On May 16, 2019, FERC rescinded its policy of issuing public Notices of Alleged Violations (“NAV”) after a subject of an investigation has had an opportunity to respond to Office of Enforcement (“OE”) staff’s preliminary findings (“NAV Policy”). FERC found that the NAV Policy no longer struck an appropriate balance between the benefit of added transparency and the potential negative impacts that the loss of confidentiality may cause to investigative subjects.
The NAV Policy was introduced in 2009 in order to increase the transparency of OE staff’s nonpublic investigations. FERC stated that the intent behind the NAV Policy was to increase transparency into OE investigations by (1) providing a way for other market participants to share evidence with OE staff prior to investigations being resolved and (2) allowing other market participants an opportunity to evaluate their own activities against the activities alleged in the NAVs. In issuing the policy, FERC balanced these benefits against the potential reputational harms to subjects under investigation. However, FERC found that once the OE staff provides its preliminary conclusions, the existence of the investigation was likely to become public regardless, and therefore the potential harm was limited.
After monitoring the effectiveness of the NAV Policy, FERC decided that the policy should be rescinded. FERC found that the intended transparency benefits of the NAV Policy were more limited than it originally believed, and that such disclosures no longer outweighed the risk to a subject’s reputation. First, FERC concluded that the NAVs did not become a significant source of information for OE staff’s investigations, and since the implementation of the NAV Policy, FERC had implemented more effective ways of acquiring such information. Second, FERC said the NAVs did not provide significant guidance to market participants due to the limited information included in the NAVs and the fact that market participants have gained more effective ways of acquiring information since the implementation of the NAV Policy. Finally, FERC found that there remained significant potential for risk of reputational harm to subjects. Accordingly, FERC rescinded the NAV Policy.
FERC’s May 16 order is available here.