March 15 (Reuters) - A federal court on Friday ruled that the chief regulator for electric power does not have the authority to sanction a trader whose bets helped bring down a billion-dollar hedge fund, invalidating a $30 million fine.
The U.S. Court of Appeals for the District of Columbia Circuit ruled that the Commodity Futures Trading Commission (CFTC) and not the Federal Energy Regulatory Commission (FERC) has the authority to fine Brian Hunter - a key trader with hedge fund Amaranth Advisors LLC when it failed in 2006.
Hunter booked some $6 billion in bad bets on natural gas futures that precipitated the firm’s collapse.
The two federal agencies that police investments in the energy market had each tried to convince the court that they had the right to handle the Hunter case.
The court said that FERC was wrong to fine Hunter $30 million for manipulation of natural gas futures contracts.
The ruling has no bearing on a class-action case that Amaranth settled with investors for about $77 million in 2011, and the CFTC’s $7.5 million settlement with Amaranth two years earlier.
“Manipulation of natural gas futures contracts falls within the CFTC’s exclusive jurisdiction,” the court ruled.
The case was read as a test of the authority of the two watchdogs that have similar powers to prevent fraud in billion-dollar markets where sophisticated trades make operations difficult to police. (Reporting by Patrick Rucker; Editing by Phil Berlowitz)