[Federal Register Volume 61, Number 218 (Friday, November 8, 1996)]
[Rules and Regulations]
[Pages 57773-57775]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-28596]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Part 201

[Release Nos. 33-7361; 34-37912; IC-22310; IA-1596]


Adjustments to Civil Monetary Penalty Amounts

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

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SUMMARY: This rule implements the Debt Collection Improvement Act of 
1996, which requires that the Commission adopt a regulation adjusting 
for inflation the maximum amount of civil monetary penalties under the 
Securities Act of 1933, the Securities Exchange Act of 1934, the 
Investment Company Act of 1940 and the Investment Advisers Act of 1940.

EFFECTIVE DATE: December 9, 1996.

FOR FURTHER INFORMATION CONTACT: Richard A. Levine, Senior Special 
Counsel, or Laura Leedy Gansler, Senior Counsel, Office of the General 
Counsel, at (202) 942-0900.

SUPPLEMENTARY INFORMATION: This regulation implements the Debt 
Collection Improvement Act of 1996 (``DCIA'').1 The DCIA amended 
the Federal Civil Penalties Inflation Adjustment Act (``FCPIAA'') 
2 to require that the Commission adopt regulations no later than 
180 days after the enactment of the statute and at least once every 
four years thereafter adjusting for inflation the maximum amount of the 
civil monetary penalties under the statutes administered by the 
Commission.
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    \1\ P.L. 104-134, section 31001(s) (April 26, 1996)
    \2\ 28 U.S.C. 2461 (1990).
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    A civil monetary penalty is defined in relevant part as any 
penalty, fine, or other sanction that: (1) is for a specific amount, or 
has a maximum amount, as provided by federal law; and (2) is assessed 
or enforced by an agency in an administrative proceeding or by federal 
court pursuant to federal law.3 This definition covers the 
monetary penalty provisions contained in the statutes administered by 
the Commission.
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    \3\ Id. at Sec. 3(2).
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    The DCIA requires that the penalties be adjusted by the cost-of-
living adjustment set forth in section 5 of the FCPIAA.4 The cost-
of-living adjustment is defined as the percentage by which the U.S. 
Department of Labor's Consumer Price Index (``CPI'') for the month of 
June of the year preceding the adjustment exceeds the CPI for the

[[Page 57774]]

month of June for the year in which the amount of the penalty was last 
set or adjusted pursuant to law. The adjusted amounts are then rounded 
in accordance with the rounding formula set forth in section 5 of the 
FCPIAA. However, the DCIA imposes a 10% maximum increase for each 
penalty for the first adjustment pursuant thereto.
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    \4\ P.L. 104-134.
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    The Commission administers four statutes which provide for civil 
monetary penalties: the Securities Act of 1933; the Securities Exchange 
Act of 1934; the Investment Company Act of 1940; and the Investment 
Advisers Act of 1940. The last years in which the penalties 
administered by the Commission were adjusted or set were 1936,5 
1988,6 and 1990.7 For each of these years, the required CPI 
adjustment exceeds 10%. Therefore, for this first increase pursuant to 
the DCIA, the Commission is directed by the statute to increase the 
maximum amount of each penalty by 10%.
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    \5\ See 15 U.S.C. 78ff(b)). The CPI for June 1936 was 41.4. The 
CPI for June 1995 was 456.7. Therefore, the cost-of-living 
adjustment factor for penalties set or last amended in 1936 is 
11.031.
    \6\ See 15 U.S.C. 78ff(c)(1)(B), 78ffc(2)(C), 78u-1(a)(3). The 
CPI for June 1988 was 353.5. The CPI for June 1995 was 456.7. 
Therefore, the cost-of-living adjustment factor for penalties set or 
last amended in 1988 is 1.29.
    \7\ See 15 U.S.C. 77t(d); 15 U.S.C. 78u-2, 78u(d)(3); 15 USC 
80a-9(d), 80a-41(e), 80b-3(i), 80b-9(e). The CPI for June 1990 was 
389.1. The CPI for June 1995 was 456.7. Therefore, the cost-of-
living adjustment factor for penalties set or last amended in 1990 
is 1.17.
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    Accordingly, the Commission is adopting an amendment to 17 CFR 201 
to add a new Subpart E increasing by 10% the amount of each civil 
monetary penalty authorized by Securities Act of 1933, the Securities 
Exchange Act of 1934, the Investment Company Act of 1940 and the 
Investment Advisers Act of 1940. The adjustments set forth in the 
amendment apply to violations occurring after the effective date of the 
amendment.
    Because the Commission is required by statute to adjust the civil 
monetary penalties within its jurisdiction by 10%, the Commission finds 
that good cause exists to dispense with public notice and comment 
pursuant to the notice and comment provisions of the Administrative 
Procedure Act (``APA'').8 Specifically, the Commission finds that, 
because the adjustment is mandated by Congress and does not involve the 
exercise of Commission discretion or any policy judgments, public 
notice and comment is unnecessary. Therefore, the provisions of the 
Regulatory Flexibility Act, which apply only when notice and comments 
are required by the APA or other laws, are also not applicable.9
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    \8\ 5 U.S.C. 553(b)(3)(B).
    \9\ See 5 U.S.C. 601-612.
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    This rule does not contain any collection of information 
requirements as defined by the Paperwork Reduction Act of 1995 as 
amended.10 Therefore, Office of Management and Budget review is 
not required.
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    \10\ 44 U.S.C. 3501 et. seq.
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List of Subjects in 17 CFR Part 201

