[Federal Register Volume 81, Number 123 (Monday, June 27, 2016)]
[Rules and Regulations]
[Pages 41435-41438]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-15078]


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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 143

RIN 3038-AE45


Adjustment of Civil Monetary Penalties for Inflation

AGENCY: Commodity Futures Trading Commission.

ACTION: Interim final rule.

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SUMMARY: The Commodity Futures Trading Commission (Commission) is 
amending its rule that 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 (CEA) and 
Commission rules, regulations and orders thereunder. The rule, as 
amended, implements the Federal Civil Penalties Inflation Adjustment 
Act of 1990, as amended.

DATES: Effective Date: This interim final rule is effective August 1, 
2016.

FOR FURTHER INFORMATION CONTACT: Edward J. Riccobene, Associate Chief 
Counsel, Division of Enforcement, at (202) 418-5327 or 
[email protected], Commodity Futures Trading Commission, 1155 21st 
Street NW., Washington, DC 20581.

SUPPLEMENTARY INFORMATION: 

I. Background

    The Federal Civil Penalties Inflation Adjustment Act of 1990 
(FCPIAA) \1\ requires the head of each Federal agency to periodically 
adjust for inflation the minimum and maximum amount of CMPs provided by 
law within the jurisdiction of that agency.\2\ On November 2, 2015, the 
President signed into law the Federal Civil Penalties Inflation 
Adjustment Act Improvements Act of 2015 (the 2015 Act),\3\ which 
further amended the FCPIAA to improve the effectiveness of civil 
monetary penalties and to maintain their deterrent effect. The 2015 Act 
requires agencies to: (1) Adjust the level of civil monetary penalties 
with an initial ``catch-up'' adjustment through an interim final 
rulemaking; and (2) make subsequent annual adjustments for 
inflation.\4\ Agencies are required to publish interim final rules with 
the initial penalty adjustment amounts by July 1, 2016, and the new 
penalty levels must take effect no later than August 1, 2016.\5\
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    \1\ The FCPIAA, Public Law 101-410 (1990), as amended, is 
codified at 28 U.S.C. 2461 note. The FCPIAA states that the purpose 
of the act is to establish a mechanism that (1) allows for regular 
adjustment for inflation of civil monetary penalties; (2) maintains 
the deterrent effect of civil monetary penalties and promote 
compliance with the law; and (3) improves the collection by the 
Federal Government of civil monetary penalties.
    \2\ 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, regulations and orders 
promulgated thereunder; the Act does not set forth any minimum 
penalties. Therefore, the remainder of this release will refer only 
to CMP maximums.
    \3\ See 2015 Act, Public Law 114-74, 129 Stat. 584 (2015), title 
VII, Section 701.
    \4\ Id., Section 701(b). Rule 143.8(b) is amended to reflect the 
change to annual adjustments from ``once every four years.''
    \5\ 2015 Act, Section 701(b).
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II. Commodity Exchange Act Civil Monetary Penalties

    The inflation adjustment requirement applies to any penalty, fine 
or other sanction that (A) is for a specific monetary amount as 
provided by Federal law or has a maximum amount provided for by Federal 
law; (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 CEA provides for CMPs that meet the above definition and are, 
therefore, subject to the inflation adjustment in the following 
instances: Sections 6(c), 6(d), 6b, and 6c of the CEA.\6\
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    \6\ 7 U.S.C. 9, 13a, 13a-1, 13b.
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    Section 6(c) of the CEA,\7\ as adjusted by the FCPIAA,\8\ currently 
sets the maximum CMP that may be imposed by the Commission in an 
administrative proceeding on ``any person (other than a registered 
entity)'' for: (1) Each violation of Section 6(c) of the CEA or any 
other provisions of the Act or of the rules, regulations, or orders of 
the Commission thereunder to the greater of $140,000 or triple the 
monetary gain to the violator; and (2) any manipulation or attempted 
manipulation in violation of Section 6(c) or 9(a)(2) of the CEA to the 
greater of $1,000,000 or triple the monetary gain to the violator.
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    \7\ 7 U.S.C. 9.
    \8\ See 17 CFR 143.8(a)(1).
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    Section 6(d) of the CEA,\9\ as adjusted by the FCPIAA,\10\ 
currently sets the maximum CMP that may be imposed by the Commission in 
an administrative proceeding on ``any person (other than a registered 
entity)'' \11\ for violations of

