[Federal Register Volume 61, Number 209 (Monday, October 28, 1996)]
[Rules and Regulations]
[Pages 55564-55567]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-27557]
=======================================================================
-----------------------------------------------------------------------
COMMODITY FUTURES TRADING COMMISSION
17 CFR Part 143
Adjustment of Civil Monetary Penalties for Inflation
AGENCY: Commodity Futures Trading Commission.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Commodity Futures Trading Commission (Commission) is
adopting a new rule, Rule 143.8, which sets forth the maximum,
inflation-adjusted dollar amount for civil monetary penalties
assessable for violations of the Commodity Exchange Act (Act) and
Commission rules. The new rule will implement the Federal Civil
Penalties Inflation Adjustment Act of 1990 as amended by the Debt
Collection Improvement Act of 1996. The Commission is also adopting
amendments to Rule 143.1 to refer to the Federal Civil Penalties
Inflation Adjustment Act of 1990 as amended.
EFFECTIVE DATE: November 27, 1996.
FOR FURTHER INFORMATION CONTACT: Lawrence B. Patent, Associate Chief
Counsel, or Thomas E. Joseph, Attorney/Adviser, Division of Trading and
Markets, Commodity Futures Trading Commission, 1155 21st Street, NW,
Washington, DC 20581. Telephone Number: (202) 418-5450.
SUPPLEMENTARY INFORMATION:
I. Background
The Federal Civil Penalties Inflation Adjustment Act of 1990
(FCPIAA), as amended by the Debt Collection Improvement Act of 1996
(DCIA),1requires the head of each
[[Page 55565]]
agency to adjust by regulation the maximum amount of civil monetary
penalties (CMPs) or, as applicable, the range of minimum and maximum
CMPs, provided by law within the jurisdiction of that Federal agency by
the cost-of-living adjustment defined in the FCPIAA, as amended.2
The CMP maximums must be adjusted not later than a date 180 days after
the date on which the DCIA was enacted, i.e., by October 23, 1996, and
at least once every four years thereafter. Since the purposes for the
inflation adjustments include maintaining the deterrent effect of CMPs
and promoting compliance with the law, the Commission intends to
monitor the effects of inflation on its CMP maximums and adjust them as
needed to implement the requirements and purposes of the FCPIAA.3
---------------------------------------------------------------------------
\1\ The FCPIAA is codified in a note at 28 U.S.C. 2461 note.
The relevant amendments to the FCPIAA contained in the Debt
Collection Improvement Act of 1996, Pub. L. No. 104-134 (1996), will
also be codified at 28 U.S.C. 2461 note.
\2\ Excluded from this requirement is ``any penalty (including
any addition to tax and additional amount) under the Internal
Revenue Code of 1986, the Tariff Act of 1930, the Occupational
Safety and Health Act of 1970 or the Social Security Act.'' 28
U.S.C. 2461 note, as amended by Pub. L. No. 104-134.
Currently, for the relevant CMPs within the Commission's
jurisdiction, the Act provides only for maximum amounts that can be
assessed for each violation of the Act or the regulations
thereunder; the Act does not set forth any minimum penalties.
Therefore, the remainder of this release will refer only to CMP
maximums.
\3\ Specifically, the FCPIAA states:
The purpose of [the FCPIAA] is to establish a mechanism that
shall--
(1) allow for regular adjustment for inflation of civil monetary
penalties;
(2) maintain the deterrent effect of civil monetary penalties
and promote compliance with the law; and
(3) improve the collection by the Federal Government of civil
monetary penalties.
---------------------------------------------------------------------------
II. Relevant Commission CMPs
The inflation adjustment requirement applies to:
any penalty, fine or other sanction that--
(A) (i) Is for a specific monetary amount as provided by Federal
law; or
(ii) Has a maximum amount provided for by Federal law; and
(B) Is assessed or enforced by an agency pursuant to Federal
law; and
(C) Is assessed or enforced pursuant to an administrative
proceeding or a civil action in the Federal courts. 28 U.S.C. 2461
note.
The Act provides for CMPs that meet the above definition, and are
therefore subject to the inflation adjustment, in three sections,
section 6(c) of the Act, section 6b of the Act, and section 6c of the
Act.4
---------------------------------------------------------------------------
\4\ 7 U.S.C. 9, 13a and 13a-1.
