Call it a battle of the commissions. The Commodity Futures Trading Commission wants the Federal Energy Regulatory Commission to step off.
The CFTC has a case pending in federal district court in New York against a commodities trader named Brian Hunter. FERC, however, also wants to investigate and prosecute Hunter. But Hunter’s lawyer, Michael Kim, name partner at Kobre & Kim, and the CFTC’s lawyers, both say FERC needs to back off.
Bradford Berry, a lawyer for the CFTC, this week told a federal appeals court in Washington that FERC doesn’t have authority to investigate and prosecute Hunter. Sitting at Berry’s table in court: Hunter’s lawyer, Kim.
Hunter unsuccessfully fought FERC in federal court in D.C., kicking the dispute to the U.S. Court of Appeals for the D.C. Circuit. The argument Wednesday was before Judges David Tatel, Judith Rogers and Janice Rogers Brown. At issue is regulation of the commodities futures markets.
Hunter was co-head of the trading desk for commodity derivatives for Amaranth Advisors until 2006, court records show. In 2007, Hunter filed court papers in Washington federal court to block FERC’s enforcement action. Judge Richard Leon of the U.S. District Court for the District of Columbia ruled in favor of FERC last year.
The CFTC did not participate in the proceedings in the trial court. Tatel wanted to know more about cases where one federal agency sues another. Berry said the CFTC would be in an "awkward" position in trying to go after FERC.
The Commodity Futures Trading Commission, Kim said in court Wednesday, has regulatory authority over futures markets on the New York Mercantile Exchange. FERC regulates wholesale energy markets. Amaranth has no involvement in transportation services related to natural gas. CFTC filed a complaint against Hunter and Amaranth in federal court in New York in 2007 that alleged manipulation of settlement prices of natural gas futures.
FERC lawyer Robert Solomon said the commission and the CFTC have overlapping jurisdiction. FERC, he said, is regulating conduct in the aggregate—beyond any single transaction on the NYMEX. Berry said the two federal agencies would appreciate guidance from the D.C. Circuit. There was no immediate ruling.
Washington’s Spiegel & McDiarmid represented, among others, the American Public Gas Association in support of FERC. Kirkland & Ellis represented the National Futures Association and the Managed Funds Association, among others, as amicus in support of Hunter.
“Congress understood that having a single set of comprehensive regulatory provisions was the most efficient way of providing protection for the public and meaningful regulation for the industry,” said Kirkland partner Mark Young, who practices in the firm’s Washington office.