[[Page 41436]]

the CEA or any other provisions of the CEA or of the rules, 
regulations, or orders of the Commission thereunder to the greater of 
$140,000 or triple the monetary gain to the violator.
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    \9\ 7 U.S.C. 13b.
    \10\ See 17 CFR 143.8(a)(2).
    \11\ The term ``registered entity'' is a defined term under the 
CEA. Section 1a(40) provides that the term ``registered entity'' 
means (A) a board of trade designated as a contract market under 
section 7 of the act; (B) a derivatives clearing organization 
registered under section 7a-1 of the act; (C) a board of trade 
designated as a contract market under section 7b-1 of the act; (D) a 
swap execution facility registered under section 7b-3 of the act; 
(E) a swap data repository registered under section 24a of the act; 
and (F) with respect to a contract that the Commission determines is 
a significant price discovery contract, any electronic trading 
facility on which the contract is executed or traded. 7 U.S.C. 
1a(40).
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    Section 6b of the CEA \12\ provides that the Commission in an 
administrative proceeding may impose a CMP on: (1) Any registered 
entity for not enforcing or has not enforced its rules of government 
made a condition of its designation or registration as set forth in the 
CEA, or (2) any registered entity, or any director, officer, agent, or 
employee of any registered entity, for violations of the CEA or any 
rules, regulations, or orders of the Commission thereunder. For each 
violation for which a CMP is assessed pursuant to Section 6b, the 
current, FCPIAA-adjusted maximum penalty is set at: The greater of 
$1,025,000 or triple the monetary gain to such person for manipulation 
or attempted manipulation in violation of Section 6(c), 6(d), or 
9(a)(2) of the CEA; and the greater of $700,000 or triple the monetary 
gain to such person for all other violations.\13\
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    \12\ 7 U.S.C. 13a.
    \13\ 17 CFR 143.8(a)(3).
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    Section 6c of the CEA \14\ provides that Commission may bring an 
action in 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 and the court may impose on a CMP on 
``any registered entity or other person'' found by the court to have 
committed any violation of any provision of the CEA or any rule, 
regulation, or order thereunder, or is restraining trading in any 
commodity for future delivery or any swap. For each violation for which 
a CMP is assessed pursuant to Section 6c(d), the current, FCPIAA-
adjusted maximum penalty is set at: The greater of $1,000,000 or triple 
the monetary gain to such person for manipulation or attempted 
manipulation in violation of Section 6(c), 6(d), or 9(a)(2) of the CEA; 
and the greater of $140,000 or triple the monetary gain to such person 
for all other violations.\15\
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    \14\ 7 U.S.C. 13a-1.
    \15\ 17 CFR 143.8(a)(2).
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III. Inflation Adjustment for Commodity Exchange Act Civil Monetary 
Penalties

A. Methodology

    The inflation adjustment under the FCPIAA, in the context of the 
CFTC's CMPs, is determined by increasing the maximum penalty by a 
``cost-of-living adjustment,'' rounded to the nearest multiple of 
$1.\16\ For purposes of this initial, catch-up adjustment, the cost-of-
living adjustment means the percentage (if any) for each civil monetary 
penalty by which the Consumer Price Index for the month of October, 
2015 exceeds the Consumer Price Index for all Urban Consumers (CPI-U) 
\17\ for the month of October of the calendar year during which the 
amount of such civil monetary penalty was established or adjusted under 
a provision of law other than the FCPIAA.\18\ The amount of the CMP 
increase is capped at 150 percent of the amount of that civil monetary 
penalty on the date of enactment of the 2015 Act.\19\
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    \16\ FCPIAA Sections 4 and 5.
    \17\ The CPI-U is published by the Department of Labor. 
Interested parties may find the relevant Consumer Price Index on the 
Internet. To access this information, go to the Consumer Price Index 
Home Page at: http://www.bls.gov/cpi/. Under the ``CPI Databases'' 
heading, select ``All Urban Consumers (Current Series)'', ``Top 
Picks.'' Then check the box for ``U.S. All Items, 1967=100 - 
CUUR0000AA0'', and click the ``Retrieve data'' button.
    After this initial catch-up adjustment, subsequent annual 
inflation adjustments will be based on the percent change between 
the October CPI-U preceding the date of the adjustment, and the 
prior year's October CPI-U. FCPIAA Section 4(b)(2).
    \18\ FCPIAA Section 5(b)(2).
    \19\ Id.
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B. Civil Monetary Penalty Adjustments

    Applying the FCPIAA catch-up adjustment methodology results in the 
following amended CMPs:

