[Federal Register Volume 65, Number 143 (Tuesday, July 25, 2000)]
[Rules and Regulations]
[Pages 45709-45711]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-18728]


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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 143

RIN 3038-AB59


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 
amending Rule 143.8, which governs the maximum amount of civil monetary 
penalties, to adjust for inflation. This rule sets forth the maximum, 
inflation-adjusted dollar amount for civil monetary penalties 
assessable for violations of the Commodity Exchange Act (Act) and 
Commission rules and orders thereunder. The rule, as amended, 
implements the Federal Civil Penalties Inflation Adjustment Act of 
1990, as amended by the Debt Collection Improvement Act of 1996.

EFFECTIVE DATE: October 23, 2000.

FOR FURTHER INFORMATION CONTACT: Lawrence B. Patent, Associate Chief 
Counsel, or Julie R. Windhorn, Law Clerk, 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),\1\ requires the head of each Federal agency to adjust by 
regulation, at least once every four years, the maximum amount of civil 
monetary penalties (CMPs) provided by law within the jurisdiction of 
that agency by the cost-of-living adjustment defined in the FCPIAA, as 
amended.\2\ Because the purposes for the inflation adjustments include 
maintaining the deterrent effect of CMPs and promoting compliance with 
the law, the Commission monitors the impact of inflation on its CMP 
maximums and adjusts 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. 104-134 (1996), are also codified 
at 28 U.S.C. 2461 note. In addition, the Federal Reports Elimination 
Act of 1998, Pub. L. 105-362 (1998), is also codified at 28 U.S.C. 
2461 note. This statute, among other things, eliminated section 6 of 
the FCPIAA, which previously required the President to report 
annually to Congress. This amendment is not relevant to the 
adjustment of CMPs for inflation.
    \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. 104-134.
    DCIA also requires that the range of minimum and maximum CMPs be 
adjusted, if applicable. This is not applicable to the Commission 
because, 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 rules and orders 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 false or 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 rules, 
regulations or orders thereunder.

    Penalties may be assessed pursuant to Section 6b of the Act, 7 
U.S.C. 13a, against: (1) Any contract market that the Commission finds 
is not enforcing or has not enforced its rules; or (2) 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, regulations, 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 any provision 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 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.\5\ The

[[Page 45710]]

adjusted CMP maximums are to be rounded based upon the size of the 
penalty and a specified formula.
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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. To access this information, go to the Consumer Price 
Index Home Page at http://stats.bls.gov/datahome.htm; first select, 
Most Requested Series; then select Overall BLS Most Requested 
Series; and finally, under Price Indexes, select CPI for All Urban 
Consumers (CPI-U) 1967=100 (Unadjusted)--CUUROOOOAAO.
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    The Commission's initial inflation adjustment, reflected in the 
current Rule 143.8, was published in the Federal Register on October 
28, 1996, with an effective date of November 27, 1996.\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 1999 (i.e., June of the year preceding 
this year) exceeds that index for June 1996.\7\ After rounding 
according to the applicable formula,\8\ the maximum, inflation-adjusted 
CMP for each violation of the Act or Commission rules or orders 
thereunder assessed against any person pursuant to sections 6(c) and 6c 
of the Act will be $120,000 or triple the monetary gain to such person 
for each such violation, and $575,000 for each such violation when 
assessed pursuant to section 6b of the Act. 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 maximum may be applied only to violations 
of the Act that occur after the effective date of this amendment, 
October 23, 2000.\9\
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    \6\ 61 FR 55564.
    \7\ The Consumer Price Index for all-urban consumers published 
by the Department of Labor for June 1999 was 497.9, and for June 
1996 was 469.5. Therefore, the relevant cost of living adjustment 
factor would equal 497.9 divided by 469.5.
    \8\ The FCPIAA, as amended by DCIA, provides in relevant part 
for the rounding of any inflation adjustment ``to the nearest--
    (5) multiple of $10,000 in the case of penalties greater than 
$100,000 but less than or equal to $200,000; and
    (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:
    (497.9/469.5) x $110,000=$116,653.89
    (497.9/469.5) x $550,000=$583,269.44
    When rounded according to the statutory requirements, the 
inflation-adjusted CMP maximums would be $120,000 and $575,000.
    \9\ See also Landgraf v. USI Film Products, 511 U.S. 244 (1994) 
(holding that there is a presumption against retroactivity in 
changes to damage remedies or civil penalties in the absence of 
clear statutory language to the contrary).
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IV. Related Matters

