regulated exchanges.” Id. at 8. As a consequence, “if a scheme, such as manipulation, involves buying or selling commodity futures contracts, CEA section 2(a)(1)(A) vests the CFTC with jurisdiction to the exclusion of other agencies.” Id. (Emphasis added). Elaborating on this point in a comment with incredibly broad implications, the court explained that “once a scheme crosses the statute’s event horizon, the CFTC has exclusive jurisdiction.” Id. at 9. The court also held that nothing in Section 4A of the NGA (1) permits the FERC to “intrude upon,” or (2) impliedly repealed, the CFTC’s exclusive jurisdiction. Id. at 10 and 12.
The facts in Hunter pre-date the amendments to the CEA made by the Dodd-Frank Act. The CFTC now has exclusive jurisdiction over futures and options on futures transactions, and commodity swap transactions traded or executed on a CFTC-regulated contract market (exchange), swap execution facility, or “any other . . . market.” Thus, if an alleged manipulative scheme involves any of the types of transactions within the CFTC’s exclusive jurisdiction and, therefore, “crosses the statute’s event horizon,” FERC arguably lacks jurisdiction to prosecute the alleged manipulative conduct even if it is “in connection with” a FERC-jurisdictional transaction.
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