Jones Day Talks®: Energy Derivatives and Regulatory Enforcement by the CFTC and FERC
The energy markets are highly regulated, and producers, transmitters, and consumers of energy all use the highly regulated derivatives markets to hedge their energy risks. How do the Commodity Futures Trading Commission (CFTC) and the Federal Energy Regulatory Commission (FERC) respond when there are price disruptions, like with Winter Storm Uri, or evidence of manipulation or other potential wrongdoing in those markets? Listen as our partners and former senior FERC and CFTC regulators David Applebaum and Joshua Sterling share their views on how those agencies bring enforcement actions and how they will seek to address climate change and other issues relevant to the energy markets.
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Read the full transcript below:
Dave Dalton:
Established in 1977 and headquartered in Washington, DC, the Federal Energy Regulatory commission or FERC regulates the interstate transmission of and projects related to natural gas, oil, and electricity. But FERC also monitors and investigates energy markets, which leads naturally to an interest in energy derivatives, primarily futures and forward contracts and options contracts, which are used to mitigate risk or for speculative investment purposes. Jones Day partners, Josh Sterling and David Applebaum are here to talk about trends in enforcement and rulemaking priorities for FERC and the Commodity Futures Trading Commission, or CFTC, what we can expect from the Biden administration and how companies can prepare for what is shaping up to be a rapidly changing regulatory landscape. I'm Dave Dalton. You're listening to Jones Day Talks.
Dave Dalton:
Josh Sterling is a Washington-based Jones Day partner. He has 20 years experience in the derivatives and securities markets, both as a lead counsel to major companies and as a senior federal financial regulator. Josh represents clients that are active on derivatives markets with matters before the US Commodity Futures Trading Commission or CFTC, the US Securities and Exchange Commission, and various self-regulatory organizations. And David Applebaum is also a Jones Day partner and also based in Washington. His practice focuses on energy-related enforcement compliance, internal investigations, audits, litigation, and regulatory matters. David advises on proposed energy market transactions to avoid or mitigate enforcement risks from FERC, that's the Federal Energy Regulatory Commission, and other regulatory agencies. In fact, David is a former head of FERC's Division of Investigations, where he managed all aspects of the division, including high-level decisions on opening, conducting, and resolving investigations, settlements, enforcement actions, trials, and electric reliability inquiries.
Dave Dalton:
Josh, David, thanks for joining us today.
David Applebaum:
Thanks for having us.
Joshua Sterling:
Yes. Thank you, Dave.
Dave Dalton:
Great, great topic. This is the third podcast in this series of Jones Day Talks talking about derivatives markets, regulations, and so forth. I'm going to go to David first before we jump into the heart of the subject matter. David, Josh has been with us a couple of times before on previous podcasts. We met him, the audience is familiar. We've not spoken with you before. Give us a little bit of your background. Tell us about what you were doing prior to coming to Jones Day.
David Applebaum:
I've really been enjoying Josh's podcasts, and so I'm glad he suggested we do this one together and happy to be here. I started out doing class action, antitrust, and financial services litigation for about 10 years. But I had sort of government service bug. I wanted to try that out, hoping I could make a contribution and do something fun and learn a few things. So I joined the Federal Energy Regulatory Commission or FERC in early 2010. And I started up taking the lead on market manipulation and other investigations and sort of learning how FERC investigates. And then after a few years found myself in management and all the way up to the director of the division. So I had significant responsibility in terms of figuring out what types of cases to bring, how to them, when to bring them, when to exercise prosecutorial discretion, not to bring.
David Applebaum:
And we're closely with commissioners and other senior staff to make those decisions and really enjoyed it. After about six and a half years, I wanted to return to the private sector. And now I'm very happy to be with the whole Jones Day team. We're representing a lot of different energy companies in a wide range of areas from energy trading to natural gas producers to shippers and really helping them, of course, defending them in government investigations, which is a core aspect of what we do, but also working with companies to address compliance problems, hopefully before they reach the government and structure transactions and trades to mitigate enforcement risk.
