[Federal Register Volume 69, Number 168 (Tuesday, August 31, 2004)]
[Rules and Regulations]
[Pages 52993-52995]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-19754]


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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 143

RIN 3038-AC13


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 its rule 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 (CMPs) 
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, 2004.

FOR FURTHER INFORMATION CONTACT: Daniel A. Nathan, Chief, Office of 
Cooperative Enforcement, Division of Enforcement, at (202) 418-5314 or 
[email protected]; Terry S. Arbit, Associate General Counsel, at (202) 
418-5357 or [email protected]; Commodity Futures Trading Commission, 1155 
21st Street, NW., Washington, DC 20581. This document also is available 
at http://www.regulations.gov.

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 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 of 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, Pub. L. 101-410 (1990), and the relevant 
amendments to the FCPIAA contained in the DCIA, Pub. L. 104-134 
(1996), are codified at 28 U.S.C. 2461 note.
    \2\ The 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:
    [A]ny penalty, fine or other sanction that--

(A) 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. 2661 note. The Act provides for CMPs that meet the above 
definition, and are therefore subject to the inflation adjustment, in 
three instances: Sections 6(c), 6b, and 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 in a Commission administrative proceeding 
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, in 
interstate commerce, or for future delivery;
(2) Willfully made 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 the Commission's rules, 
regulations or orders thereunder.

    Penalties may be assessed in a Commission administrative proceeding 
pursuant to Section 6b of the Act, 7 U.S.C. 13a, against: (1) Any 
registered entity \5\ that the Commission finds is not enforcing or has 
not enforced its rules, or (2) any registered entity, or any director, 
officer, agent, or employee of any registered entity, that is violating 
or has violated any of the provisions of the Act or the Commission's 
rules, regulations or orders thereunder.
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    \5\ The Commodity Futures Modernization Act of 2000, Appendix E 
of the Consolidated Appropriations Act of 2000, Pub. L. 106-554, 114 
Stat. 2763 (2000) (CFMA), substituted the term ``registered entity'' 
for the term ``contract market'' throughout the Act, including in 
Section 6b. The CFMA also added a definition of the term 
``registered entity'' in section 1a(29) of the Act, 7 U.S.C. 1a(29) 
of the Act, 7 U.S.C. 1a(29), which includes designated contract 
markets, registered derivatives transaction execution facilities, 
and registered derivatives clearing organizations. The amended Rule 
143.8 includes a technical correction substituting the term 
``registered entity'' for the term ``contract market'' to conform to 
this change in the Act.
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    Penalties may be assessed pursuant to Section 6c of the Act, 7 
U.S.C. 13a-1, against ``any person'' found by ``the proper district 
court of the United States'' 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 formula for determining the cost-of-living adjustment, first 
defined by the FCPIAA, and amended by the DCIA, consists of a four-step 
process.

[[Page 52994]]

