Entities that become the target of FERC investigations are the subject of two new policies announced by FERC in separate orders this month. First, pursuant to the Policy Statement on Disclosure of Exculpatory Materials, FERC enforcement staff will now be required to disclose to respondents in Section 1b investigations and enforcement actions under Part 385 of FERC’s regulations any exculpatory evidence or information “material to guilt or punishment” of the respondents and that the respondents do not already possess. The policy originates from the U.S. Supreme Court case Brady v. Maryland and has been applied by several governmental agencies in their enforcement proceedings, including the SEC and the U.S. Commodity Futures Trading Commission (CFTC).
The policy does not require FERC enforcement staff to search for materials other than the materials it receives through discovery or its investigations. The policy also does not entitle respondents to disclosure of FERC enforcement staff’s strategies, legal theories, or evaluations of evidence. Respondents in an enforcement hearing may request the presiding judge to order disclosure of any materials that the respondents “have a reasonable basis to believe” are exculpatory in their cases. FERC stated that its adoption of this policy is intended to promote maximum fairness, administrative efficiency, and transparency in enforcement investigations.
In the second order, FERC adopted a new policy of issuing a public Notice of Preliminary Violations after the subject of an enforcement investigation has had the opportunity to respond to the FERC staff’s preliminary findings of violations. The public disclosure notice will include the following information: (1) identity of the entities that are subject to the enforcement investigation, (2) time and place of the alleged conduct, (3) rules, regulations, statutes, or orders that were allegedly violated, and (4) a concise description of the wrongful conduct.
If FERC enforcement staff decide to terminate an investigation after the public notice has been issued, FERC will issue another public notice announcing the investigation termination. Although FERC noted that accelerated public disclosure of alleged violations might adversely affect an investigated entity’s reputation, FERC concluded that this new policy strikes a balance between an investigated entity’s need for confidentiality and the public interest in additional transparency in FERC investigations.