---------------------------------------------------------------------------
Penalties may be assessed pursuant to section 6(c) of the Act, 7
U.S.C. 9, against ``any person'' found by the Commission to have:
(1) Engaged in the manipulation of the price of any commodity or
futures contract;
(2) Made willfully a misleading statement or omitted a material
fact in an application or report filed with the Commission; or
(3) Violated any provision of the Act or of the regulations or
orders thereunder.
Penalties may be assessed pursuant to section 6b of the Act, 7
U.S.C. 13a, against any contract market which the Commission finds is
not enforcing or has not enforced its rules, or any contract market, or
any director, officer, agent, or employee of any contract market, that
is violating or has violated any of the provisions of the Act or any of
the rules or orders thereunder.
Penalties may be assessed by ``the proper district court of the
United States or the proper United States court of any territory or
other place subject to the jurisdiction of the United States'' pursuant
to section 6c of the Act, 7 U.S.C. 13a-1, against ``any person found *
* * to have committed any violation (of the provisions of the Act or
any rule, regulation or order thereunder).''
III. Relevant Cost-of-Living Adjustment
The cost-of-living adjustment is defined by the FCPIAA, as amended
by the DCIA, as the amount by which the Consumer Price Index for the
month of June of the calendar year preceding the adjustment exceeds the
Consumer Price Index 5 for the month of June of the calendar year
in which the amount of such civil monetary penalty was last set or
adjusted pursuant to law. The adjusted CMP maximums are to be rounded
based upon the size of the penalty and a specified formula. Further, in
no case may the initial adjustment to a CMP maximum undertaken pursuant
to these requirements exceed ten percent of such CMP maximum.
---------------------------------------------------------------------------
\5\ The Consumer Price Index means the Consumer Price Index for
all-urban consumers (CPI-U) published by the Department of Labor.
Interested parties may find the relevant Consumer Price Index over
the Internet. Go to the Consumer Price Index Home Page at http://
stats.bls.gov/cpihome.htm; first select, Most Requested Series; then
select Consumer Price Index-All Urban Consumers, and finally select,
US ALL ITEMS-1967=100-CUUROOOOAAO.
---------------------------------------------------------------------------
Congress last amended all relevant CMP maximums in the Futures
Trading Practices Act of 1992, Pub. L. No. 102-546, 106 Stat. 3590
(1992).6 Therefore, the cost-of-living adjustment for the CMP
maximums that can be assessed and enforced by the Commission would be
the amount by which the Consumer Price Index for all-urban consumers
published by the Department of Labor for June, 1995 (i.e., June of the
year preceding this year) exceeds that index for June, 1992.7
After rounding according to the applicable formula,8 the maximum,
inflation-adjusted CMP for each violation of the Act or Commission
rules assessed against any person pursuant to Sections 6(c) and 6c of
the Act will be $110,000 or triple the monetary gain to such person for
each such violation, and $550,000 for each such violation when assessed
pursuant to section 6b of the Act. For each of these CMP maximums, the
inflation adjustment will not exceed the ten percent limit imposed by
law upon the initial inflation adjustment. The FCPIAA provides that
``any increase under (FCPIAA) in a civil monetary penalty shall apply
only to violations which occur after the date the increase takes
effect.'' Thus, the new CMP maximums may be applied only to violations
of the Act that occur after the effective date of this rule.
---------------------------------------------------------------------------
\6\ The Futures Trading Practices Act of 1992 amended Section
6(c) of the Act ``by striking `$100,000' * * * and inserting `the
higher of $100,000 or triple the monetary gain to such person';''
amended Section 6b of the Act ``by striking `$100,000' * * * and
inserting `$500,000';'' and added to Section 6c of the Act the
relevant subsection allowing the Commission to seek a CMP in a civil
court action and setting forth the maximum penalty that could be
sought thereunder.
\7\ The Consumer Price Index for all-urban consumers published
by the Department of Labor for June, 1995 was 456.7, and for June,
1992 was 419.9. Therefore, the relevant cost of living adjustment
factor would equal 456.7 divided by 419.9.
\8\ The FCPIAA as amended by DCIA provides in relevant part for
the rounding of any inflation adjustment ``to the nearest--
* * *
(4) multiple of $5,000 in the case of penalties greater than
$10,000 but less than or equal to $100,000; * * *
(6) multiple of $25,000 in the case of penalties greater than
$200,000.''
