Money Penalties: Securities and Futures Regulators Collect Many Fines But
Need to Better Use Industrywide Data (Letter Report, 11/02/98,
GAO/GGD-99-8).

The Securities and Exchange Commission (SEC), the Commodity Futures
Trading Commission (CFTC), and securities and futures self-regulatory
organizations levy fines on firms and individuals that have violated
securities and futures laws and regulations and self-regulatory
organizations' rules.  These organizations use fines to remedy current
violations and deter future ones.  This report discusses (1) the extent
to which SEC, CFTC, and self-regulatory organizations collected fines,
(2) the guidance they used to determine fine amounts, and (3) how SEC
and CFTC assess the appropriateness of fines across their respective
industries.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GGD-99-8
     TITLE:  Money Penalties: Securities and Futures Regulators Collect 
             Many Fines But Need to Better Use Industrywide Data
      DATE:  11/02/98
   SUBJECT:  Securities regulation
             Stock exchanges
             Self-regulatory organizations
             Securities fraud
             Commodity futures
             Fines (penalties)

             
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Microsoft Word - vkk01!.PBF MONEY PENALTIES Securities and Futures
Regulators Collect Many Fines But Need to Better Use Industrywide
Data

United States General Accounting Office

GAO Report to Congressional Committees


November 1998 

GAO/GGD-99-8

November 1998   GAO/GGD-99-8

United States General Accounting Office Washington, D. C. 20548

General Government Division

B-275115

Page 1 GAO/GGD-99-8 Fine Imposition and Collection Activities

GAO November 2, 1998 The Honorable Alfonse M. D'Amato Chairman The
Honorable Paul S. Sarbanes Ranking Minority Member Committee on
Banking, Housing, and

Urban Affairs United States Senate

The Honorable Richard G. Lugar Chairman The Honorable Tom Harkin
Ranking Minority Member Committee on Agriculture, Nutrition, and
Forestry United States Senate

The Honorable Thomas J. Bliley, Jr. Chairman The Honorable John D.
Dingell Ranking Minority Member Committee on Commerce House of
Representatives

The Honorable Robert F. Smith Chairman The Honorable Charles W.
Stenholm Ranking Minority Member Committee on Agriculture House of
Representatives

This report provides the results of our review of fine imposition
and collection activities by the Securities and Exchange
Commission (SEC), the Commodity Futures Trading Commission (CFTC),
and securities and futures self- regulatory organizations (SRO). 1
SEC, CFTC, and SROs may levy fines as part of the sanctions they
impose on firms and individuals who have violated securities and
futures laws and regulations and SRO rules. Officials of these
organizations said that they use fines to remedy the

1 SEC and CFTC delegate responsibility to the SROs to enforce
financial and reporting requirements and legal and ethical
standards for SRO members. SROs include the national securities
and futures exchanges, registered securities and futures
associations, registered clearing agencies, and the Municipal
Securities Rulemaking Board. We do not include the latter two
groups in this report.

B-275115 Page 2 GAO/GGD-99-8 Fine Imposition and Collection
Activities

current violation and deter future violations. The objectives of
our selfinitiated review were to determine (1) the extent to which
SEC, CFTC, and SROs collected fines; (2) the guidance they used to
determine fine amounts; and (3) how SEC and CFTC assess the
appropriateness of fines across their respective industries.

SEC, CFTC, and securities and futures SROs collected most of the
over $400 million in fines imposed for disciplinary cases closed
from January 1992 through December 1996. However, the percent of
fine amounts collected and the percent of fines paid in full
varied among these agencies. SEC and CFTC, with federal regulatory
authority, both collected over 80 percent of the total amount of
fines for the cases closed during this period; 92 percent of SEC's
and 60 percent of CFTC's fines for these cases were paid in full.
2 Securities and futures SROs that operate exchanges collected
over 75 percent of the amount of fines for the cases they closed,
except for one futures exchange that had written off two large
fines, which reduced its total amount collected to 54 percent. For
the closed cases we reviewed at all seven exchanges, at least 90
percent of the fines had been paid in full; five exchanges had
over 95 percent paid in full. 3 Exchange members who do not pay
fines risk having the exchange sell their membership, or seats, to
cover the fines.

The National Association of Securities Dealers (NASD) and the
National Futures Association (NFA) collected less than 30 percent
of the amount of fines for the cases they closed. 4 NASD and NFA
fines paid in full totaled 67 percent and 54 percent,
respectively. NASD and NFA do not have the federal regulatory
authority of SEC and CFTC or seats to sell to cover unpaid fines.
NASD and NFA officials told us they recognize that, in some cases,
the fines they impose are not likely to be paid, especially when
the fines are high for such conduct as egregious violations or
repeat violators. Violators may leave the industry either to avoid
the fine or because they are suspended or barred as part of their
sanctions. In either case, the

2 CFTC officials told us that the large difference in fines paid
in full between SEC and CFTC may be attributed to the difference
in the amount of time each has had the authority to impose fines.
SEC has had civil monetary penalty authority only since 1990
(Securities Enforcement Remedies and Penny Stock Reform Act of
1990), but CFTC has had this authority since its inception in
1975. Thus, CFTC had older cases in the inventory of cases closed
during the period 1992 through 1996 than SEC, and these cases had
a greater chance of being written off. According to CFTC
officials, the cases CFTC closed during this period included 45
cases for which the fines had been uncollectible for a number of
years. Excluding these cases would increase the percent of cases
paid in full to over 85 percent.

3 As explained later, although we reviewed all or a representative
sample of cases at six exchanges, we only reviewed judgmentally
selected closed cases at NYMEX. 4 NASD and NFA have disciplinary
authority over all member securities and futures firms,
respectively, and the firms' sales representatives. Results in
Brief

B-275115 Page 3 GAO/GGD-99-8 Fine Imposition and Collection
Activities

officials said fines help remove violators from the industry and
keep them from returning until they pay their fines.

Some SROs did not maintain automated records to document that
their fines were paid. Such documentation could provide an
important internal control to ensure fines are collected and
accounted for.

The extent of guidance for setting fines varied among SEC, CFTC,
and the SROs. SEC and CFTC had statutorily established maximum
fines for civil actions and administrative proceedings. In
addition, CFTC published the factors it considers in setting fines
for use by futures SROs in conjunction with a one- time,
congressionally mandated study of futures industry penalties. All
the securities and futures exchanges had prescribed fine amounts
for minor violations of exchange rules and policies. NASD was the
only SRO that had written guidance specifying ranges of fine
amounts for more serious violations. Despite the differences in
guidance, SEC, CFTC, and SRO officials told us they considered
specific factors in setting fine amounts, which were common to
them all. These factors included the seriousness of the violation,
the number of repeat violations, and the precedent set by similar
cases.

SEC and CFTC reviewed the adequacy of sanctions at their
respective SROs as part of their regular oversight. When they
found inadequate sanctions, including fines, they recommended
actions meant to ensure that future sanctions would be
appropriate. However, each takes a different approach to analyzing
the comparative adequacy of SRO sanctions across their respective
industries.

SEC officials told us that they did not analyze industrywide
sanctions data because such data are not easily quantified and are
not meaningful without additional review. The officials said that
they evaluate the comparative adequacy of SRO sanctions through
their routine inspections and regular meetings with senior SRO
officials. However, our analysis of industrywide sanctions data
for the time period we examined showed large differences in the
average fine amounts and number of cases closed among securities
SROs and among futures SROs. These differences cannot be
specifically explained without further reviewing the data. Such an
analysis could serve to indicate the differences between and among
SRO performance over time and could provide SEC an additional
systematic, fact- based way to assess industrywide sanctions.

In contrast, CFTC maintained data and produced reports that could
be used to analyze industrywide sanctions. For example, CFTC's
reports

B-275115 Page 4 GAO/GGD-99-8 Fine Imposition and Collection
Activities

showed that the difference we found in average fines at the
Chicago Mercantile Exchange (CME) and the Chicago Board of Trade
(CBOT) $5,300 versus $23,800, respectively could be attributed to
three fines at CBOT that were unusually large. CFTC officials told
us that they reviewed industrywide information periodically to
identify patterns or trends that may require further review.
However, they did not document the results of these reviews.

SEC and CFTC are responsible for (1) administering and enforcing
federal securities and futures laws and regulations and (2)
fostering fair and efficient markets for the trading of securities
and futures. Securities and futures laws allow SEC and CFTC to
delegate authority to SROs to regulate and operate the markets in
which securities and futures are traded. SEC and CFTC are
responsible for oversight and regulation of the operations and
activities of their respective securities or futures SROs.
Securities and futures SROs operate designated markets, or
exchanges, for the trading of securities or futures. In addition,
two SROs NASD and NFA are regulatory associations of registered
securities or futures industry professionals and firms. SEC, CFTC,
and the SROs have enforcement and disciplinary programs and
processes for taking actions against violators of federal
securities or futures laws and regulations and applicable SRO
rules. Fines may be imposed as all or part of the sanctions for
these violations.

