More On Legal & Compliancefrom The Advisor's Professional Library
- The Few and the Proud: Chief Compliance Officers CCOs make significant contributions to success of an RIA, designing and implementing compliance programs that prevent, detect and correct securities law violations. When major compliance problems occur at firms, CCOs will likely receive regulatory consequences.
- Updating Form ADV and Form U4 When it comes to disclosure on Form ADV, RIAs should assume information would be material to investors. When in doubt, RIAs should disclose information rather than arguing later with securities regulators that it was not material.
After the U.S. Federal Energy Regulatory Commission (FERC) hit Deutsche Bank with a $1.5 million penalty and disgorgement of profits of $123,198, the bank has struck back, with its energy trading unit denying charges that it rigged the energy market in 2010 and saying that the penalties should be dropped.
Bloomberg reported Wednesday that in a Sept. 5 order, FERC’s enforcement staff said the bank’s energy unit, Deutsche Bank Energy Trading LLC, provided false information regarding its trading activities in the California energy market in early 2010.
However, the unit said in a filing appearing on FERC’s website Wednesday, “The legal position enforcement has taken here is radical. If the commission does not abandon these deeply flawed allegations now, they will be overturned by a federal district court.”
The bank’s filing said that its energy trading unit “did not intentionally trade against its interests,” contrary to FERC’s enforcement unit findings after its investigation was complete. The filing also said, “Traders saw arbitrage opportunities—the chance to ‘buy low and sell high’” because the prices at one power-delivery point were “significantly” lower than they were in another delivery point.
The bank said in its filing that FERC’s enforcement office took the position that “knowingly trading in two related markets is per se unlawful market manipulation, even if the trading is profit-seeking in both markets. Accepting that mistaken contention would mark a sea change in commission precedent.”
Agency spokesman Craig Cano said in the report that FERC had no comment; he was quoted saying, “The commission will consider the response.”
Also under investigation for alleged trader manipulation in electricity markets are JPMorgan Chase & Co. and Barclays. The agency is cracking down on market manipulation, and since January of last year has announced 11 investigations into the activity. In March one of those investigations resulted in FERC reaching a record $245 million settlement with Constellation Energy Group.
On Oct. 31, FERC proposed another record fine against Barclays, totaling $469.9 million in penalties and an additional $18 million on four former Barclays traders who allegedly gamed markets in the Western U.S. The bank and traders were given 30 days to respond.