Calculations of the Commission's inflation-adjusted CMP maximums
are the following:
(456.7/419.9) x $100,000 = $108,763.99
(456.7/419.9) x $500,000 = $543,819.96
When rounded according to the statutory requirements, the
inflation-adjusted CMP maximums would be $110,000 and $550,000.
---------------------------------------------------------------------------
IV. Related Matters
A. Effective Date
Adoption of Rule 143.8 would implement a statutory change regarding
agency procedure or practice within the meaning of 5 U.S.C.
553(b)(3)(A) and therefore does not require notice.9 The
[[Page 55566]]
Commission also believes that opportunity for public comment is also
unnecessary under 5 U.S.C. 553(b)(3)(B). The new rule does not effect
any substantive change in Commission regulations, nor alter any
obligation that a party has under Commission rules. No party must
change its manner of doing business, either with the public or the
Commission, to comply with the rule change. The new rule alters current
Commission practice by adjusting the maximum CMP, based on a formula
set out in the FCPIAA, which may be sought or imposed by the Commission
in an enforcement proceeding, and by setting forth a requirement that
the Commission adjust relevant CMP maximums for inflation at least once
every four years. These changes are undertaken pursuant to a statutory
requirement that all agencies make such adjustments and is intended to
prevent inflation from eroding the practical, deterrent effect of CMPs.
---------------------------------------------------------------------------
\9\ 5 U.S.C. 553(b) generally requires notice of proposed
rulemaking to be published in the Federal Register. That provision
states, however, that except when notice or hearing is required by
statute, notice is not required for:
(A) * * * interpretative rules, general statements of policy,
or rules of agency organization, procedure or practice; or (B) when
the agency for good cause finds (and incorporates the finding and a
brief statement of reasons therefor in the rules issued) that notice
and public procedure thereon are impracticable, unnecessary or
contrary to the public interest.
---------------------------------------------------------------------------
While the new higher maximum CMPs may expose persons to potentially
higher financial liability, in nominal terms, for violations of the Act
or Commission rules or orders, the new rule does not require that the
maximum penalty be imposed on any party. Nor does it alter any
substantive due process rights that a party has in an administrative
proceeding or a court of law that protect against imposition of
excessive penalties. Further, the new rule only applies to violations
of the Act, Commission rules or Commission orders that occur after the
effective date of this rule. Accordingly, persons who are currently not
in compliance with the provisions of the Act and Commission rules will
have sufficient opportunity to consider the extent to which this change
affects their potential liability for such violations and to take
action to alter their behavior.
B. Regulatory Flexibility Act
The Regulatory Flexibility Act, 5 U.S.C. 601 et seq., requires that
agencies consider the impact of their rules on small businesses. The
rule will potentially affect those persons who are found by the
Commission or the Federal courts to have violated the Act or Commission
rules or orders. Some of these affected parties could be small
businesses. Nevertheless, the Chairperson, on behalf of the Commission,
certifies that this rule will not have a significant economic impact on
a substantial number of small entities.
While the Commission recognizes that certain persons fined for
violating the Act or Commission rules or orders may be small
businesses, the rule does not mandate the imposition of the maximum
fixed CMP set forth in the rule on any party. As is currently the case,
the imposition of the maximum fixed CMP will occur only where the
administrative law judge, the Commission or a federal court finds that
the gravity of the offense warrants such a fine.10 Nor should the
rule increase in real terms the economic burden of the fixed maximum
CMPs set forth in the Act. Instead, the rule implements a statutory
requirement that agencies adjust for inflation existing CMPs so that
the real economic value of such penalties, and therefore the
Congressionally-intended deterrent effect of such CMPs, is not reduced
over time by inflation. Nor does the rule impose any new, affirmative
duty on any party or change any existing requirements and thus no party
who is currently complying with the Act and Commission regulations will
incur any expense in order to comply with the new rule. Therefore, the
Commission believes that this final rule will not have a significant
economic impact on a substantial number of small entities.
---------------------------------------------------------------------------
\10\ Section 6(e) of the Act, 7 U.S.C. 9a(1), directs the
Commission to ``consider the appropriateness of [a] penalty to the
gravity of the violation'' when assessing a CMP pursuant to section
6(c) of the Act, 7 U.S.C. 9. In addition, the Commission's penalty
guidelines state that the Commission when assessing any CMP will
consider the gravity of the offense in question. In assessing the
gravity of an offense, the Commission may consider such factors as
whether the violations resulted in harm to the victims, whether the
violations involved core provisions of the Act and whether the
violator acted intentionally or willfully, as well as other factors.
