What does FERC look for in Self-reporting of Possible Violations?

Summary:

The Commission (FERC) encourages self-reports of possible violations and, in many cases, self-reported violations have resulted in closure of the matter without sanctions. In the cases where self-reports did result in enforcement action, the penalties reflected mitigation credit for the self-reporting that substantially lowered the amount. The FERC Penalty Guidelines emphasize the importance of self-reporting by providing credit that can significantly mitigate penalties if a self-report is made. FERC staff continues to encourage the submission of self-reports and views self-reports as showing a company’s commitment to compliance.

Additional Discussion:

Over the previous five fiscal years (Fiscal Years 2017-2021), FERC staff received approximately 685 self-reports. The vast majority of those self-reports were concluded without further enforcement action because, among several factors, there was no material harm (or the reporting companies already had agreed to remedy any harms), and the companies had taken appropriate corrective measures (including appropriate curative filings), both to remedy the violation and to avoid future violations through enhancements to their compliance programs.

The Commission examines the following factors in determining the credit to be given for self-reporting:

• How did the company uncover the misconduct? Was it through a self-evaluation, internal audit, or internal compliance program? Did the company act immediately when it learned of the misconduct?
• Did the company notify the Commission promptly? Did senior management actively participate and encourage employees to provide information to identify the misconduct?
• Did the company take immediate steps to stop the misconduct? Did it implement or create an adequate response to the misconduct?
• Did the company arrange for individuals with full knowledge of the matter to meet with Commission enforcement staff?
• Did the company present its findings to the Commission and provide all relevant evidence regarding the misconduct, including full disclosure of the scope of the wrongdoing; the identity of all employees involved, including senior executives; the steps taken by the company upon learning of the misconduct; communications among involved employees; documents evidencing the misconduct; and measures taken to remedy the misconduct?

Thorough self-reports are typically in writing and include the following:

• A discussion of all relevant factors from the foregoing list
• Sufficient information for staff to understand the circumstances of how and why the violation occurred
• Whether any harm resulted from the violation and, if so the extent of the harm
• Key personnel involved in the violation
• Steps taken to cure the violation and to prevent any recurrence
• Documents relevant to the matter being reported

Another important aspect of a self-report is the promptness with which it is made. Companies that discover a violation are encouraged to contact Enforcement staff without delay. Prompt notification contributes to mitigation credit and allows staff to provide guidance as to the matters the company should explore and present in its written report. This may result in a more complete self-report and thus a more rapid conclusion to staff's inquiry.