SEC and CFTC have statutory authority to investigate and prosecute
alleged violations of federal securities and futures laws.
Securities SROs have authority to enforce securities laws,
regulations, and their own rules on their members; futures SROs
have authority to enforce their own rules. Violators may be
subject to a variety of sanctions, including fines. Other
sanctions include censures, injunctive orders, bars or
suspensions, rescissions of illegal contracts, disgorgements, and
restitutions to customers. 5

SEC has the authority to bring actions against violators of
securities laws in federal district courts or through SEC
administrative proceedings. 6 These actions may result in money
penalties, or fines, against the

5 Disgorgement orders require securities and futures law violators
to surrender the profits gained or losses avoided from their
illicit activities. 6 The 1990 amendments to federal securities
laws provided SEC authority to impose civil money penalties under
the Securities Act of 1933, the Securities Exchange Act, the
Investment Company Act of 1940, the Investment Advisors Act of
1940, and the rules of the Municipal Securities Rulemaking Board.
Background

SEC, CFTC, and the SROs Have Statutory Authority to Impose Fines

B-275115 Page 5 GAO/GGD-99-8 Fine Imposition and Collection
Activities

violators. 7 Depending upon the seriousness of the violation and
whether it was committed by an individual or a firm, the fines can
range from $5,500 to $1,100, 000 or up to three times the gross
amount of pecuniary gain from the violation. 8 If the penalty is
not paid within a prescribed time, SEC may request contempt
proceedings in federal district court to compel payment or may
refer the matter directly to the Department of the Treasury for
collection.

Similarly, CFTC is provided authority by the Commodity Exchange
Act (CEA) to discipline violators of the act and CFTC regulations
through civil actions in the federal district courts and through
administrative actions. CEA states that fines resulting from these
actions may be up to $100,000, or triple the monetary gain, for
any person; or up to $500,000 for any contract market (futures
exchange), officer, or employee. Under a 1992 amendment to CEA,
violators are to have their trading privileges automatically
suspended until their fines are paid. CFTC also may initiate
contempt proceedings or may refer unpaid fines to the Attorney
General for collection through actions in federal district court.
CFTC officials told us that they are considering whether to enter
into an agreement with Treasury under which CFTC would refer
unpaid debt to Treasury for collection in accordance with the Debt
Collection Improvement Act of 1996.

Securities and futures laws also provide authority for SROs to
impose fines. Section 6 of the Exchange Act provides authority for
any registered securities exchange, such as the New York Stock
Exchange (NYSE) or the American Stock Exchange (Amex), to impose
fines and other sanctions on members who violate securities laws
and regulations and SRO rules. In addition, section 15A provides
NASD similar authority as a registered securities association.

Futures SROs have authority under CEA to discipline and penalize
members for violations of SRO rules. Sections 5a( a)( 8) and (9)
and 5a( b) of CEA, in part, require futures exchanges, such as
CBOT, CME, or the New York Mercantile Exchange (NYMEX), to enforce
their rules, take appropriate disciplinary actions, and impose
penalties on violators. Similarly, section 17( b)( 8) of CEA
authorizes NFA to appropriately

7 As discussed later, SEC, CFTC, and the SROs may settle a case,
including the fine amount, before the court or administrative
proceeding reaches a final decision. 8 All federal agencies must
adjust civil monetary penalties for inflation as prescribed by
statute (28 U. S. C.  2461).

B-275115 Page 6 GAO/GGD-99-8 Fine Imposition and Collection
Activities

discipline its members, including imposing penalties for
violations of its rules.

SEC and CFTC enforcement actions and disciplinary decisions of all
securities and futures SROs can be appealed. For example, SEC and
CFTC administrative cases can be appealed to the respective
Commission, 9 the federal courts, and ultimately to the Supreme
Court. Securities and futures SRO cases can be appealed to higher
authorities within the SRO; SEC or CFTC, respectively; the federal
courts; and the Supreme Court.

SEC, CFTC, and SROs may impose fines and other sanctions against
violators through their specific enforcement or disciplinary
processes. SEC or CFTC may bring actions in federal court or in
administrative proceedings before an administrative law judge
(ALJ). SRO disciplinary proceedings normally are heard by a
disciplinary committee or hearing panel, which may include SRO
members; a professional hearing officer; or a member of the
public, depending on the SRO. 10

SEC and CFTC enforcement actions may be initiated after
investigations by their respective enforcement staffs of alleged
violations of laws or regulations. Allegations may be identified
from customer complaints; examinations; market surveillance; or
referrals from other federal, state, or foreign agencies. After an
investigation, enforcement staff prepare memorandums to the
commission that include the charges against the alleged violators,
any evidence of violations, and recommendations as to whether
further action should be taken. If the commission decides that a
case warrants further action, it can either file a civil suit
against the alleged violator in the federal district court or
issue a complaint against the alleged violator and order a public
hearing on the matter before an ALJ. If either the court or ALJ
finds a violation of laws and regulations, it can impose
sanctions, including fines, against violators. According to an SEC
official, determining whether a case is referred to the courts or
an ALJ depends largely on the type of sanction staff want to
obtain. For example, a bar from the industry could be obtained
from an ALJ, but only a court could issue an injunctive order.
Many cases are settled before the court or ALJ renders a final
decision when the alleged violator submits a settlement offer
agreeing to sanctions without admitting or denying liability. The
types and amounts of sanctions, including fines, are usually
negotiated

9 Both SEC and CFTC have five- member commissions headed by
chairpersons who are appointed by the President for 5- year terms.
10 Under the Futures Trading Practices Act of 1992, futures SRO
hearing panels must have a nonmember for certain types of
proceedings. How Fines Are Imposed

B-275115 Page 7 GAO/GGD-99-8 Fine Imposition and Collection
Activities

between enforcement staff and the alleged violators. Offers of
settlement are not final until approved by SEC or CFTC.

SRO disciplinary cases usually begin as a result of a customer
complaint, compliance examination, market surveillance activity,
regulatory filings, or even an item reported in the press. SROs
generally have enforcement authority over only their members and
employees. An SRO's enforcement or regulation division is
responsible for investigating and prosecuting disciplinary cases.
The enforcement or regulation division is to investigate possible
violative activity and prepare a memorandum outlining the facts
and evidence found by its investigation. The disciplinary
committee, SRO staff, or other authorizing entity is to review the
matter and decide whether to issue a formal complaint against the
alleged violator. If they issue a complaint, a written statement
of charges is to be sent to the alleged violator to which he or
she may be required to respond in writing, either admitting or
denying each charge. Upon receiving this response, the enforcement
staff is to schedule a hearing before a hearing panel. In the
hearing, the enforcement staff, acting as prosecutor, and the
respondent can present evidence and witnesses. The hearing panel
must then examine the evidence and decide on each charge and the
appropriate sanction. A written statement of the panel's decision
and sanctions is to be sent to the respondent.

SRO disciplinary cases also can be settled with the respondent
agreeing to sanctions without admitting or denying liability. SRO
officials told us that settlements are common and are often
preferred because they enable the SRO to conserve investigative
and legal resources and still remedy violations.

In 1997, SEC approved an NASD proposal that cases be heard by a
hearing panel presided over by a professional hearing officer
assisted by two securities industry professionals, instead of
being heard by members of NASD district business conduct
committees. The hearing panel's decisions may be appealed to
NASD's National Adjudicatory Council (formerly called the National
Business Conduct Committee), SEC, and the federal courts. Also, in
1996, the Chicago Stock Exchange (CHX) proposed to institute a
disciplinary committee structure, which SEC was considering as of
June 1998. Until this proposal is approved, CHX disciplinary
decisions are to be made by its president and can be appealed to
its Executive Committee.

B-275115 Page 8 GAO/GGD-99-8 Fine Imposition and Collection
Activities

Our work focused on the imposition and collection of fines through
the enforcement and disciplinary programs of SEC and CFTC and the
securities and futures SROs. The SROs we reviewed included Amex,
Chicago Board Options Exchange (CBOE), CBOT, CME, CHX, NASD, NFA,
NYMEX, and NYSE. CHX officials told us that CHX and the other
regional securities exchanges delegated their authority to examine
the sales practices of registered broker- dealers to Amex, CBOE,
NASD, or NYSE and administered few disciplinary actions. As a
result, we excluded other regional securities exchanges. We also
excluded some futures exchanges located in New York and those in
Minneapolis, MN; and Kansas City, KS, because they generally
administered few disciplinary actions; or most of their actions
involved minor rules violations. Minor violations included floor
conduct, decorum, and recordkeeping violations that normally do
not undergo disciplinary proceedings. The exchanges generally
referred to these violations as traffic ticket violations, which
are handled through summary proceedings and involve smaller fine
amounts.

We interviewed officials at SEC, CFTC, and the SROs to obtain
information about their enforcement and disciplinary programs and
processes, including their imposition of fines. We obtained copies
of SEC and CFTC regulations, SRO rules, and other documents
regarding their enforcement and disciplinary programs and the
imposition of fines. We also obtained data from SEC, CFTC, and the
SROs on cases closed during the 5- year period January 1992
through December 1996 that included a fine among other
disciplinary actions. Fines collected included cases that were
either paid in full or in part. We used these data to calculate
fine collection rates and other statistics for SEC, CFTC, and the
SROs.