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                                                                                           Year CMP last    CMP amount      Current CMP
                                                                                            set by law      last set by       amount         Inflation
                    Citation                                   Description                  other than    law other than    (including     adjusted  CMP
                                                                                             under the       under the     prior FCPIAA     amount \2\
                                                                                            FCPIAA \1\        FCPIAA       adjustments)
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Section 6(c) of the CEA, 7 U.S.C. 9............  Prohibition Regarding Manipulation and             2010        $140,000        $140,000        $152,243
                                                  False Information [Other Violation
                                                  (Non-Manipulation)].
Section 6(c) of the CEA, 7 U.S.C. 9............  Prohibition Regarding Manipulation and             2008       1,000,000       1,000,000       1,098,190
                                                  False Information [Manipulation or
                                                  Attempted Manipulation].
Section 6(d) of the CEA, 7 U.S.C. 13b..........  Manipulations or Other Violations;                 2010         140,000         140,000         152,243
                                                  Cease and Desist Orders Against
                                                  Persons Other Than Registered
                                                  Entities; Punishment; Misdemeanor or
                                                  Felony; Separate Offenses.
Section 6b of the CEA, 7 U.S.C. 13a............  Nonenforcement of Rules of Government              1992         500,000         700,000         838,640
                                                  or Other Violations; Cease and Desist
                                                  Orders; Fines and Penalties;
                                                  Imprisonment; Misdemeanor; Separate
                                                  Offenses [Other Violation (Non-
                                                  Manipulation)].
Section 6b of the CEA, 7 U.S.C. 13a............  Nonenforcement of Rules of Government              2008       1,000,000       1,025,000       1,098,190
                                                  or Other Violations; Cease and Desist
                                                  Orders; Fines and Penalties;
                                                  Imprisonment; Misdemeanor; Separate
                                                  Offenses [Manipulation or Attempted
                                                  Manipulation].
Section 6c of the CEA, 7 U.S.C. 13a-1..........  Enjoining or Restraining Violations                1992         100,000         140,000         167,728
                                                  [Other Violation (Non-Manipulation)].

[[Page 41437]]

 
Section 6c of the CEA, 7 U.S.C. 13a-1..........  Enjoining or Restraining Violations                2008       1,000,000       1,025,000       1,098,190
                                                  [Manipulation or Attempted
                                                  Manipulation].
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\1\ Sections 212 and 221 of the Futures Trading Practices Act of 1992, Public Law 102-546, 106 Stat. 3590 (1992), set maximum CMPs for Sections 6b and
  6c of the CEA, 7 U.S.C. 13a, 13a-1, with respect to non-manipulation violations. Section 13103 of the CFTC Reauthorization Act of 2008, Title XIII of
  Public Law 110-234, 122 Stat. 923 (2008), set maximum CMPs for Sections 6(c), 6b and 6c of the CEA, 7 U.S.C. 9, 13a, 13a-1, with respect to
  manipulation violations. Section 753 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Public Law 111-203, 124 Stat. 1376 (2010), set
  maximum CMPs for Sections 6(c) and 6(d) of the CEA, 7 U.S.C. 9, 13b, with respect to non-manipulation violations.
\2\ The catch-up cost-of-living adjustment for CMPs last set by law 1992 is 67.728%. The cost-of-living adjustment for CMPs last set by law 2008 is
  9.819%. The cost-of-living adjustment for CMPs last set by law 2010 is 8.745%.

    The FCPIAA, as amended by the 2015 Act, provides that any increase 
under the FCPIAA in a civil monetary penalty shall apply only to civil 
monetary penalties, including those whose associated violation predated 
such increase, which are assessed after the date the increase takes 
effect.\20\ Thus, the new CMP amounts may be applied only in Commission 
administrative or civil injunctive enforcement proceedings that are 
initiated on or after the effective date of this amendment, August 1, 
2016.\21\
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    \20\ FCPIAA Section 6.
    \21\ Prior to the 2015 Act, the date of the violation determined 
the inflation-adjusted penalty applicable to the violation. 28 
U.S.C. 2461 note, Section 6 (2012) (inflation-adjusted penalty 
increases applied ``only to violations which occur after the date 
the increase takes effect''). Consequently, rule 143.8 as revised 
will continue apply the prior violation date specific penalty amount 
with respect to CFTC enforcement proceedings initiated prior to 
August 1, 2016. Further, the Commission will strike rule 143.8(c), 
which memorialized the prior intent of Congress regarding the 
application of inflation-adjusted penalties, which was amended by 
the 2015 Act.
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IV. Administrative Compliance