Dave Dalton:
You've joined the firm in an interesting time to say the least they're keeping you busy. I'm imagining.
David Applebaum:
Yes. For sure. Absolutely. There's a lot going on and happy to be in the mix.
Dave Dalton:
Where are you from? Where was law school? Where'd you grow up? Are you an east coast person or more Midwest or where'd you come up?
David Applebaum:
Yeah. East coast person born and raised in northern New Jersey, near New York, always figured I'd spend the rest of my life in New York, which I love, but ended up in law school in Nashville at Vanderbilt. My wife and I also spent about five years in Minnesota, which was wonderful. And now I'm back in DC, but in fact, our family's moving to Houston where I'll be working out of the Houston office, which is not a bad place to be for an energy lawyer. So I'm excited about that too.
Dave Dalton:
All right. Well, David, thanks for being here today and it's certainly welcome to the firm. All right, let's jump right into this. We're going to talk about the energy sector and derivatives markets. So let's go to Josh for a second. Josh, talk about that relationship, I guess, at a very high level, how do people in the energy sector use derivatives?
Joshua Sterling:
Thanks for that Dave and glad to be here. And for a third time, and talking with David today, the connection between the energy and derivatives markets is quite deep. Like any asset class, if you think of energy as an asset or power, there are risks involved in it, price risk, delivery risk, all manner of things.
Dave Dalton:
Right.
Joshua Sterling:
And so you can hedge those risks in the derivatives markets with futures options or swaps.
Dave Dalton:
Okay.
Joshua Sterling:
And the other side of the market for those who hedge their risks are those that seek returns from trading. And so the two-sided market for derivatives in energy is not unlike the two-sided market for derivatives in any other kind of underlying asset class. You have the producers, the users, the consumers, if you will. And then you have on the other side, people basically seeking a financial return. So it's used pretty extensively by energy companies for hedging purposes. And frankly they trade to seek returns as well, depending upon the overall activities of the business.
Dave Dalton:
Okay. Back to David Applebaum for a second, when it comes to energy and maybe as it relates to derivatives and we'll drill down on that in a second, but what are the regulatory agencies involved? You mentioned FERC, right? So tell us a little about that.
David Applebaum:
Yeah. Well, there's a lot of different regulatory agencies involved in energy. On the derivative side, no question that CFTC is the real main regulator and they're the one with the most responsibility and authority, but FERC gets involved in quote on quote regulating derivatives in a sense through enforcement cases, particularly market manipulation cases, because there's a common scheme that the government agencies, both FERC and the CFTC have identified where you could be trading physical, natural gas that says is something that FERC would regulate in some respects of trying to influence an index or benchmark price because you have a derivative traded on a CFTC exchange that you're trying to benefit. And so you could quickly get into a scenario where both FERC and CFTC are looking at a particular enforcement issue from similar sides, but not exactly the same sides other than derivatives FERC has a very comprehensive role in all sorts of other aspects of regulating energy from approving electric market mergers and acquisitions, overseeing the nation's power markets, the rules governing reliability of electrical grid and a whole bunch of other things.
Dave Dalton:
Okay. So pretty broad influence and oversight there for certain. Okay. So it looks like we're talking primarily about the CFTC and FERC. How has the jurisdiction split between these agencies and what are the potential overlaps? Let's go to David first, then back to Josh.
David Applebaum:
One area, probably the main area of overlap is on the enforcement and manipulation side. As I mentioned that actually there've been some tensions over the years where they've quieted down a little bit when the CFTC has thought that FERC's enforcement authority, intruded too much into the CFTC's exclusive authority to regulate derivatives exchanges. So that has caused some tension over the years, but it's died down. But basically the two agencies have similar roles, particularly in looking at natural gas market manipulation. But I would say outside of the enforcement context, there really isn't all that much overlap. Both agencies are crucial to energy companies across the board, but FERC does a lot of things that the CFTC really doesn't touch and vice versa. And I don't think you find too many instances in which the agencies are working together or working at cross purposes outside of the enforcement context. I wonder if Josh has the same view.
