[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]


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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 143


Adjustment of Civil Monetary Penalties for Inflation

AGENCY: Commodity Futures Trading Commission.

ACTION: Final rule.

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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
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    \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.
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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
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    \4\  7 U.S.C. 9, 13a and 13a-1.
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    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.
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    \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.
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    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.
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    \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.
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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.
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    \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.
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    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.
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    \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).
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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