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Energy Prosecutions: Is the CFTC Out of Gas?

Futures & Derivatives Law Report
December 2009

Beginning in 2002, the U.S. Commodity Futures Trading Commission (CFTC) has brought attempted manipulation and false reporting enforcement cases against 42 public energy companies and 31 individual traders alleging violations of Section 9(a)(2) of the Commodity Exchange Act (CEA) with respect to their privately negotiated, principal-to-principal, bilateral energy product transactions, assessing $445 million in civil monetary penalties. Section 9(a)(2), entitled “Criminal Penalties,” has distinct prongs for manipulations, corners, false reporting of commodity prices and general antifraud violations under the CEA. This article will discuss whether the CFTC has exceeded its authority in bringing these cases against traders based on off exchange, negotiated bilateral transactions that fall outside of the CFTC’s jurisdiction.

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