SEC, CFTC, and most of the SROs provided us with databases of
their records of fines administered during the 1992 through 1996
period. One exchange, CBOT, did not maintain its fine collection
records for past years on a computer but provided us with monthly
records on hard copy. We drew a representative sample of 208 CBOT
cases for 1992 through 1996 from a database of SRO disciplinary
cases maintained by CFTC and NFA. We then asked CBOT to provide us
with the amounts of fines collected on these sample cases. Another
exchange, NYMEX, could not provide us summary information on fines
collected from 1992 through 1996 because it did not maintain
records on its fine collection activity apart from individual case
files. Using the CFTC/ NFA database, we drew a representative
sample of NYMEX cases and asked NYMEX officials to provide the
amounts collected. However, they said that it would be very
burdensome for NYMEX to go back to all of the case files to obtain
this information. Therefore, we limited our sample selection to 31
cases from Scope and

Methodology

B-275115 Page 9 GAO/GGD-99-8 Fine Imposition and Collection
Activities

the 1992 through 1996 period and asked NYMEX officials to provide
us case documents and copies of checks so that we could develop
information on NYMEX collection activity. As a result, we could
comment only on the specific NYMEX cases reviewed, which are not
representative of the universe of NYMEX cases for this period.
Amex, CBOT, and NYMEX data also included some records on summary
fines imposed for minor violations that were not provided by other
SROs.

To assess the reliability of the fine collection data that SEC,
CFTC, and the SROs provided, we asked officials at each agency
whether they had application controls in place to supervise data
entry and safeguard the data from unauthorized changes. We also
asked whether they performed data verification and testing.
Although controls varied across the agencies, the level of
controls seemed adequate for our purposes. In addition, we
performed limited testing on SEC, CFTC, and SRO fine collection
data sets. We examined data fields for illegal entries (out- of-
range values) and illogical relationships between fields in the
same data records. We found a number of deficiencies in individual
entries, such as inconsistencies in how violators' names were
spelled, but they were not material to our analysis.

To verify that fines reported as paid actually were paid, and to
further assess the accuracy and completeness of fine collection
data, we obtained copies of checks, deposit statements, or other
documents showing that fines had been paid for a small,
judgmentally selected sample of closed fine cases at each agency.
We selected cases to provide a range of fine amounts. To determine
the reasons for which fines were waived, voided, or written off as
uncollectible, we reviewed a judgmentally selected sample of cases
involving these attributes at each agency where applicable.

To determine the guidance SEC, CFTC, and SROs used in setting
fines for serious violations, we selected judgmental samples of
cases in which the same violator had been fined more than once
during 1992 through 1996. Our samples may not be representative of
all SEC, CFTC, and SRO cases for 1992 through 1996. For the sample
cases, we reviewed complaint documents, investigative memorandums,
decision memorandums, and other case documents.

To determine the extent to which SEC and CFTC assessed the results
of their disciplinary actions, including the fines they imposed,
we interviewed officials at each agency. We also reviewed SEC
inspection reports and CFTC rule reviews.

B-275115 Page 10 GAO/GGD-99-8 Fine Imposition and Collection
Activities

We requested comments on a draft of this report from the Chairman,
SEC; the Chairperson, CFTC; and the heads of the SROs. Their
written and oral comments are discussed near the end of this
letter.

We did our work in accordance with generally accepted government
auditing standards between October 1996 and October 1998. We
performed our work in Washington, D. C.; New York, NY; and
Chicago, IL.

SEC, CFTC, and the SROs collected most of the over $400 million in
fines for cases they closed from 1992 through 1996. The percentage
of total fine amounts collected and the percentage of fines paid
in full were relatively consistent among agencies grouped
according to their authorities to collect fines SEC and CFTC; the
SROs that operate securities and futures exchanges; and the two
remaining SROs, NASD and NFA. SEC and CFTC have federal regulatory
authority to collect fines. Securities and futures exchange
members who do not pay their fines risk having the exchange sell
their membership, or seat, to cover the fine. NASD and NFA have
neither federal regulatory authority nor seats to sell to cover
unpaid fines. NASD and NFA officials said they often impose fines
that they never expect to collect because violators leave the
industry. For the cases we reviewed, most fines reported as paid
actually were paid, and SEC, CFTC, and the SROs took action when
payment was considered unlikely. However, some SROs lacked
automated recordkeeping systems to capture and maintain their fine
collection activity.

As shown in table 1, SEC collected over 80 percent of the total
dollar amount of fines for cases it closed during 1992 through
1996. It collected the full amount of the fine in over 90 percent
of the cases. CFTC collected over 80 percent of the dollar amount
of fines for cases it closed during 1992 through 1996, and 60
percent of the fines were paid in full. The percentage of dollars
CFTC collected was influenced by two cases with fines totaling
$7.25 million that were paid in full. These two fines accounted
for about one- third of the total dollars fined for the period.
CFTC officials told us that CFTC's lower percentage of fines paid
in full may be attributed to the longer time its fines may have
been outstanding. SEC has had civil monetary penalty authority
only since 1990 (Securities Enforcement Remedies and Penny Stock
Reform Act of 1990), but CFTC has had this authority since its
inception in 1975. Thus, CFTC had older cases than SEC in the
inventory of cases closed during the period 1992 through 1996.
These older cases had a greater chance of being written off.

Unlike the SROs, SEC and CFTC may bring enforcement actions in
federal court or institute administrative proceedings before an
ALJ. SEC and SEC, CFTC, and the

SROs Collected Most Fines, but Collection Rates Varied

SEC and CFTC Have Federal Regulatory Authority to Collect Fines

B-275115 Page 11 GAO/GGD-99-8 Fine Imposition and Collection
Activities

CFTC also have the ability to seek court injunctive orders to
impose fines and to collect interest from violators who do not
pay. In addition, SEC and CFTC can refer unpaid fines to the
Treasury Department and the Attorney General for centralized debt
collection.

Federal regulator Number of closed cases

Percent of cases paid in

full Percent of

cases all/ part written off

Total dollar amount of

fines Dollar

amount collected

Percent of dollars collected

SEC 534 92% 8% $258,607,797 $215,163,074 83% CFTC 147 60 a 40
21,883,384 17,763,569 81

a According to CFTC officials, the cases CFTC closed during this
period included 45 cases for which the fines had been
uncollectible for a number of years. Excluding these cases would
increase the percent of cases paid in full to over 85 percent.

Source: GAO analysis of data provided by SEC and CFTC.

Overall, as shown in tables 2 and 3, securities and futures
exchanges generally collected a high percentage of fines during
1992 through 1996. Among the securities exchanges, CHX, NYSE, and
CBOE collected 95 percent or more of the dollar amount of fines on
their closed cases, and Amex collected 75 percent. Amex officials
told us that all of the amounts uncollected were written off
because the cases related to firms or individuals that filed
bankruptcy or that, as a result of not paying the fine, were
permanently barred or suspended from trading at Amex until the
fine is paid. They said the total dollar amount of fines
uncollected included three large fines of $100, 000 each, which
reduced the percentage of dollars collected for Amex. However,
Amex, like the other securities SROs, collected the full amount
for 90 percent or more of its fines.

Exchange Number of closed cases

Percent of cases paid in

full Percent of

cases all/ part written off

Total dollar amount of

fines Dollar

amount collected

Percent of dollars collected

CHX 11 100% 0% $87,350 $87,350 100% NYSE 195 95 5 9, 887,000
9,731,000 98 CBOE 267 90 10 2,629,972 2,487,724 95 Amex 251 93 7
1, 721,501 1,298,788 75

Source: GAO analysis of data provided by each exchange.

As shown in table 3, CME collected 85 percent of the amount of the
fines on its closed cases, but CBOT collected only 54 percent. The
percentage of dollars collected was lower for CBOT because of
large fines that were written off. CBOT considered fines in two
cases totaling $2.25 million to be uncollectible, substantially
reducing the percentage of total dollars collected. Excluding
these two fines, CBOT's collection rate for the dollar

Table 1: Fine Collection Rates for SEC and CFTC for 1992 Through
1996

Securities and Futures SROs that Operate Exchanges Collect a Large
Amount of the Fines They Imposed

Table 2: Fine Collection Rates for NYSE, Amex, CBOE, CHX, 1992
Through 1996

B-275115 Page 12 GAO/GGD-99-8 Fine Imposition and Collection
Activities

amount of fines would have been about 99 percent. We do not show
information on fine amounts for NYMEX because the 31 cases we
reviewed may not be representative of its actual collection
activity. CME, CBOT, and NYMEX each collected the full amount of
96 percent or more of the fines they imposed for the cases we
reviewed.

Exchange Number of closed cases

Percent of cases paid in

full Percent of

cases all/ part written off

Total dollar amount of

fines Dollar

amount collected

Percent of dollars collected

CME 521 96% 4% $2,776,650 $2,366,950 85% CBOT 208 a 97 3 4,
953,800 2,672, 438 54 NYMEX 31 b 97 3 N/ A N/ A N/ A

a Representative sample selected from 477 cases closed from 1992
through 1996. The estimated sampling error is 5 percent at the 95
percent confidence level. b Judgmental, nonrepresentative sample
selected from about 600 cases.

Source: GAO analysis of data provided by the exchange or NFA.

