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CFTC Extends Exemptions of RTO Energy Products to Bar Private Rights of Action

by   |   October 24, 2016

The CFTC quelled a controversy that had emerged regarding its proposed exemption of certain specified energy products transacted in Regional Transmission Organizations (RTO) by doing a “180” on its proposals that otherwise would have made the general anti-fraud, anti-manipulation, and scienter-based prohibitions that still apply to such transactions under the Commodity Exchange Act enforceable through private rights of action. Instead, the CFTC expressly recognized in its Final Order that its RTO exemptions will exempt the specified transactions from the Act’s private right of action provision as well. The Federal Energy Regulatory Commission (FERC), numerous trade organizations, market participants, and others had strongly opposed the CFTC’s proposal to leave the transactions subject to private rights of action, arguing that such a regime would introduce unwarranted inconsistencies and uncertainty in markets that are already heavily regulated by FERC.

Commissioner Giancarlo stated in support of the Order: “As I have observed, preserving the Section 22 private right of action is not necessary in these heavily regulated markets. Both the CFTC and the FERC have the authority to seek redress for the claims of private persons who raise meritorious allegations of fraud or manipulation.”