See, CFTC Policy Statement Relating to the Commission's Authority to
Impose Civil Monetary Penalties and Futures Self-Regulatory
Organizations' Authority to Impose Sanctions; Penalty Guidelines,
Comm. Fut. L. Rep. [Current Transfer Binder] para. 26,265 (November
1994).
---------------------------------------------------------------------------
C. Paperwork Reduction Act
Neither this rule nor the group of rules of which it is a part has
a burden within the meaning and intent of the Paperwork Reduction Act
of 1980, 44 U.S.C. 3501 et seq.
List of Subjects in 17 CFR Part 143
Civil monetary penalty, Claims.
In consideration of the foregoing and pursuant to authority
contained in sections 6(c), 6b and 6c of the Act, 7 U.S.C. 9, 13a, and
13a-1(d), and 28 U.S.C. 2461 note as amended by Pub. L. No. 104-134,
the Commission hereby amends part 143 of chapter I of title 17 of the
Code of Federal Regulations as follows:
PART 143--COLLECTION OF CLAIMS OWED THE UNITED STATES ARISING FROM
ACTIVITIES UNDER THE COMMISSION'S JURISDICTION
1. The authority citation for Part 143 is revised to read as
follows:
Authority: 7 U.S.C. 9 and 15, 9a, 12a(5), 13a, 13a-1(d) and
13(a); 31 U.S.C. 3701-3719; 28 U.S.C. 2461 note.
2. Section 143.1 is revised to read as follows:
Sec. 143.1 Purpose.
This part implements the Federal Claims Collection Act, as amended
by the Debt Collection Act, 31 U.S.C. 3701-3719, and interpreted by the
Department of Justice and General Accounting Office in the Federal
Claims Collection Standards (4 CFR parts 101-105), and the Federal
Civil Penalties Inflation Adjustment Act of 1990 as amended by the Debt
Collection Improvement Act of 1996. This part provides procedures which
the Commission will use to collect claims owed the United States
arising from activities under the Commission's jurisdiction, including
amounts due the United States from fees, fines, civil penalties,
damages, interest and other sources. This part further sets forth
procedures for the Commission to determine and collect interest,
penalties, and administrative costs on unpaid claims and to refer
unpaid claims for litigation. This part also sets forth the maximum
inflation-adjusted civil monetary penalties that may be assessed and
enforced against persons for violations of the Commodity Exchange Act
or regulations thereunder.
3. Section 143.8 is added to read as follows:
Sec. 143.8 Inflation-adjusted civil monetary penalties.
(a) Unless otherwise amended by an act of Congress, the inflation-
adjusted maximum civil monetary penalty for each violation of the
Commodity Exchange Act or the rules promulgated thereunder that may be
assessed or enforced by the Commission under the Commodity Exchange Act
pursuant to an administrative proceeding or a civil action in Federal
court will be:
(1) For each violation for which a civil monetary penalty is
assessed against any person (other than a contract market) pursuant to
Section 6(c) of the Commodity Exchange Act, 7 U.S.C. 9, not more than
the greater of $110,000 or triple the monetary gain to such person for
each such violation;
(2) For each violation for which a civil monetary penalty is
assessed against any contract market or other person pursuant to
Section 6c of the
[[Page 55567]]
Commodity Exchange Act, 7 U.S.C. 13a-1, not more than the greater of
$110,000 or triple the monetary gain to such person for each such
violation; and
(3) For each violation for which a civil monetary penalty is
assessed against any contract market or any director, officer, agent,
or employee of any contract market pursuant to section 6b of the
Commodity Exchange Act, 7 U.S.C. 13a, not more than $550,000.
(b) The Commission will adjust for inflation the maximum penalties
set forth in this section at least once every four years.
(c) Unless otherwise amended by an act of Congress, the penalties
set forth in this rule or any penalty adjusted for inflation in the
future pursuant to paragraph (b) of this section shall be applicable
only to violations of the Commodity Exchange Act, Commission rules, or
Commission orders which occur after November 27, 1996 or the date on
which such future inflation adjustments become effective, as
applicable.
Issued in Washington, DC, on October 21, 1996, by the
Commission.
Jean A. Webb,
Secretary of the Commission.
[FR Doc. 96-27557 Filed 10-25-96; 8:45 am]
BILLING CODE 6351-01-P