Members of securities and futures exchanges risk losing their
membership and membership privileges, including access to the
exchange trading floor, if they do not pay these fines. 11
Exchange rules generally allow the exchanges to revoke, suspend,
expel, or otherwise terminate and sell a violator's membership if
fines are not paid within the time period allowed. Depending on
the fine amount, the value of the membership, and the proceeds
from its sale, the proceeds can be used to offset unpaid fines. In
addition, CBOE requires members that lease seats to make a $500
deposit that can be applied towards any unpaid fines.

As shown in table 4, collection rates for NASD and NFA were
generally lower than those shown in tables 1, 2, and 3 for SEC,
CFTC, and the exchanges. NASD and NFA officials told us they
recognize that in some cases fines imposed are not likely to be
paid, especially when the fines are high for conduct such as
egregious violations or repeat violators. Violators may leave the
industry either to avoid the fine or because they are suspended or
barred as part of their sanctions. In either case, fines would
help remove violators from the industry and keep them from
returning until they pay their fines. SEC officials told us that
NASD may actually waive a fine unless the respondent attempts to
reenter the industry, and therefore the fine is not actually
collectible except as a reentry fee. Should

11 Exchange officials told us that some seats are leased, and they
would not pursue the seat owner for violations of the lessee.
Therefore, the threat of having the seat sold to pay a fine is not
always available.

Table 3: Fine Collection Rates for CBOT, CME, and NYMEX for 1992
Through 1996

NASD and NFA Officials Said They Never Expected to Collect Many
Fines Imposed

B-275115 Page 13 GAO/GGD-99-8 Fine Imposition and Collection
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the violators apply to reenter the industry, they would first have
to pay any outstanding fines.

NASD collected 24 percent of the total dollar amount of fines on
its closed cases, but 67 percent of the fines collected were paid
in full. Similarly, NFA collected 27 percent of the dollar amount
of fines on its closed cases, but 54 percent of the fines
collected were paid in full. We could not directly verify whether
these lower collection rates were due to fines that NASD and NFA
never expected to collect or other reasons because we could not
(1) identify cases with unpaid fines and disbarments from the data
NFA provided; or (2) electronically identify these data from the
over 4,000 cases NASD provided. However, NASD cases that were not
paid had disproportionately larger fines than its cases that were
paid, an indication that unpaid fines were set at relatively
higher levels. NASD's average dollar amount for cases that were
not paid was about $59,900 compared to $12,500 for cases that were
paid. About 70 percent of the cases that were not paid had fines
of $15,000 or greater; only about 10 percent of the cases that
were paid had a similar level of fines.

We found similar collection results at NFA. For example, NFA
collected 2 of 11 fines that were $100,000 or greater. A CFTC
official told us that if cases involving both an unpaid fine and a
disbarment were excluded from our calculations, NFA's fine
collection rate would be similar to other futures SROs.

Regulatory association Number of

closed cases Percent of

cases paid in full

Percent of cases all/ part

written off Total dollar

amount of fines

Dollar amount collected

Percent of dollars collected

NASD 4,076 67% 33% $113,857,938 $27,068,247 24% NFA a 91 54 46
3,221,050 881,300 27 b

a Data cover cases closed July 1992 through June 1997. b NFA
officials said that NFA's collection rate should be 35 percent.
They said the primary difference in the rates is attributable to
open regulatory fine invoices, which NFA includes as paid and we
excluded. NFA cited one firm that had a $200, 000 regulatory fine
invoice open at June 30, 1997, that we considered uncollected. NFA
reported that it has subsequently collected $155,000 of the fine
and anticipates it will collect the balance.

Source: GAO analysis of data provided by the SROs.

Exchange memberships, or seats, are limited in number and thus
have a monetary value, the loss of which can be used as leverage
to enforce the payment of fines. NASD and NFA memberships are
basically unlimited in number and do not involve seats. Therefore,
they do not have a financial interest that can be sold to pay a
fine. However, NASD and NFA registrations can be suspended or
revoked or their members expelled.

Table 4: Fine Collection Rates for NFA and NASD for 1992 Through
1996

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Once violators lose their membership privileges, they have little
or no incentive to pay their fines. According to an NASD official,
high fines effectively remove violators from the industry because
the violators have no intention of paying such fines to stay in,
or later returning to, the securities industry. An NFA official
stated that violators who fail to pay their fines also tend to
allow their memberships to terminate uncontested.

In an effort to ensure that more fines are paid, NFA has proposed
a rule change that would require respondents who request hearings
on disciplinary charges to post bond, which would be applied
toward the payment of any pending fines. According to CFTC
officials, CFTC staff objected to the proposal because the bond
would be used to secure payment of the fine rather than ensure
appearance at a hearing. Further, the officials said that
respondents could be automatically suspended for failure to post
bond, whether they were guilty or not, which could violate the
respondents' right to due process. As of June 30, 1998, NFA had
not resubmitted the bond proposal to CFTC for its reconsideration.

For the selected cases we reviewed at SEC, CFTC, and the SROs,
most fines reported as paid actually were paid. When SEC, CFTC,
and the SROs determined that collection was unlikely, they took
action to write off, waive, or void fines.

For the selected cases of fines reported as paid (see table 5), we
verified that the amounts actually had been collected. We accepted
as documentation that the fine was paid either a copy of a check
that had been remitted to SEC, CFTC, or an SRO for payment; or
other pertinent documentation, such as a bank deposit slip. We
found that in most cases SEC, CFTC, and SROs had collected the
full amount of the fine assessed. In some cases, SEC and CFTC even
collected amounts that exceeded the assessed fine amount because
of interest payments or disgorgements. For example, three cases at
SEC and one case at CFTC involved amounts collected that exceeded
the fine amounts assessed, each of which involved the payments of
interest or disgorgements. However, 3 futures SROs could not
provide documentation to show fines were paid in 4 of the 46 total
cases we reviewed.

Appropriately documenting that fines are paid provides an
important internal control to ensure that the money is collected
and accounted for. SEC, CFTC, and the SROs

Had Collected Most Fines Reported as Paid and Took Action When
They Considered Collection Unlikely

Selected Fines Reported as Paid Actually Were Paid

B-275115 Page 15 GAO/GGD-99-8 Fine Imposition and Collection
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Although most SROs recorded fine collection activities for past
and current years on computer files, CBOT kept records on a
computer file only for the current year; records for past years
were kept only on hard copy. Amex kept records of its fine
collection activity in a hard copy ledger. Amex responded to our
request for information by incorporating these data into a
computer spreadsheet. NYMEX did not consolidate its records of
fine collection activity but kept records in individual case
files. CHX, which had only 11 disciplinary cases from 1992 through
1996, also had no computerized records.

Table 5 shows the fine amounts reported as paid and the amounts
paid.

Regulator Number of cases reviewed Amount of fines

reported as paid Amount

documented as actually collected

SEC 20 $8,949,768 $8,967,850 a CFTC 20 6,316,000 6,483,442 b
Securities exchange Amex 20 312,500 312,500 CBOE 21 645,246
642,698 c CHX 3 27,000 27,000 NYSE 20 3,748, 500 3,748,500 Futures
exchanges CBOT 19 15,600 14,350 d CME 16 110,600 108,600 e NYMEX
15 6, 700 5,750 f NASD 15 270,998 270,998 NFA 9 267,050 258,550 g
a The amount paid includes $6,728 in interest on two fines and
$11,354 in disgorgements and interest

on another fine. b The amount paid includes (a) $17,000 interest
on a fine of $200, 000, (b) a $300,000 fine that had

doubled to $600,000, and (c) a $150, 000 fine that had not been
paid because it had been vacated on appeal. c The amount paid
includes a $10,948 fine that the violator was paying in
installments. The violator still

owed $2,548. d CBOT could not provide documentation for one fine
of $1, 000 and another of $250.

e CME waived parts of four fines totaling $3,500. CME also
collected $1,500 that had been previously waived. f The amount
collected includes a fine that had been reduced from $1,000 to
$250 on appeal. The

amount paid includes a $500 fine of which only $300 had been paid.
g NFA could not provide documentation for one fine of $7, 500 and
another for $1, 000.

Source: GAO analysis of documents provided by SEC, CFTC, and the
SROs.

When SEC, CFTC, and SROs assess fines, they give violators a
specific time period in which to pay. For settled cases, SEC,
CFTC, and the SROs generally demand payment at settlement. In
cases that are not settled, the time periods to pay fines varied.
SEC said it gives violators 30 days to pay; CFTC officials said
payment dates are subject to negotiation, but they

Table 5: Amount of Fines Reported as Paid and Amount Documented as
Actually Collected for Cases Reviewed

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typically give 10 days to pay. SRO rules prescribe when fines are
due. For example, NYSE gives violators 45 days to pay. Other SROs
give violators from 15 to 30 days to pay. These time frames can be
delayed or suspended when violators request an appeal of the fines
imposed. Also, SEC, CFTC, and some SRO officials told us that when
the situation warrants, they can allow installment plans for
payment.

SEC, CFTC, and the SROs continued to seek collection of unpaid
fines using their own internal collection methods when fines were
not paid within the allotted time frame. 12 They also initiated
other disciplinary actions for the lack of payment, such as
suspensions or temporary expulsions. When they determined that
payment was unlikely, they wrote off, waived, or voided the fines.

