The Ghost of Enron Past? or FERC Comes a Calling

Dealbook, at the New York Times, reports that the Federal Energy Regulatory Commission (“FERC”) has launched investigations into many Wall Street firms for manipulating energy markets. (NYT)

The Federal Energy Regulatory Commission, the government watchdog overseeing the oil, natural gas and electricity business, has lately taken aim at three major banks suspected of manipulating energy prices. After taking action against JPMorgan Chase and Deutsche Bank, the agency on Wednesday threatened to impose its largest fine ever against Barclays.

The agency — building on a 2005 law, additional resources and a string of personnel moves — is increasingly exercising its new enforcement muscle to pursue not only energy companies but some of the nation’s biggest banks. Indeed, the case against Barclays, which could cost the British bank $470 million, stems from a broad crackdown on questionable trading that has prompted 19 actions in the last two years.

You may be wondering where FERC came from and the answer is the ashes of the Enron energy market manipulation:

The agency’s effort is rooted in a 2005 law passed in the aftermath of the Enron fraud. The law created an enforcement unit at the agency and gave it the authority to assess hefty fines.

Under the Obama administration, the enforcement unit expanded its ranks and received a nearly 50 percent budget increase.

The unit, which this year created a specialized group to analyze arcane data and detect manipulation, also hired seasoned criminal investigators. The enforcement team is led by Norman C. Bay, the former United States attorney for New Mexico. One of his top deputies is a former general counsel of the Federal Bureau of Investigation.

With fines that large, Compliance can no longer be considered a cost center.


Posted on November 2, 2012 in Compliance, Investments, Regulation

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