Dave Dalton:
Sure. Josh, anything to add.
Joshua Sterling:
I think that's right. I do think there is a degree of overlap in terms of enforcement. I would say that it's certainly in the derivatives markets to CFTC. It feels like it has the whip hand. And I think it does. I do know we've seen cases along these lines recently where the CFTC has looked at manipulation in the markets for the actual commodities. The CFTC does have enforcement powers over actual commodities trading, not just derivatives based on commodities. And so that could get into areas. Let's say of energy where FERC might also have jurisdiction, but again, that's more so for enforcement. I would also note that I think it was back in 2013, a number of the basically energy markets throughout the country.
Joshua Sterling:
And David will know these acronyms much better than I, the RTOs and the ISOs petitioned the CFTC for relief from a number of the rural requirements the CFTC was applying at that time to derivatives trading and swaps trading as a result of Dodd-Frank and that petition was granted. And so the CFTC agreed to, in response to that petition take a big step back from potentially getting involved more in the substance of regulating those markets themselves of certain transactions looked like or were in fact in certain swaps, which is a very broad definition in the commodities laws. And so I sort of view that as a conscious decision, not to get into those areas where I believe and not just because David's my partner now. FERC and certainly state regulators have the expertise and the lead.
David Applebaum:
Josh, just to chime in, you'll find this funny because we may have talked about it. But when I was at FERC at that time, I was part of the team that wrote comment letters in support of the CFTC, granting that exemption, somewhat concerned that the CFTC would intrude more than it ended up having done.
Joshua Sterling:
Well. I'm glad that my old agency listened to you.
Dave Dalton:
See, and who says people can't get along in Washington. I love hearing stuff like this. I'm going to go into the weeds a little bit and forgive me. But David, a couple of moments ago, you were talking about market manipulation, natural gas, I believe it was. This probably enough fodder for a whole other program, but could you give us a brief description of what that is and how that works? I think I know, but I probably know just enough to be dangerous. So could you talk about that for a second?
David Applebaum:
It's a constantly changing topic and they're close cases and they're hard cases at sort of an easier case could just be some sort of deliberate fraud to enter transaction that wasn't a real transaction where someone's sort of lying and cheating. Those are the easy cases, what gets more attention are the harder cases. And there are probably two main categories. I'll try not to get too much into the weeds, but one is price manipulation, actually trying to move an index price that affects a lot of different companies.
David Applebaum:
And the CFTC has a long history of working on those cases and sort of newer to FERC, but about both FERC and the CFTC, get involved in a policing intentional efforts to move prices outside of market fundamentals. Another category of manipulation that FERC focuses on a lot, probably the best way to think about it is coming from the Enron saga. Wait way back when, where the idea was that there were some trading strategies that maybe didn't break specific regulations, but nonetheless were seen to be unlawful attempts to get around the rules and avoid regulations in a way that the agency thought was fraudulent and manipulative. And so FERC now spends a lot of time investigating those type of schemes.
Dave Dalton:
Okay. Lots to cover. Certainly moving along a few minutes ago, one of you mentioned state regulators and the role they might have in some of these enforcements and regulatory actions talk about state versus federal issues in that jurisdiction. David, do you have a take on that?
David Applebaum:
Yeah, sure. Another big and important and sometimes messy topic, I would say on the enforcement side, it's actually pretty straightforward for manipulations and other violations of the wholesale market rules, kind of the power grids throughout the country or for rules like the electric reliability of the grid. It's pretty well established that that's FERC's job and not the state's job, but no question that it states through public utility commissions and state AGS can bring investigations in cases for what they might deem to be retail type fraud. But that wholesale retail jurisdiction divide exist in is often fairly easy to understand where it gets muddier is outside of the enforcement context sometimes exactly where the state and federal governments, regulatory interest in certain energy resources and energy products overlap, or where the federal power act ends and begins and where state level authorities begin and end can be a tough issue that the commission actually spends a fair amount of time trying to work through.