For each case we reviewed in which fines had not been paid in
full, the case files documented why the fines could not be
collected. This documentation showed that the primary reasons that
fines were unlikely to be collected were bankruptcy or failure to
locate the respondents. According to an SRO official, most
bankruptcy courts consider SRO fines to be unsecured debt, which
usually has a low priority for payment. This official said fines
owed to SROs in these cases are often discharged by the courts,
making the violators no longer responsible for paying the fines.
The case files also showed other reasons why fines were considered
uncollectible, including that violators had been suspended or
barred from the industry, had their registration revoked, or had
been expelled from membership.

Two SROs, Amex and CME, had voided or waived fines. Amex officials
told us that as a routine recordkeeping practice they void
appealed cases from the Amex database until the appeals process is
completed. Before late 1997, Amex reopened cases under new case
numbers when respondents contested fines. 13 We reviewed 11
randomly selected Amex voided cases and found that 6 of the cases
were contested fine amounts that were assigned new case numbers.
Amex voided two cases because the respondents filed bankruptcy.
Amex voided the remaining three cases because it had mistakenly
fined persons for failure to file specific year- end reports who
were not members of the exchange at that time.

12 A few of the SROs had used professional collection agencies to
collect fines. However, SRO officials said the costs to collect
fines using these agencies were high, and the collection agencies'
success rates were minimal.

13 An Amex official told us that in late 1997, instead of
assigning new file numbers, Amex began to retain the same
identification numbers, adding a letter A designation to indicate
cases had been appealed. Regulators Took Action

When They Considered Payment Unlikely

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CME officials told us that they use waivers mostly for
computerized trade reconstruction (CTR) violations. Waivers
release violators from payment of all or part of their fines, on
the condition that they do not commit the same violation for a
given time period. According to a CME official, CME's rules do not
provide for the use of waivers, but its committees have found
waivers to be an effective compliance mechanism. Waivers are
initiated and granted by a hearing committee on the basis of
violators' presentation of mitigating evidence and their
historical record with the exchange. If the violators have another
violation during this period, the original fines become due and
additional fines can be imposed. CME is to advise CFTC of its
decisions, and the violators are to report the disciplinary action
to NFA. Waivers have worked well for CTR violations, said the
official, because these violations are measurable and can be
monitored by computer. He said that these violations have declined
since 1996.

Securities and futures laws set maximum fines for civil actions
and administrative proceedings, but fines can be higher than these
maximums when they involve many violations or when they are based
on the profits generated by the illegal activity. The courts and
ALJs set fines, with input from agency enforcement staff, after
considering such factors as the seriousness of the violation, the
number of repeat violations, and the precedent set by similar
cases. These factors were generally documented in the SEC and CFTC
case files that we reviewed. All the securities and futures
exchanges had prescribed fine amounts for minor violations of
exchange rules and policies. For more serious violations, one SRO,
NASD, had written guidance that specified ranges of fine amounts.
The factors that officials from the other SROs told us they used
were the same as those that SEC and CFTC considered in setting
fines. At the time of our review, we could not determine the
factors some SROs considered in setting fines for more serious
violations because documentation was not routinely included in
case files. Subsequently, the SROs provided additional
documentation to show the factors they considered in setting fines
for these violations.

The federal securities laws provide maximum penalties in a three-
tiered structure for SEC civil actions and administrative
proceedings to address violations of the laws and regulations. The
principal penalty provisions are Section 20 of the Securities Act,
Sections 21A and 21B of the Exchange Act, Sections 9 and 42 of the
Investment Company Act, and Sections 203 and 209 of the Investment
Advisers Act. In the first tier, the amount of the fine is not to
exceed the greater of $5,500 for a natural person or $55,000 SEC,
CFTC, and

the SROs Have Considered a Variety of Factors in Setting Fines

Maximum Fines Set by Law for SEC and CFTC

B-275115 Page 18 GAO/GGD-99-8 Fine Imposition and Collection
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for any other person, 14 or the gross amount of pecuniary gain to
the defendant as a result of the violation. 15 If the violation
involved fraud, deceit, manipulation, or deliberate or reckless
disregard of a regulatory requirement, the second tier provides
that the amount of the fine is not to exceed the greater of
$55,000 for a natural person or $275,000 for any other person, or
(in civil actions only) the gross amount of pecuniary gain to the
defendant as a result of the violation. If the violation involved
fraud, deceit, manipulation, or deliberate or reckless disregard
of a regulatory requirement and directly or indirectly resulted in
substantial losses or created a significant risk of substantial
losses to other persons or (in administrative proceedings only)
resulted in substantial pecuniary gain to the person who committed
the violation, the third tier provides that the amount of the
penalty is not to exceed the greater of $110,000 for a natural
person or $550,000 for any other person, or (in civil actions
only) the gross amount of pecuniary gain to the defendant as a
result of the violation. The provisions governing the imposition
of fines in a judicial proceeding and an administrative proceeding
are generally the same, with differences relating to the
consideration of pecuniary gain, noted above. Civil penalties for
insider trading violations are defined separately and are not to
exceed three times the amount of the profit gained or loss avoided
by the inside trader. A person who controls an inside trader may
be liable for a penalty not to exceed the greater of $1,100,000 or
three times the amount of the profit gained or loss avoided by the
inside trader.

Section 6 of CEA provides CFTC the authority to impose fines in
administrative proceedings of not more than the higher of $100,000
or triple the monetary gain resulting from the violations. Section
6c provides CFTC the authority to seek penalties of $100,000 or
triple the monetary gain for each violation of the futures laws
and regulations through civil actions in federal district court.
In addition, Section 6b provides CFTC the authority to impose
fines of up to $500,000 for failure of a contract market (an
exchange or board of trade) to enforce its rules or for any
official or employee of a contract market who violates the futures
laws and regulations. 16 In setting a civil penalty, CEA requires
CFTC to consider the appropriateness of the penalty to the gravity
of the violation.

14 As defined in Section 3( a)( 9) of the Exchange Act, the term
person means a natural person, company, government, or political
subdivision, agency, or instrumentality of a government. 15 All
penalties were increased to adjust for inflation as required by
the Debt Collection Improvement Act of 1996. 16 In determining the
amount of the penalty under this section, CFTC must consider the
gravity of the offense and, in the case of a contract market,
whether the amount of the penalty will materially impair the
market's ability to carry on its operations and duties.

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SEC officials told us that courts and ALJs primarily consider the
seriousness of the violation, the number of repeat violations, and
the precedent set by similar cases in setting fines for securities
law violations. In addition, securities laws provide guidance on
factors to consider in setting fines. In administrative
proceedings, the amount of the fine SEC may impose is to be based
upon the level of intent of the violator and a determination that
the fine is in the public interest. In SEC's determination of
whether the imposition of the fine is in the public interest, the
statute provides that it may consider the following: (1) whether
the act or omission involved fraud, deceit, manipulation, or
deliberate or reckless disregard of a regulatory requirement; (2)
the harm to others, resulting either directly or indirectly from
the act or omission; (3) the extent to which any person was
unjustly enriched, taking into account any restitution made to
persons injured by such behavior; (4) previous violations; (5) the
need to deter the defendant and other persons from committing such
acts or omissions; and (6) such other matters as justice may
require. 17 Further, the statute provides that SEC may consider
the respondent's ability to pay on the basis of evidence submitted
by the respondent in determining whether the penalty is in the
public interest. In a civil proceeding, the statute does not
contain the public interest test.

We found documentation in the case files for 12 of 14 judgmentally
selected SEC cases that showed the courts and ALJs used a variety
of these factors to set fines. However, the documentation for each
of the 12 cases showed that the courts and ALJs primarily
considered the violators' illicit financial gain and the precedent
set in other cases to set the fines. For example, one firm was
fined $1. 9 million because SEC established that this was the
amount of the pecuniary gain the firm illicitly obtained from its
customers. In another case, the court fined a large brokerage firm
$850,000. SEC documents showed that the court set the fine at this
level because other brokerage firms had been fined similar amounts
for similar violations. Most of the case files contained
documentation showing that SEC considered the sanction imposed,
including the fine, appropriate to deter repeat violations and to
deter others from committing the same violation.

17 15 U. S. C.  78u- 2( c). Factors SEC Considered in

Setting Fines Were Generally Documented in Case Files Reviewed

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CFTC has identified certain factors that it considers when
determining the amount of a fine. In November 1994, CFTC completed
a study of the futures industry's fines and provided the report to
Congress. 18 In conjunction with this study, CFTC published a
policy statement containing the major factors that have influenced
CFTC in its civil money penalty assessments. These include the
gravity of the offense, financial condition of the violator, and
other considerations. Table 6 lists each major consideration and
its influencing factors. CFTC published this list to provide a
coherent statement of what it considers in setting fines, to
enhance the public's awareness of these considerations, and to
provide insight into the possible future application of such
authority.