A. Notice Requirement

    The notice and comment procedures of 5 U.S.C. 553 do not apply to 
this rulemaking because the Commission is acting herein pursuant to 
statutory language which mandates that the Commission act in a 
nondiscretionary matter. Lake Carriers' Ass'n v. E.P.A., 652 F.3d 1, 10 
(D.C. Cir. 2011).\22\
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    \22\ The Commission has determined that the amendment to rule 
143.8 is exempt from the provisions of the Administrative Procedure 
Act, 5 U.S.C. 553, which generally require notice of proposed 
rulemaking and provide other opportunities for public participation, 
but excludes rules of agency practice, such as those found in part 
143 of the Commission's regulations, and in particular rule 143.8 
being revised herein.
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B. Regulatory Flexibility Act

    The Regulatory Flexibility Act \23\ requires agencies with 
rulemaking authority to consider the impact of certain of their rules 
on small businesses. A regulatory flexibility analysis is only required 
for rule(s) for which the agency publishes a general notice of proposed 
rulemaking pursuant to section 553(b) or any other law. Because the 
Commission is not obligated by section 553(b) or any other law to 
publish a general notice of proposed rulemaking with respect to the 
revisions being made to regulation 143.8, the Commission additionally 
is not obligated to conduct a regulatory flexibility analysis.
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    \23\ 5 U.S.C. 601-612.
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C. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (PRA),\24\ 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. This 
rule amendment does not contain information collection requirements 
that require the approval of the Office of Management and Budget.
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    \24\ 44 U.S.C. 3507(d).
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D. Consideration of Costs and Benefits

    Section 15(a) of the CEA \25\ requires the Commission to consider 
the costs and benefits of its action before issuing a new regulation. 
Section 15(a) further specifies that costs and benefits shall be 
evaluated in light of five broad areas of market and public concern: 
(1) Protection of market participants and the public; (2) efficiency, 
competitiveness, and financial integrity of futures markets; (3) price 
discovery; (4) sound risk management practices; and (5) other public 
interest considerations.
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    \25\ 7 U.S.C. 19(a).
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    The Commission believes that benefits of this rulemaking greatly 
outweigh the costs, if any. As the Commission understands, the 
statutory provisions by which it is making cost-of-living adjustments 
to the CMPs in regulation 143.8 were enacted to ensure that CMPs do not 
lose their deterrence value because of inflation. An analysis of the 
costs and benefits of these adjustments were made before enactment of 
the statutory provisions under which the Commission is operating, and 
limit the discretion of the Commission to the extent that there are no 
regulatory choices the Commission could make that would supersede the 
pre-enactment analysis with respect to the five factors enumerated in 
section 15(a), or any other factors.

List of Subjects in 17 CFR Part 143

    Civil monetary penalties, Claims.

    For the reasons stated in the preamble, the Commodity Futures 
Trading Commission amends 17 CFR part 143 as follows:

PART 143--COLLECTION OF CLAIMS OWED THE UNITED STATES ARISING FROM 
ACTIVITIES UNDER THE COMMISSION'S JURISDICTION

0
1. The authority citation for part 143 is revised to read as follows:

    Authority:  7 U.S.C. 9, 15, 9a, 12a(5), 13a, 13a-1(d), 13(a), 
13b; 31 U.S.C. 3701-3720E; 28 U.S.C. 2461 note.


0
2. Amend Sec.  143.8 as follows:
0
a. Revise paragraphs (a)(1) through (4) and (b); and
0
b. Remove paragraph (c).
    The revisions read as follows:


Sec.  143.8  Inflation-adjusted civil monetary penalties.

    (a) * * *
    (1) For a civil penalty assessed pursuant to Section 6(c) of the 
Commodity Exchange Act, 7 U.S.C. 9, against any person (other than a 
registered entity):
    (i) In an administrative proceeding before the Commission or a 
civil action in Federal court initiated prior to August 1, 2016:
    (A) For manipulation or attempted manipulation violations:
    (1) Committed on or after May 22, 2008, not more than the greater 
of

[[Page 41438]]