Dave Dalton:
Sure. I know from talking to people here at the firm, Jones Day just launched a state attorney's general practice earlier this year. We interviewed some of the lawyers working in that practice and we did a podcast. We did a couple of videos and so forth, and I was amazed. We were talking about energy in particular, but just across the board activist posture, almost of state AGs that has kind of moved forward in the last couple of decades. It's certainly something to consider and be aware that it's out there. So again, apologies for the slight digression there, but I wasn't surprised at all to hear you explain it that way, David.
David Applebaum:
No, I'll just say that's a great group. I have a feeling for larger energy cases. I'll have lots of opportunities to work with them.
Dave Dalton:
Yeah. They're not slowing down, that's for certain. That's a great group. Let's talk about cooperation and coordination. When would agencies like FERC and CFTC work together in enforcement cases to Josh first?
Joshua Sterling:
Yeah. Sure Dave and I would add as well, fun fact on state AGs, they have authority in the commodity exchange act to bring cases themselves. And there was an action last year where CFTC incoordination with 30 state AGs brought a settled action against the commodity trading shop out west. And there could certainly be more of that, but onto your point about cooperation and coordination.
Dave Dalton:
Sure.
Joshua Sterling:
I think that in a scenario where there is potential manipulation in an energy market, at a power market within (Inaudible), let's say then you're likely going to have a concern about manipulation or other inappropriate trading in related derivatives contracts. The reason is, is that the price for something in a cash market and the price for something in a derivatives market at the same underlying is supposed to converge. And there can be efforts to frustrate that and make a profit.
Joshua Sterling:
And you usually see people taking positions in both markets if they're really intending to manipulate because there's another opportunity for profit. And so I think in those scenarios, I'd like to think that if FERC is pursuing some manipulative claim in a market and it happens to be a market where there are derivatives contracts on the same power or energy that CFTC, or at least the derivatives exchange, the CFTC regulates will be clued in and can begin pursuing the same thing because CFTC has different expertise and different powers than FERC. And although I don't think they were designed to be complimentary in many respects. I think they turn out to work that way.
Dave Dalton:
Is there a formal process CFTC hears about something or thinks, okay, we might have an infraction here. Is there a formal process you go through when you file with FERC and you let them know you're on this, or you just pick up the phone and call somebody, how does that actually go down?
Joshua Sterling:
Well, Dave, I do know that there's a great degree of coordination amongst the staffs of both agencies. And I think that in reality, a lot of that is, as you say, picking up the phone, including someone in, so that's been my experience of it.
Dave Dalton:
Let's talk about recent cases, significant cases that maybe this audience, these listeners might want to hear about. Is there anything breaking recently in terms of a case that might provide insight in terms of enforcement trends? This is to both of you, we'll go to David first, anything catch your eye in terms of recent matter that this indicative of what they're tracking.
David Applebaum:
Yeah. I'd say it's been a busy time for FERC enforcement. FERC enforcement and the last administration was lower by every metric. But over the past few months it's picked up and there are three new significant litigated enforcement proceedings just brought within the past few months, which is somewhat uncommon. I mean, most of the cases that are broader announced to the public, through a settlement. So to have three new litigated proceedings for FERC is a big deal. You don't have time to get into all of them, but I think I'll point out two of them just generally because they reflect trends that I think are likely to continue. One concerns, a pipeline company's compliance with its quote certificate unquote, which is basically the FERC order that governs how you're supposed to construct the pipeline and the kind of activities you're supposed to be involved in during construction.