    The first step entails determining the inflation adjustment factor. 
This is done by calculating the percentage increase 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.\6\ Accordingly, the 
inflation adjustment factor for the present adjustment equals the 
Consumer Price Index for all-urban consumers published by the 
Department of Labor for June 2003 (i.e., June of the year preceding 
this year), divided by that index for June 2000.\7\
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    \6\ 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://www.bls.gov/data/. Under the Prices and 
Living Conditions Section, select Most Requested Statistics for CPI-
All Urban Consumers (Current Series). Then check the box for CPI for 
U.S. All Items, 1967=100--CUUR0000AA0, and click the Retrieve Data 
button.
    \7\ The Consumer Price Index for all-urban consumers published 
by the Department of Labor for June 2003 was 550.4, and for June 
2000 was 516.5. Therefore, the relevant inflation adjustment factor 
equals 550.4 divided by 516.5 The result is a 6.56 percent increase 
in the CPI between June 2000 and June 2003. Accordingly, our 
inflation adjustment factor is 6.56 percent, or 0.0656 for 
computational purposes.
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    Once the inflation adjustment factor is determined, it is then 
multiplied by the current maximum CMP set forth in Rule 143.8 to 
calculate the raw inflation increase.\8\ This raw inflation increase is 
then rounded according to the guidelines set forth by the FCPIAA.\9\ 
Finally, once the inflation increase has been rounded pursuant to the 
FCPIAA, it is added to the current CMP maximum to obtain the new CMP 
maximum penalty.\10\ As a result, 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 $130,000 or triple the monetary gain to such person for each 
violation, and $625,000 for each such violation when assessed pursuant 
to Section 6b of the Act.
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    \8\ The current CMP maximum listed in Rule 143.8, as amended in 
2000, for purposes of Sections 6(c) and 6c of the Act is $120,000. 
The current CMP maximum for purposes of Section 6b of the Act is 
$575,000.
    Accordingly, the calculations for the raw inflation increase are 
the following:
    Sections 6(c) and 6c: (0.0656 x $120,000) = $7,872
    Section 6b: (0.0656 x $575,000) = $37,720
    \9\ The FCPIAA, as amended by the DCIA, provides in relevant 
part that any increase ``shall be rounded 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.''
    Accordingly, the raw inflation increase for purposes of Sections 
6(c) and 6c of the Act ($7,872) is rounded to $10,000, while the raw 
inflation increase for purposes of Section 6b ($37,720) is rounded 
to $50,000.
    \10\ For purposes of Sections 6(c) and 6c of the Act, the 
rounded inflation increase ($10,000) is added to the current CMP 
maximum ($120,000), totaling $130,000. For purposes of Section 6b of 
the Act, the rounded inflation increase ($50,000) is added to the 
current CMP maximum ($575,000), totaling $625,000.
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    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.'' \11\ 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, 2004.
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    \11\ 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. Notice Requirement

    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.\12\ The Commission 
also believes that opportunity for public comment is unnecessary under 
5 U.S.C. 553(b)(3)(B). This amendment does not effect any substantive 
change in Commission rules, 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 amendment. This change is undertaken pursuant to a 
statutory requirement that all agencies make such adjustments and is 
intended to prevent inflation from eroding the deterrent effect of 
CMPs.
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    \12\ U.S.C. 553(b) generally requires notice of proposed 
rulemaking to be published in the Federal Register. That provision 
states, however, that ``[e]xcept when notice or hearing is required 
by statute, [notice is not required]--
    (A) [for] 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 amendment 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, as previously noted, the 
rule amendment applies only to violations of the Act or Commission 
rules or orders that occur after the effective date of this amendment.

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 Acting 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 Act or Commission rules or orders may be small 
businesses, the rule does not mandate the imposition of the maximum CMP 
set forth in the rule on any party. As is currently the case, the 
imposition of the maximum 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.\13\
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    \13\ 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. 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 Community 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 Sanction; Penalty Guidelines, [1994-1996 
Transfer Binder] Comm. Fut. L. Rep. (CCH) ] 26,265 (CFTC Nov. 1994).
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    The rule should not increase in real terms the economic burden of 
the 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

[[Page 52995]]

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 amended rule. Therefore, the Commission believes 
that this final rule will not have a significant economic impact on a 
substantial number of small entities.\14\
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    \14\ 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 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 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, connection with their conducting or sponsoring any 
collection of information as defined by the PRA, does not apply to this 
rule. The Commission 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.


0
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. 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

0
1. The authority of citation for part 143 reads 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.


0
2. Section 143.8 is amended by revising paragraph (a) 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 registered entity) 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;
    (ii) For violations committed between October 23, 2000 and October 
22, 2004, not more than the greater of $120,000 or triple the monetary 
gain to such person for each such violation; and
    (iii) For violations committed on or after October 23, 2004, not 
more than the greater of $130,000 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 registered entity 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;
    (ii) For violations committed between October 23, 2000 and October 
22, 2004, not more than the greater of $120,000 or triple the monetary 
gain to such person for each such violation; and
    (iii) For violations committed on or after October 23, 2004, not 
more than the greater of $130,000 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 registered entity or any director, officer, agent, 
or employee of any registered entity 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;
    (ii) For violations committed between October 23, 2000 and October 
22, 2004, not more than $575,000 for each such violation; and
    (iii) For violations committed on or after October 23, 2004, not 
more than $625,000 for each such violation.
* * * * *

    Issued in Washington, DC on August 24, 2004, by the Commission.
Jean A. Webb,
Secretary of the Commission.
[FR Doc. 04-19754 Filed 8-30-04; 8:45 am]
BILLING CODE 6351-01-M