$1,000,000 or triple the monetary gain to such person for each such 
violation; and
    (2) [Reserved]
    (B) For all other violations:
    (1) 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;
    (2) 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;
    (3) Committed between October 23, 2004 and October 22, 2008, not 
more than the greater of $130,000 or triple the monetary gain to such 
person for each such violation; and
    (4) Committed on or after October 23, 2008, not more than the 
greater of $140,000 or triple the monetary gain to such person for each 
such violation;
    (ii) In an administrative proceeding before the Commission or a 
civil action in Federal court initiated on or after August 1, 2016:
    (A) For manipulation or attempted manipulation violations, not more 
than the greater of $1,098,190 or triple the monetary gain to such 
person for each such violation; and
    (B) For all other violations:
    (1) Not more than the greater of $152,243 or triple the monetary 
gain to such person for each such violation; and
    (2) [Reserved]
    (2) For a civil monetary penalty assessed pursuant to Section 6(d) 
of the Commodity Exchange Act, 7 U.S.C. 13b, against any person (other 
than a registered entity):
    (i) In an administrative proceeding before the Commission or a 
civil action in Federal court initiated prior to August 1, 2016, for 
violations committed on or after August 15, 2011, not more than the 
greater of $140,000 or triple the monetary gain to such person for each 
such violation; and
    (ii) In an administrative proceeding before the Commission or a 
civil action in Federal court initiated prior or after August 1, 2016, 
not more than the greater of $152,243 or triple the monetary gain to 
such person for each such violation; and
    (3) For a civil monetary penalty assessed pursuant to Section 6b of 
the Commodity Exchange Act, 7 U.S.C. 13a, against any registered entity 
or any director, officer, agent, or employee of any registered entity:
    (i) In an administrative proceeding before the Commission or a 
civil action in Federal court initiated prior to August 1, 2016:
    (A) For manipulation or attempted manipulation violations:
    (1) Committed between May 22, 2008 and August 14, 2011, not more 
than the greater of $1,000,000 or triple the monetary gain to such 
person for each such violation;
    (2) Committed on or after August 15, 2011, not more than the 
greater of $1,025,000 or triple the monetary gain to such person for 
each such violation; and
    (B) For all other violations:
    (1) Committed between November 27, 1996 and October 22, 2000, not 
more than $550,000 for each such violation;
    (2) Committed between October 23, 2000 and October 22, 2004, not 
more than $575,000 for each such violation;
    (3) Committed between October 23, 2004 and October 22, 2008, not 
more than $625,000 for each such violation;
    (4) Committed between October 23, 2008 and October 22, 2012, not 
more than the greater of $675,000 or triple the monetary gain to such 
person for each such violation; and
    (5) Committed on or after October 23, 2012, not more than the 
greater of $700,000 or triple the monetary gain to such person for each 
such violation; and
    (ii) In an administrative proceeding before the Commission or a 
civil action in Federal court initiated on or after August 1, 2016:
    (A) For manipulation or attempted manipulation violations, not more 
than the greater of $1,098,190 or triple the monetary gain to such 
person for each such violation; and
    (B) For all other violations, not more than the greater of $838,640 
or triple the monetary gain to such person for each such violation;
    (4) For a civil monetary penalty assessed pursuant to Section 6c of 
the Commodity Exchange Act, 7 U.S.C. 13a-1, against any registered 
entity or other person:
    (i) In an administrative proceeding before the Commission or a 
civil action in Federal court initiated prior to August 1, 2016:
    (A) For manipulation or attempted manipulation violations:
    (1) Committed between May 22, 2008 and August 14, 2011, not more 
than the greater of $1,000,000 or triple the monetary gain to such 
person for each such violation; and
    (2) Committed on or after August 15, 2011, not more than the 
greater of $1,025,000 or triple the monetary gain to such person for 
each such violation; and
    (B) For all other violations:
    (1) 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;
    (2) 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;
    (3) Committed between October 23, 2004 and October 22, 2008, not 
more than the greater of $130,000 or triple the monetary gain to such 
person for each such violation; and
    (4) Committed on or after October 23, 2008, not more than the 
greater of $140,000 or triple the monetary gain to such person for each 
such violation;
    (ii) In an administrative proceeding before the Commission or a 
civil action in Federal court initiated on or after August 1, 2016:
    (A) For manipulation or attempted manipulation violations, not more 
than the greater of $1,098,190 or triple the monetary gain to such 
person for each such violation; and
    (B) For all other violations, not more than the greater of $167,728 
or triple the monetary gain to such person for each such violation.
    (b) The Commission will adjust for inflation the maximum penalties 
set forth in this section on a yearly basis.

    Issued in Washington, DC, on June 21, 2016, by the Commission.
Christopher J. Kirkpatrick,
Secretary of the Commission.

    Note: The following appendix will not appear in the Code of 
Federal Regulations.

Appendix to Adjustment of Civil Monetary Penalties for Inflation--
Commission Voting Summary

    On this matter, Chairman Massad and Commissioners Bowen and 
Giancarlo voted in the affirmative. No Commissioner voted in the 
negative.

[FR Doc. 2016-15078 Filed 6-24-16; 8:45 am]
 BILLING CODE 6351-01-P