    Administrative practice and procedure, Claims, Confidential 
business information, Equal access to justice, Lawyers, Securities.

    For the reasons set forth in the preamble, part 201, title 17, 
chapter II of the Code of Federal Regulations is amended to read as 
follows:

PART 201--RULES OF PRACTICE

Subpart E--Adjustment of Civil Monetary Penalties

Sec.
201.1001  Adjustment of civil monetary penalties.

Table I to Subpart E--Civil Monetary Penalty Inflation Adjustments

Subpart E--Adjustment of Civil Monetary Penalties

    Authority: Pub. L. 104-134, 110 Stat. 1321.


Sec. 201.1001  Adjustment of civil monetary penalties.

    As required by the Debt Collection Improvement Act of 1996, the 
maximum amounts of all civil monetary penalties under the Securities 
Act of 1933, the Securities Exchange Act of 1934, the Investment 
Company Act of 1940, and the Investment Advisers Act of 1940 are 
adjusted for inflation in accordance with Table I to this subpart. The 
adjustments set forth in Table I apply to violations occurring after 
December 9, 1996.


                       Table 1 To Subpart E.--Civil Monetary Penalty Inflation Adjustments                      
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                                                                         Year                                   
                                                                       penalty       Original        Adjusted   
       U.S. code citation               Civil monetary penalty        amount was     statutory        maximum   
                                             description             last set by      maximum     penalty amount
                                                                         law      penalty amount                
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SECURITIES AND EXCHANGE                                                                                         
 COMMISSION:                                                                                                    
    15 USC 77t(d)...............  FOR NATURAL PERSON...............         1990          $5,000          $5,500
                                  FOR ANY OTHER PERSON.............         1990          50,000          55,000
                                  FOR NATURAL PERSON/FRAUD.........         1990          50,000          55,000
                                  FOR ANY OTHER PERSON/FRAUD.......         1990         250,000         275,000
                                  FOR NATURAL PERSON/SUBSTANTIAL            1990         100,000         110,000
                                   LOSSES OR RISK OF LOSSES TO                                                  
                                   OTHERS.                                                                      
                                  FOR ANY OTHER PERSON/SUBSTANTIAL          1990         500,000         550,000
                                   LOSSES OR RISK OF LOSSES TO                                                  
                                   OTHERS.                                                                      
    15 USC 78ff(b)..............  EXCHANGE ACT/FAILURE TO FILE              1936             100             110
                                   INFORMATION DOCUMENTS, REPORTS.                                              
    15 USC 78ff(c)(1)(B)........  FOREIGN CORRUPT PRACTICES--ANY            1988          10,000          11,000
                                   ISSUER.                                                                      
    15 USC 78ff(c)(2)(C)........  FOREIGN CORRUPT PRACTICES--ANY            1988          10,000          11,000
                                   AGENT OR STOCKHOLDER ACTING ON                                               
                                   BEHALF OF ISSUER.                                                            
    15 USC 78u-1(a)(3)..........  INSIDER TRADING--CONTROLLING              1988       1,000,000       1,100,000
                                   PERSONS.                                                                     
    15 USC 78u-2................  FOR NATURAL PERSON...............         1990           5,000           5,500
                                  FOR ANY OTHER PERSON.............         1990          50,000          55,000
                                  FOR NATURAL PERSON/FRAUD.........         1990          50,000          55,000

