FERC suspends JPMorgan unit's power trading ability

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The regulatory hits keep coming for JPMorgan Chase.

The latest is that the Federal Energy Regulatory Commission (FERC) has slapped a six-month suspension on JPMorgan Chase's energy trading unit's ability to make market-based trades. This comes after the company was found to have "made factual misrepresentations and omitted material information over the course of several months of communications" with the commission and the California Independent System Operator (California ISO), which operates the energy system.

The information was originally requested in connection with bidding activities in the California market. JPMorgan told the media that the case was more about document production than any market misconduct. The bank also says that the FERC action is novel. In fact, it is the first time FERC has issued such a suspension.

The six-month suspension does not take effect until April 1, 2013, to give the market time to react and fulfill various contractual obligations. The bank will not disappear from the market while it is suspended. During this six-month time, JPMorgan Ventures will still be allowed to participate in wholesale electricity markets by either scheduling quantities of energy products without an associated price or by specifying a zero-price in its offer as provided in the pertinent tariffs.

This is yet another indication that FERC means business. It has already hit several banks and energy companies with fines for market abuses. The move against JPMorgan is no doubt intended to send a message to others. The effect on the bottom line at this point is unclear.

For more:
- here's a FT article
- here's a release
- here's the decision

Related articles:
More banks face prosecution for energy manipulation
FERC, Barclays head toward energy market showdown
 

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