David Applebaum:
And there's a new case about this and there've been several recently and it says to me very clearly that the FERC, the commission has made a considered effort to try to get the office of enforcement involved in bringing cases for violations of these infrastructure certificates. Whereas for many years they had not done so. So, that's something to watch. Another important area to watch is that there's a new, the alleged violation of electric reliability rules that involves the largest proposed fine against a single company for an electric reliability violation. And while FERC enforcement has been involved in electric reliability violation cases for some time, I would say it's been pretty quiet recently. And so now there's this big new case that a lot of people are paying attention to. And so there's a lot going on at the agency right now, and what's going to happen with these cases and more over the next six months to a year are really worth paying attention to.
Dave Dalton:
Josh. Anything you'd add there or anything catching your eye in terms of trends?
Joshua Sterling:
Sure. Well, I would say that in the energy space so far, nothing of the CFTC has really caught my eye. I would say though, in a related fashion, the continued focus of the CFTC on I'll call it over the counter trading, meaning not on the exchanges and actual commodities, whether it's a digital asset like Bitcoin or more traditional assets, things you would actually think of as commodities that have been the subject of some cases recently, do have me thinking about this? So it might not be that those cases are going to involve a FERC regulated market, but the CFTC is clearly showing an interest in bringing cases alongside the DOJ on different theories, based on misconduct in the physical I'll call it physical commodities markets. So I sort of see an expansive view of that. So it wouldn't surprise me to continue to see more of those cases. In fact, some companies have disclosed or at least it's been reported that they're under investigation, even though the case hasn't been settled or been taken to trial in court yet. So I would expect to see more of that coming down the pike.
Dave Dalton:
We recorded a podcast several weeks ago about CFTC in the DOJ in terms of cooperation and enforcement and so forth. And we'll link to that with this podcast. All right, let's move on to this. You guys sent me some notes when I was preparing for this program. I was so glad you brought this up big news story from earlier this year, winter storm Uri. I think that's how it's pronounced, struck the US and parts of Canada back in February. Now I'm going to read this. So I get it right. This storm lasted 11 days brought winds of up to 80 miles an hour, dropped 26 inches of snow in some places 176 people died. And this is believed to be the cost of this winter storm ever damage is estimated just under $200 billion, but what caught a lot of attention was the fact that it shut down the Texas power grid. And this was not a little bit controversial. David, what are some of the issues FERC, state regulators and the CFTC even could be considering after an event like that? What's this bring about potentially?
David Applebaum:
Important topic with lots of dimensions that I'll say it's even as bad as you describe it and accurately so it was even potentially worse with the grid potentially being down for even a lot longer. And that was avoided. But this event touches the whole energy industry, really from the grid operator to transmission operators, to generators, to traders, to pipeline companies, to producers, they're all part of a pretty complex system that ensures that the energy is there and working and gets to the people. And isn't interrupted for more than a short amount of time, which clearly did not happen here. And what FERC is doing along with an entity, sorry for the acronym. You can't avoid it when you're talking about FERC, but with NERC, which is the North American Electrical Liability Corporation that has sort of day-to-day responsibility over the reliability of the grid, okay, they're in the middle of an intensive inquiry.
David Applebaum:
It's not an investigation, but it's an inquiry to find out what happened and report that publicly. And FERC, NERC have done that for other weather events. And it looks like this particular report will come out later in the summer. Now you ask what's worth considering looking at in the past, these kinds of inquiries have made recommendations about best practices and ideas for potential changes over time, but they've not come down strongly and saying, we need to change the law. We need to change this regulation. We need more regulations here. And the question is whether this event and this report that a lot of people are going to pay attention to causes policy makers at FERC and the state side in Congress to decide whether they want to not just have new guidelines, but actually new regulations. So, everyone's going to be paying close attention to that.
Dave Dalton:
Very high profile. All right, let's talk national politics for a second, new administration. David, what do you see as enforcement or priorities in terms of rulemaking for FERC and the CFTC in the Biden administration in the area of energy as issues pertain to the energy sector?
David Applebaum:
Well, I definitely see increased enforcement on the market manipulation side on the electric reliability side, on the infrastructure side, as I was talking about earlier. The new chairman Richard Glick has made that clear that he thinks there should be more enforcement. He actually publicly described the commission under the previous administration is going AWOL on enforcement, which is strong language from a commissioner and a chairman.