Major considerations Influencing factors

Gravity of the offense whether the violation involved fraud,
manipulation, or affected market integrity whether the violator
acted intentionally or willfully whether the violator acted in
concert with others number and duration of violations whether the
violator benefitted from wrongdoing whether the violations
resulted in harm to victims whether the violator attempted to cure
violation, disclosed wrongdoing, or provided restitution Financial
condition net worth of the respondent

business viability Other considerations sanctions imposed in
similar cases

prior misconduct collectibility of the penalties double jeopardy
conservation of CFTC resources Source: CFTC Policy Statement
Relating to Its Authority to Impose Civil Money Penalties and
Futures SROs' Authority to Impose Sanctions, Nov. 1994.

Our review of a judgmental sample of 16 CFTC cases showed that
CFTC followed these guidelines in setting fine amounts. Eleven of
the 16 cases had documentation showing that CFTC considered the
precedent set in similar cases, the violator's net worth, or
various other case circumstances to determine fine amounts. In
most cases, CFTC accepted the alleged violators' offers of
settlement because the agreed- upon fine amounts and other
sanctions were deemed appropriate given the violations and because
the offers were similar to amounts accepted in previous cases. For

18 A Study of CFTC and Futures Self- Regulatory Organization
Penalties, Commodity Futures Trading Commission (Washington, D.
C., November 1994). Factors CFTC Considered

Were Generally Documented in the Case Files Reviewed

Table 6: Factors CFTC Considers in Setting Fines

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example, CFTC fined one large firm $925,000 for various
violations, including failure to properly segregate customer funds
and failure to diligently supervise employees and their trading
activities. CFTC stated that the fine was appropriate because the
violations were more significant than similar violations committed
by another large firm that had previously been fined $725,000.

Securities and futures exchanges have rules that contain specific
fine amounts for violations of exchange rules and policies,
referred to as minor violations. These minor violations include
infractions of reporting, record retention, or floor decorum
requirements. Minor violations are subject to smaller fines and
are not considered serious violations of securities and futures
laws because they do not cause the same financial harm.

The fines for minor violations on securities and futures exchanges
generally ranged from $25 to $5,000, and in exceptional cases may
be as high as $10,000. For example, at Amex individuals violating
recordkeeping requirements are to be fined $500 for the first
violation, $1,000 for the second violation, and $2,500 for
subsequent violations. For member firms, fines for this violation
and its reoccurrence were $1,000, $2,500, and $5,000,
respectively. At CBOT, individuals violating floor conduct rules
could be fined, depending on the activity, from $25 to $500, with
fines increasing for subsequent offenses. CBOT's Floor Conduct
Committee has discretion to increase fines when minor rule
violations are excessively repeated, up to a maximum fine of
$5,000.

NASD was the only SRO that had written guidelines, NASD Sanction
Guidelines, for setting fine amounts for more serious violations.
NASD officials told us that NASD has had these guidelines for over
10 years. The 12 NASD districts are to use these guidelines to
decide appropriate sanctions, including fines, for particular
violations. In May 1993, NASD made the guidelines available to its
members to provide them the fine schedule and information on other
actions to be taken for specific types of violations. NASD revised
these guidelines, effective May 1998.

The old guidelines, which were effective for the cases included in
our review, provided specific fines and other sanctions for 47
securities industry violations. For example, the guidelines
provided fines that ranged from $5,000 to $50,000 for unauthorized
transactions. For the sale of unregistered securities, the
guidelines provided fines ranging from $2, 500 to $50,000. The
actual fine to be imposed generally depended upon several
mitigating or aggravating factors that could increase or decrease
the fine beyond the limits set forth in the guidance. For example,
when NASD Securities and Futures

Exchanges Have Fine Schedules for Minor Violations

NASD Has Written Guidance for Setting Fine Amounts for Serious
Violations

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considered the specific fine amount to set for unauthorized
transactions, it was to evaluate 10 factors, including whether the
violator attempted to conceal the misconduct or repeated the
violation. The objective of the guidelines was to guide the
various district committees in an effort to achieve greater
consistency, uniformity, and fairness when imposing sanctions, not
to prescribe fixed fine amounts or sanctions for particular
securities violations.

NASD's revised guidelines increased maximum fine amounts for some
violations. For example, maximum fines for unauthorized
transactions increased from $50,000 to $75,000. Other maximum fine
amounts, for violations such as the sale of unregistered
securities, remained the same. The new guidelines also grouped
particular violations under 11 summary categories.

We reviewed 19 NASD cases to determine if the fines imposed fell
within the ranges prescribed by NASD guidelines. We found that in
17 of the 19 cases, the fines imposed fell within the range
prescribed. For example, one case involved a broker who had been
fined $50,000 and barred from the securities industry for repeated
unauthorized transactions violations. These are the maximum
sanctions prescribed by the guidelines. In this case, NASD noted
that the two actions imposed will serve to deter any future or
similar conduct by others who may be inclined to engage in similar
violations.

In one case in our sample that fell outside the fine range set by
the guidelines, we found a $225,000 fine that had been imposed
against a broker- dealer for unauthorized transactions and failure
to supervise its employees. The maximum fine amount established
for unauthorized transactions is $50, 000 and $25,000 for the
failure to supervise. NASD's files showed that NASD had noted
various deficiencies in three separate examinations of the broker-
dealer; thus, it had imposed a higher fine than the guideline
amounts. In the other case, we found that NASD imposed a $400,000
fine on a brokerage firm for extensively selling various
securities, including derivatives, which were unsuitable for
clients. The maximum fine for this violation, according to NASD
sanction guidelines, was $50,000. The case file also noted that
the firm lacked written supervisory procedures and failed to
adequately supervise its registered representatives, which had a
maximum fine of $25,000. The case file referred to potential
losses for this firm's customers of about $14 million, which may
have influenced the fine amount, but the case file did not
document a specific reason why the fine exceeded the NASD
prescribed amounts.

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Unlike NASD, other securities and futures SROs do not have
specific written guidance for setting fines for more serious
violations. Officials at these SROs told us that they prefer to
have flexibility when setting fine amounts for violations. The
officials said they set fines on a case- by- case basis, relying
on the recommendations of enforcement attorneys and the discretion
of an ALJ or disciplinary committee, rather than on prescribed
guidelines. They said that they consider a variety of factors to
determine fine amounts, including the type and seriousness of the
violation; the respondent's prior disciplinary history; the
monetary precedent set by other similar or like cases; and the
illicit financial gain, if any.

For the judgmentally selected cases we reviewed at Amex, NYSE,
CBOE, and CHX to determine how they set fines for their more
serious violations, the documentation these SROs initially
provided us did not always show that they considered the factors
listed above. SRO officials told us that in many cases,
particularly involving settlements, the internal discussions that
lead to agreed- upon fine amounts are not documented. Amex, CBOE,
and NYSE officials told us they prepared memorandums for each
case, which provide the basis for the sanctions imposed. The
officials said that the memorandums discuss possible sanctions,
including ranges of fines, the current violation, the violator's
disciplinary history, and precedent set in similar cases. At the
time of our review, Amex, CBOE, and NYSE did not provide us these
memorandums for various reasons, including that they were
contained in the complete case files, which had already been
archived offsite; or that they contained sensitive information.
Subsequently, Amex and NYSE provided sections of these memorandums
that showed the reasons why fines were assessed for the cases not
already documented. CBOE did not prepare these memorandums until
1996 and did not have them for the cases we reviewed.

Of the 16 cases we reviewed at Amex, 13 files had supporting
documentation to show the factors Amex considered when setting
fine amounts. Each of the 13 cases involved Amex Rule 590
violations, which Amex considers minor rule violations. For
example, Amex fined a broker $50 and $300, respectively, for his
first two decorum violations and imposed a $500 fine when he
failed to wear the proper attire a third time. Documentation in
the file showed that Amex considered that the latest violation was
a repeat occurrence. The broker was assessed the highest amount
established by the minor rule violations fines schedule for
decorum violations. The remaining three Amex cases had fine
amounts of $30,000, $50,000, and $200,000 and involved serious
violations of Amex rules or the federal securities laws. Apart
from noting the type and seriousness of the violations, the case
file information we reviewed for Other Securities and

Futures SROs Allow More Flexibility in Setting Fine Amounts

Securities SROs

B-275115 Page 24 GAO/GGD-99-8 Fine Imposition and Collection
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these three cases did not show how Amex arrived at each fine
amount. However, the precedent memorandums that Amex provided us
later showed the reasons why the fines were set, including
precedent set in similar cases and the respondent's disciplinary
history.

All of the 13 cases we reviewed at NYSE were for violations of
securities laws. Six of the 13 cases had documentation to show how
NYSE arrived at the fine amounts set in each case. Subsequently,
NYSE provided precedent memorandums for each case that showed the
reasons why fines were set for the remaining seven cases.
Specifically, NYSE considered the firms' disciplinary history and
precedents set in similar cases to determine the current fine
amounts. For example, one broker- dealer firm was assessed a
$250,000 fine and an undertaking for failing to maintain
appropriate procedures of supervision and for failing to register
its securities representatives and traders. 19 The documentation
in this case file showed that NYSE considered the firm's prior
investigative and disciplinary history, which included a previous
fine of $5,000 for the same violation and the firm's continuing
and repeated failures to comply with previous compliance
stipulations.