[[Page 57775]]

                                                                                                                
                                  FOR ANY OTHER PERSON/FRAUD.......         1990         250,000         275,000
                                  FOR NATURAL PERSON/SUBSTANTIAL            1990         100,000         110,000
                                   LOSSES TO OTHERS/GAINS TO SELF.                                              
                                  FOR ANY OTHER PERSONS/SUBSTANTIAL         1990         500,000         550,000
                                   LOSSES TO OTHERS/GAIN TO SELF.                                               
    15 USC 78u(d)(3)............  FOR NATURAL PERSON...............         1990           5,000           5,000
                                  FOR ANY OTHER PERSON.............         1990          50,000          55,000
                                  FOR NATURAL PERSON/FRAUD.........         1990          50,000          55,000
                                  FOR ANY OTHER PERSON/FRAUD.......         1990         250,000         275,000
                                  FOR NATURAL PERSON/SUBSTANTIAL            1990         100,000         110,000
                                   LOSSES OR RISK OF LOSSES TO                                                  
                                   OTHERS.                                                                      
                                  FOR ANY OTHER PERSON/SUBSTANTIAL          1990         500,000         550,000
                                   LOSSES OR RISK OF LOSSES TO                                                  
                                   OTHERS.                                                                      
    15 USC 80a-9(d).............  FOR NATURAL PERSON...............         1990           5,000           5,500
                                  FOR ANY OTHER PERSON.............         1990          50,000          55,000
                                  FOR NATURAL PERSON/FRAUD.........         1990          50,000          55,000
                                  FOR ANY OTHER PERSON/FRAUD.......         1990         250,000         275,000
                                  FOR NATURAL PERSON/SUBSTANTIAL            1990         100,000         110,000
                                   LOSSES TO OTHERS/GAINS TO SELF.                                              
                                  FOR ANY OTHER PERSON/SUBSTANTIAL          1990         500,000         550,000
                                   LOSSES TO OTHER/GAINS TO SELF.                                               
    15 USC 80a-41(e)............  FOR NATURAL PERSON...............         1990           5,000           5,500
                                  FOR ANY OTHER PERSON.............         1990          50,000          55,000
                                  FOR NATURAL PERSON/FRAUD.........         1990          50,000          55,000
                                  FOR ANY OTHER PERSON/FRAUD.......         1990         250,000         275,000
                                  FOR NATURAL PERSON/SUBSTANTIAL            1990         100,000         110,000
                                   LOSSES OR RISK OF LOSSES TO                                                  
                                   OTHERS.                                                                      
                                  FOR ANY OTHER PERSON/SUBSTANTIAL          1990         500,000         550,000
                                   LOSSES OR RISK OF LOSSES TO                                                  
                                   OTHERS.                                                                      
    15 USC 80b-3(i).............  FOR NATURAL PERSON...............         1990           5,000           5,500
                                  FOR ANY OTHER PERSON.............         1990          50,000          55,000
                                  FOR NATURAL PERSON/FRAUD.........         1990          50,000          55,000
                                  FOR ANY OTHER PERSON/FRAUD.......         1990         250,000         275,000
                                  FOR NATURAL PERSON/SUBSTANTIAL            1990         100,000         110,000
                                   LOSSES TO OTHERS/GAIN TO SELF.                                               
                                  FOR ANY OTHER PERSON/SUBSTANTIAL          1990         500,000         550,000
                                   LOSSES TO OTHERS/GAIN TO SELF.                                               
    15 USC 80b-9(e).............  FOR NATURAL PERSON...............         1990           5,000           5,500
                                  FOR ANY OTHER PERSON.............         1990          50,000          55,000
                                  FOR NATURAL PERSON/FRAUD.........         1990          50,000          55,000
                                  FOR ANY OTHER PERSON/FRAUD.......         1990         250,000         275,000
                                  FOR NATURAL PERSON/SUBSTANTIAL            1990         100,000         110,000
                                   LOSSES OR RISK OF LOSSES TO                                                  
                                   OTHERS.                                                                      
                                  FOR ANY OTHER PERSON/SUBSTANTIAL          1990         500,000         550,000
                                   LOSSES OR RISK OF LOSSES TO                                                  
                                   OTHERS.                                                                      
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    Dated: November 1, 1996.

    By the Commission.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 96-28596 Filed 11-7-96; 8:45 am]
BILLING CODE 8010-01-M