David Applebaum:
So there's going to be more enforcement. And we've already seen that in the past six months. And I think that's going to continue for years to come for other areas like rulemakings in policy. There's a lot going on right now. And I think one thing to pay attention to both on FERC's side. And then Josh, I hope will chime in on the CFTC side is just climate change and what role that plays in FERC policies. And rulemakings, it's a complex story for FERC and ultimately FERC doesn't decide what type of a generation mix there's going to be in the country.
David Applebaum:
Those are state level decisions and corporate decisions, FERC isn't going to impose carbon trading. It doesn't have that kind of authority, but it does have the authority and arguably responsibility to try to figure out how to integrate new state and other policies into the regulatory systems so that they work efficiently on the grid and in power markets. So FERC is thinking through its role and what it can do, what it can't do, what it should do with respect to climate change. And I think again, chairman Glick has made it clear that that's something he's interested in.
Dave Dalton:
Absolutely. And Josh do pick up on that if you can, a little bit, because we've talked climate change a little bit. And so your previous podcast is this relates to energy and so forth. Where's the CFTC that you think coming from?
Joshua Sterling:
Yeah, absolutely. So still in a bit of a holding pattern at the CFTC in the sense that there's an acting chairman and there are currently only four commissioners and we're waiting for a permanent chair and another commissioner to come on board. No action on that yet. So it's a little hard to say, but what we do know, and we have talked about this before, is the CFTC has formed a climate risk unit and the composition of that client risk unit is yet to be publicly announced. I got word that that could come soon, but I expect that they're taking events like the storm in Texas and thinking about the implications for the derivatives markets and market participants that are financial services companies, banks, brokerages and how they should be focusing themselves to make sure that the markets can work and the traders can trade in the event of not only climate events, but sort of an overall perceived change in the climate, which could make liquidity more dear in certain contexts.
Joshua Sterling:
And I could go on and on about that, but I won't. So I think in terms of the focus, I do think climate will be a lead area focus, certainly at the executive order that was issued. I know the firm just released a white paper on it, regarding climate is significant. The CFTC is part of the financial stability oversight council. The FSOC will indeed be involved in those conversations. So I would say for now, as it pertains to energy and the agenda, it's definitely going to be climate driven at the CFTC. And I think if there were discreet lessons to be learned coming out of the Texas storm situation, I do know that the CFTC was looking into that as well. That might influence some policy thinking on how those contracts that relate to of how our market work. But it's too early to tell. So I guess to sum that up very quickly, we don't have a new full-time chairman yet, but it sure seems like it's going to be climate focused.
Dave Dalton:
Sure. In fact, that's a nice segue because I want to wrap up this conversation with short chat and we've touched on it a little bit, but new administration, it's still new, Biden's administration's been in the saddle since January, but how should energy companies and other market participants prepare for the changing enforcement and regulatory landscape under a Biden administration? And I think, again, you both alluded to a little bit, but is there anything you'd like to leave listeners with in terms of here's what's likely to happen in the next three, four years, David start with you, please.
David Applebaum:
There's going to be more surveillance inquiries in market manipulation investigation cases, as we've talked about on the FERC side, I don't think there's any question of that. And in terms of preparation, really, it comes down to good compliance practices. And we work a lot with clients on that. I don't just handle investigations, but working with lots of other folks at Jones Day, kind of vetting compliance programs, making suggestions of helping companies to build up their compliance programs. Obviously you do that in part because you want to avoid any risks, but even if you can't avoid all risks, that's just too much to ask. If you can identify potential concerns in energy trading or energy transactions early on, because you've built up the right system, you can mitigate the impact of enforcement actions, and then you can be best situated to go to FERC or frankly, other government agencies and explain to them why the good compliance program had existed even if it didn't catch this one particular issue is worthy of credit.