Of the 20 case files we reviewed at CBOE, none of the cases
contained documentation to show how CBOE arrived at setting the
fine amounts. The documentation in the case files detailed only
the types of violations and other sanctions imposed, such as
undertakings. For example, as a result of a joint CBOE and NYSE
investigation, one firm had been fined $450,000 for various
securities violations. The case file contained information on the
violation and sanctions imposed, which also included an
undertaking to retain an outside consultant to review and report
on the firm's systems and procedures. CBOE files contained no
documentation to show what factors were considered when the
$450,000 fine was set. CBOE officials told us that since late
1996, they have required each case to have a precedent memorandum
that documents the reasons fines are set.

The three cases we reviewed at CHX did not contain documentation
to show how the exchange set the fines. 20 CHX officials told us
that the files did not contain documentation because CHX cases are
normally concluded after the respondent makes a monetary offer to
settle the case. They said

19 An undertaking is a specific action that the violator is
required to take, such as prepare written supervision procedures.
20 CHX had 12 cases involving fines over the 5- year period we
reviewed. One of these cases was pending and 11 were settled.
Because CHX officials told us that these cases had no
documentation for fine amounts, we reviewed only three to verify
the lack of documentation.

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they accept only settlements that are based on precedent set in
previous cases.

CFTC's policy statement published after its 1994 penalties study
included factors that futures SROs are to consider as guidance in
determining fines. The SRO guidance contains the same factors that
CFTC reported it considers in determining fines (see table 5). The
policy statement also identifies other factors that the SROs
indicated to CFTC that they consider, including the particular
commodity involved or any pending disciplinary actions by CFTC or
another SRO concerning the same offense. It states that these
factors together should guide the SROs in determining the
sanctions to impose on a case- by- case basis. It also suggests
that futures SROs develop criteria consistent with their own
regulatory experience and minimal standards of fairness for the
fines they impose. For the cases we reviewed at CBOT, CME, and
NFA, we found little documentation to show how these SROs set
fines, including whether they considered the factors CFTC
suggested. All nine cases we reviewed at NYMEX included documents
showing the factors considered in setting fines. Also, CME was the
only SRO that had developed additional criteria.

Two of the four cases we reviewed at CBOT had documentation that
showed CBOT explicitly considered the disciplinary history of
respondents to set fines as suggested by CFTC. Other than listing
the type of violation, the factors that CBOT considered in setting
fine amounts for the remaining two cases were not documented.

In addition to CFTC's guidance, CME has rules that list the
sanctions available for major offenses, including a maximum fine
of not more than $250,000. However, CME's rules do not address the
method for determining the dollar amount of fines or for choosing
which sanctions to impose. Only 1 of the 10 case files we reviewed
at CME contained documentation that provided some rationale for
the fine imposed. In that case, CME imposed an automatic fine of
$5,000 on a violator who repeatedly exceeded a trading limit. Upon
review, CME later reduced the fine to $1,000 because the violator
exceeded the limit by only 0.3 percent and took corrective
actions. We could not determine what factors CME considered in the
remaining nine cases.

In each of the nine cases we reviewed at NYMEX, documentation
showed that NYMEX considered the seriousness of the violation and
the disciplinary history of the respondents as suggested by CFTC.
For example, one case involved a member firm that had been fined
$240,000 in 1994 for being undercapitalized. Documentation in the
case file showed Futures SROs

B-275115 Page 26 GAO/GGD-99-8 Fine Imposition and Collection
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that NYMEX considered that the firm had been warned of its
undercapitalization since 1992. The file showed that NYMEX levied
the $240,000 fine because the member firm had failed to notify it
of the firm's continued adverse financial status and also failed
to meet the capital requirements required of NYMEX member firms.

NFA officials told us that they use CFTC guidance to set fines.
Only 6 of the 14 cases we reviewed at NFA had documentation of the
rationale for the fines imposed. For example, the hearing panel
reduced a fine in one case, although the offense was serious and
it was a repeat violation, because the violator had taken
mitigating actions.

Both SEC and CFTC, as part of their regular SRO oversight,
reviewed the adequacy of disciplinary program sanctions and found
some inadequate sanctions. However, each takes a different
approach to analyze the comparative adequacy of SRO sanctions
across their respective industries. SEC officials told us that
they do not analyze industrywide data but instead use the results
of their regular SRO inspections and meetings with senior SRO
officials to assess overall SRO performance. However, analyzing
industrywide data to identify changes in SRO performance over time
could provide SEC an additional systematic, fact- based way to
assess the comparative adequacy of SRO sanctions. In contrast,
CFTC officials told us that they reviewed industrywide sanctions
data periodically to identify patterns or trends in futures SRO
performance that may require further review. However, they said
that CFTC did not document the results of these reviews.

SEC officials told us that they review the disciplinary program of
each securities SRO during their regular oversight inspections.
They said they review a selected sample of cases to identify
patterns of inadequacy in disciplinary sanctions, including fines.
CFTC officials said that they review every disciplinary case
included in their inspection period at each futures SRO during
routine rule enforcement reviews. The reports for the reviews we
examined showed that both agencies found patterns of inadequacy
and recommended actions the SROs could take to improve their
disciplinary programs including preventing future inadequate
sanctions.

For example, 18 of the 19 SEC inspections of SRO enforcement
departments performed in 1995 and 1996 included reviews of the
adequacy of sanctions imposed by Amex, CBOE, NYSE, and 11 NASD
Districts. 21 The

21 During the 2- year period one inspection was completed for
enforcement departments of Amex, NYSE, CBOE, and NASD Districts of
San Francisco (District 1), Los Angeles (District 2), Kansas City
(District 4), Dallas (District 6), Atlanta (District 7), and
Boston (District 11). Two inspections were completed SEC Does Not
Analyze

Fines Industrywide, and CFTC Does Not Document its Industrywide
Analysis

SEC and CFTC Oversight Reviews Found Inadequate Sanctions

B-275115 Page 27 GAO/GGD-99-8 Fine Imposition and Collection
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reports for 11 of the 18 inspections indicated that SEC either
found SRO sanctions to be adequate or found no deficiencies.
Reports for six inspections found some sanctions inadequate and
recommended ways to ensure that future sanctions would be
adequate. One inspection found the SRO improperly accepted an
offer of settlement by a violator who had already ignored the
terms of settlement and denied his guilt. SEC inspection reports
completed on the market surveillance departments at NYSE, Amex,
NASD, CBOE, and the regional exchanges (Boston, Cincinnati,
Chicago, Pacific, and Philadelphia Stock Exchanges) also included
comments on the adequacy of sanctions imposed. For example, in a
1996 inspection report, SEC found that an exchange's sanctions
were inadequate in three cases, and it recommended ways to ensure
that future sanctions would be adequate. SRO officials told us
that they have taken actions to correct the deficiencies SEC
identified in both enforcement and market surveillance
departments.

CFTC reviewed the adequacy of sanctions, including fines, during
at least one rule enforcement review for each of the nine futures
exchanges. 22 CFTC found that fines were adequate at six of the
exchanges and inadequate at one exchange, for which it recommended
ways to improve future fines. Two of the exchanges had no
disciplinary actions. Futures SROs told us that they had taken
action to correct the deficiencies identified.

Apart from these reviews, CFTC officials told us that they also
review all SRO disciplinary action notices filed with CFTC to
evaluate the adequacy of the sanction. If the sanction appeared
inadequate, they said they conduct a further review and may take
action, if necessary. In one case, CFTC reviewed the sanctions
imposed by CBOT at the expiration of the March 1996 wheat futures
contract. CBOT had issued letters of reprimand to six members for
trading after the close of the market. CFTC concluded that (1) the
letters of reprimand were inadequate because they were not
commensurate with the gravity of the violation, and (2) CBOT
failed to follow CFTC guidance on imposing effective penalties.
CBOT responded that the Commission lacked authority under CEA to
institute a review of a CBOT disciplinary proceeding and that the
CBOT disciplinary committee

for NASD Districts of Chicago (District 8), Denver/ Seattle
(District 3a/ 3b), New Orleans (District 5), New York (District
10), and Philadelphia/ Washington, D. C. (District 9). According
to SEC officials, SEC completed one inspection for each regional
exchange during this period.

22 These nine exchanges included the Chicago Board of Trade;
Chicago Mercantile Exchange; Coffee, Sugar, and Cocoa Exchange;
New York Cotton Exchange; Kansas City Board of Trade; New York
Futures Exchange; New York Mercantile Exchange; Minneapolis Grain
Exchange; and the Philadelphia Board of Trade.

B-275115 Page 28 GAO/GGD-99-8 Fine Imposition and Collection
Activities

did consider the CFTC guidance in imposing the penalties. In an
opinion and order issued November 6, 1997, the Commission
concluded that the letters of reprimand issued by CBOT were
inadequate in light of the seriousness of the violations alleged.
CFTC directed CBOT to reopen the proceedings against the violators
and either reach new settlements or augment its prior
investigations, as appropriate, and conduct full disciplinary
hearings consistent with the requirements of CFTC rules.