A. Effective Date

    This amendment to Rule 143.8 will 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.\10\ The Commission 
also believes that opportunity for public comment is also unnecessary 
under 5 U.S.C. 553(b)(3)(B). This amendment does not affect any 
substantive change in Commission regulations, nor alter any obligation 
that a party has under Commission rules, regulations or orders. No 
party must change its manner of doing business, either with the public 
or the Commission, to comply with the rule amendments. These changes 
are undertaken pursuant to a statutory requirement that all agencies 
make such adjustments and are intended to prevent inflation from 
eroding the practical, deterrent effect of CMPs.
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    \10\ 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) * * * interpretive 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 higher maximum CMPs may expose persons to potentially higher 
financial liability, in nominal terms, for violations of the Act or 
Commission rules or orders thereunder, the rule amendments do not 
require that the maximum penalty be imposed on any party, nor do they 
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 rule amendments only 
apply to violations of the Act, Commission rules or Commission orders 
that occur after the effective date of these amendments.

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 
amended 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 Chairman, 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 assessed a CMP 
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 a CMP in that amount.\11\
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    \11\ 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 Money Penalties and Futures Self-Regulatory 
Organizations' Authority to Impose Sanctions; Penalty Guidelines, 
[1994-1996 Transfer Binder] Comm. Fut. L. Rep. (CCH) para.26,265 
(November 1994).
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    The rule should not 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.\12\
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    \12\ Any agency that regulates the activities of small entities 
must establish a policy or program to reduce and, when appropriate, 
to waive civil penalties for violations of statutory or regulatory 
requirements by small entities. An agency is not required to reduce 
or to waive civil penalties, however, if: (1) An entity has been the 
subject of multiple enforcement actions; (2) an entity's violations 
involve willful or criminal conduct; or (3) the violations involve 
serious health, safety or environmental threats. See Small Business 
Regulatory Enforcement Fairness Act of 1996 (``SBREFA''), Pub. L. 
104-121, Sec. 223, 110 Stat. 862 (March 29, 1996). The Commission 
takes these provisions of SBREFA into account when it considers 
whether to seek or to impose a civil monetary penalty in a 
particular case involving a small entity.
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C. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (PRA), 44 U.S.C. 3507(d), which 
imposes certain requirements on federal agencies, including the 
Commission, in connection with their conducting or sponsoring any 
collection of information as defined by the PRA, does not apply to this 
rule. The Commission

[[Page 45711]]

believes this rule amendment does not contain information collection 
requirements that require the approval of the Office of Management and 
Budget.

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 of 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 143.8 is amended by revising paragraphs (a) and (c) 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 or orders 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:
    (i) For violations committed between November 27, 1996 and October 
22, 2000, not more than the greater of $110,000 or triple the monetary 
gain to such person for each such violation; and
    (ii) For violations committed on or after October 23, 2000, not 
more than the greater of $120,000 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 Commodity Exchange Act, 7 U.S.C. 13a-1:
    (i) For violations committed between November 27, 1996 and October 
22, 2000, not more than the greater of $110,000 or triple the monetary 
gain to such person for each such violation; and
    (ii) For violations committed on or after October 23, 2000, not 
more than the greater of $120,000 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:
    (i) For violations committed between November 27, 1996 and October 
22, 2000, not more than $550,000 for each such violation; and
    (ii) For violations committed on or after October 23, 2000, not 
more than $575,000 for each such violation.
* * * * *
    (c) Unless otherwise amended by an act of Congress, the penalties 
set forth in this section 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 the date on which such future 
inflation adjustments become effective.

    Issued in Washington, DC on July 19, 2000 by the Commission.
Jean A. Webb,
Secretary of the Commission.
[FR Doc. 00-18728 Filed 7-24-00; 8:45 am]
BILLING CODE 6351-01-U