David Applebaum:
And really a lot of government agencies, FERC, CFTC, SEC, various components of DOJ have been writing compliance guidance and giving speeches on compliance over the past five to 10 years increasingly. So with more specific detailed guidance, and you can use that to help work with clients, to try to build a compliance program that will show the agency that you really were trying to avoid violations. And so I think that's something that companies had been doing for a long time, but they should continue to do so, and maybe even potentially increase their efforts in this time of more enforcement.
Dave Dalton:
That sounds like a heavy lift to me, the compliance program, dealing with things like this and the energy sector is so complicated to begin with. You go in and you start from scratch with a client or are they kind of halfway there? And there are things could be doing this better. Or this is sort of an obvious thing. Where do you fit into all that? We're starting from the beginning and going, or do you make adjustments to what they might already have in place David?
David Applebaum:
For large sophisticated established companies, you're definitely not starting from scratch. Good clients have long appreciated the need that they have to have a good, strong, robust compliance programs. But one, there are always areas of improvement. Two, there could be new business lines, three, there could be new people coming into the organization. And four, there could just be recognition that perhaps FERC enforcement is getting into certain areas that maybe hasn't in the past, like the infrastructure certificate compliance that I talked about that might cause you to take the good program you already have, but expand it to new areas if that's where the government is going.
Dave Dalton:
Certainly. All right, let's close up with this. Josh. Anything else we got to talk about in terms of where the Biden administration is going?
Joshua Sterling:
I agree with David that we anticipate a significant uptick in enforcement as well, coming off what was in many respects, a record year in fiscal 20 for CFTC enforcement, not that fiscal 19 was in any means light. We recently put out a white paper, Brian Rabbit, and I did talking about combined parallel proceedings by the DOJ and CFTC in that vein, we made recommendations that companies could look at to try and improve their compliance programs to get ahead of the curve and to position themselves, to take advantage of policies, the DOJ and the CFTC have about giving credit for self-reporting, cooperating in an investigation, and then remediating and that's agnostic as to what the underlying market is. So those lessons would apply to any problems that our firm has encountered in the energy markets to energy derivatives markets. And I'm sure there's a lot of common ground between those policy frameworks perhaps what FERC looks at.
Joshua Sterling:
And certainly that would be true or DOJ ever involved in something where FERC was involved as well. And so I think it's a great time sort of take a hard look at your compliance programs, recognizing they're going to be put under pressure and make sure importantly that there is really good internal cooperation between compliance and the business. Neither is siloed from each other. They understand what each does. They work towards common solutions. And then by displaying a good respect for partnership with compliance. What can happen is that a person who might otherwise be inclined to pick up the phone and call the agencies whistleblower hotline and try and get a credit for being a whistleblower financial credit.
Joshua Sterling:
If you feel like you're being taken seriously inside the building, you might not do that. You still might because there's significant financial rewards for whistleblowing. But a lot of times whistleblowers have said that they go outside the building or company to blow the whistle when they feel like they're just not being heard-
Dave Dalton:
Really.
Joshua Sterling:
So because tips, complaints and referrals are a huge driver of enforcement cases. Don't cut your nose off to spite your face when you're spending money on compliance. And when you're driving the message that compliance really should be taken seriously by the business and vice versa. All those things will serve companies well, whether it's in a sort of a pure FERC space, pure CFTC space or where they overlap as they often do.
Dave Dalton:
Well. Good. Hey, we will leave it right there. David, Josh, thanks so much for being here today. We'll talk again soon.
Joshua Sterling:
Thanks so much.
David Applebaum:
Thank you.
Joshua Sterling:
You can find complete biographies and contact information for Josh Sterling and David Applebaum at JonesDay.com for additional and timely content. Check out our insights page. You'll find podcasts, publications, videos, blogs, newsletters, and more, and be sure to subscribe to Jones Day Talks, apple podcast or wherever you get your podcasts. It's free Jones Day talks is produced by Tom Kondilas as always we appreciate your listening. I'm Dave Dalton. We'll talk to you next time.
Speaker 5:
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