SEC officials told us that they do not use industrywide data to
assess comparative SRO sanctions because such data are not easily
quantified and are not meaningful without additional review. They
said that they use routine inspections of the surveillance,
investigatory, and enforcement programs of securities SROs and
discussions with SRO officials to determine the comparative
adequacy of sanctions. They described SEC's routine inspections of
SROs' enforcement programs as follows:

SEC reviews randomly selected files of SRO enforcement cases. For
each case file reviewed, SEC analyzes, among other things, the
adequacy of the resolution of the disciplinary action. In
assessing the adequacy of the resolution, SEC considers a number
of factors, including the existence of previous violations by the
subject, the level of cooperation, and the amount of financial
losses caused by the violation. SEC also reviews any fine schedule
contained in the SRO's rules, either as a part of the SRO's minor
rule plan or general disciplinary rules. If SEC considers that the
fine or sanction imposed in the case is questionable, SEC ensures
that the sanction is consistent with the SRO's own fine schedule.
If SEC still believes that the fine or sanction is inadequate,
although consistent with the SRO's schedule, SEC will compare the
SRO's fine schedule with the fine schedules of other SROs and will
determine whether the fine is consistent with industry norms. In
addition, in concluding whether the sanction is inadequate for
purposes of the inspection report, SEC gathers information on past
fines at the SRO and on current and past fines at other SROs for
the type of violation. Such information is found in current and
past inspection files maintained by SEC and also may be
periodically requested from the SROs.

In addition, SEC officials told us that they meet quarterly with
senior SRO officials to discuss, among other things, recent
enforcement actions of the SROs. They said that because SEC meets
with all the SROs on a regular basis and routinely inspects each
SRO's enforcement program, SEC is able to assess the consistency
of the enforcement and disciplinary activities both within each
SRO and among the SROs. SEC and CFTC Approaches

to Assessing Sanctions Industrywide Differed

B-275115 Page 29 GAO/GGD-99-8 Fine Imposition and Collection
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The industrywide information we collected for table 2 shows large
differences among the securities SROs in the number of cases
closed and the average dollar amount of fines imposed. For
example, CBOE and Amex had over 250 cases closed from 1992 through
1996; NYSE had 195 cases closed and CHX had 11. Also, the average
amount of NYSE fines was about $51,000; the average for CHX was
$8, 000. These disparities may represent differences in SRO rules,
relative size, and the types of violations and other sanctions
involved, or the presence of a few unusual fines. SEC officials
told us that each securities SRO is an individual membership
organization with its own rules, whose disciplinary committees
impose sanctions, including fines, based primarily on the
precedents of cases within that SRO, and differences are to be
expected. However, without an analysis of the information, the
disparities cannot be specifically explained.

SEC officials said their periodic inspections and meetings with
SRO officials provide a more substantive, although subjective,
view of the industry. This bottom- up approach analyzes and
compares the results of individual SRO inspections to identify
differences among the SROs. Although we agree that industrywide
data may be difficult to quantify and need further review to be
meaningful, as discussed above, the data can still be used as an
indicator of the differences between and among SRO performance
over time. Analyzing industrywide data could provide SEC a top-
down approach that could supplement SEC's reviews and provide a
systematic, fact- based way to assess industrywide sanctions.

CFTC officials told us that they use industrywide data to
supplement their oversight reviews of the futures SROs. They said
that they have maintained a computerized database of SRO
disciplinary actions since 1986. 23 They said they use the
database to assist them in their oversight of futures SRO
disciplinary programs and to analyze and assess performance
between and among SROs. CFTC produces 42 statistical reports and 3
summary reports from the database, which can be sorted and
analyzed in a number of ways: by respondent; SRO; type of
violation; or the sanction imposed, including fines.

CFTC officials said they do biweekly reviews of these statistical
and summary reports to identify patterns or trends in individual
or industrywide SRO disciplinary actions that might call for
further CFTC review. The officials said that some differences in
sanctions across the industry can be attributed to an SRO's size.
However, when one SRO's

23 CFTC officials said they updated the database in 1995, and the
new database contains all futures SRO disciplinary actions since
1990.

B-275115 Page 30 GAO/GGD-99-8 Fine Imposition and Collection
Activities

sanctions relative to other SRO's sanctions change, they said CFTC
examines the data further to determine if the differences can be
readily explained or they notify CFTC examiners to closely review
the individual SRO's sanctions in subsequent examinations, called
rule enforcement reviews. However, these officials said that they
do not document their industrywide reviews of SRO sanctions data
and, thus, had no evidence to show the effects of such reviews.

In its one- time 1994 study to assess the consistency of fines for
various violations industrywide, CFTC reported that it could not
do so because such an analysis was difficult using econometric
means. However, CFTC had not yet updated its database of
disciplinary actions, and the study did not focus on particular
types of violations. Instead, it focused on broad categories of
violations that could make the violations too unlike each other to
allow anyone to reach conclusions about consistency of fines.

For our review CFTC used its database to produce the 42
statistical reports for the same 1992 through 1996 time period we
selected, which showed all the sanctions imposed by each futures
SRO, including the total amount of fines. A CFTC official said the
data showed that CBOT fines, which are fairly consistent from year
to year, were unusually high during this period because of three
fines totaling about $4.25 million. This information helps to
explain the large differences that we found in the average fine
amounts at CME (about $5,300) and at CBOT (about $23,800) during
this period, which we developed from information in table 3.
However, this does not indicate the appropriateness of the fines
at either SRO.

SEC, CFTC, and the majority of the SROs collected most of the
total dollar amounts of the fines they imposed and took action
when fines could not be collected. NASD and NFA officials
attributed their lower fine collection rates to the many fines
they imposed that they did not expect to collect because violators
leave the industry. However, they did not have readily available
data for us to verify this assertion. Automated recordkeeping
systems would not only provide improved verification but could
help SROs, particularly those with large numbers of disciplinary
cases, more efficiently capture and maintain the information
necessary to track and analyze their fine collection activities.

Evaluating the relative benefits of having specific guidelines for
fine amounts, as NASD does, or allowing discretion in setting fine
amounts based on the facts and circumstances of a particular case,
as the other regulators do, was beyond the scope of our review. We
noted that the Conclusions

B-275115 Page 31 GAO/GGD-99-8 Fine Imposition and Collection
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specific guidelines made it easier for us, as reviewers, to assess
the fines for compliance. However, most SROs prefer flexibility
and do not always provide complete documentation on the basis for
the fines imposed. Therefore, it becomes more important to ensure
that this flexibility is resulting in fines that are appropriate
to the facts and circumstances of particular cases.

SROs in the same industry basically do similar business and have
many overlapping members, despite the differences in their rules
and membership requirements. The large differences that we found
in the number of closed cases and average fine amounts among the
SROs may be readily explained by such factors as the relative size
of the SRO; the types of violations and the other sanctions
involved; or the presence of a few very large fines, as CFTC
demonstrated. On the other hand, determining the reasons for the
disparities may require further, more detailed reviews. Analyzing
industrywide data could provide SEC an additional tool to identify
disparities among SROs that may require further review. In
contrast, CFTC has the information it needs to do industrywide
reviews and says it does them. However, because it does not
document the results, CFTC cannot ensure that any questionable
patterns or trends in overall disciplinary actions are
appropriately addressed in follow- up reviews and any needed
corrective actions are taken. One way for CFTC to document the
results of its industrywide reviews would be to prepare periodic
reports to the Chairperson or other interested CFTC commissioners
and staff.

We recommend that the Chairman, SEC, analyze industrywide
information on disciplinary program sanctions, particularly fines,
to understand possible disparities among the SROs and identify
ways to improve SRO disciplinary programs. We also recommend that
the Chairpersons, SEC and CFTC, require that the results of these
analyses be appropriately documented. Further, we recommend that
the Chairpersons encourage SROs to maintain automated records of
their fine collection activities that are appropriate for the
number of fines they impose.

SEC provided oral technical comments on a draft of this report,
which we have incorporated where appropriate. In addition, SEC
provided written comments (see app. I), in which it generally
agreed with our findings and conclusions. However, SEC stated that
comparing SRO performance based on its detailed inspections
provided more substantive results than analyzing industrywide
sanctions data. SEC also stated that the enforcement and
disciplinary programs of the SROs vary too widely in subject and
scope to be amenable to quantitative analysis of industrywide
Recommendations

Agency Comments and Our Evaluation

B-275115 Page 32 GAO/GGD-99-8 Fine Imposition and Collection
Activities

sanctions data. We recognize that such quantitative analysis, by
itself, would not provide information necessary to recommend
improvements in SRO disciplinary programs and would need to be
supplemented by detailed inspections. However, analyzing such data
can provide a systematic, fact- based way to identify disparities
or changing trends among SRO disciplinary programs, such as those
we demonstrated, that may indicate areas that need additional
review. It might also be used, as CFTC demonstrated for the
statistics we developed on futures SROs, to dispel concerns about
seemingly large differences in outcomes. Further, over time,
differences in the subject and scope of SRO disciplinary programs
are likely to be identifiable in the statistics, and any further
analysis could focus on variances from these identified
relationships in the sanctions data among the SROs.

CFTC officials provided oral comments on a draft of this report.
In addition to technical comments, which we incorporated where
appropriate, they provided information to explain their low rate
of fines paid in full relative to SEC. We have included this
information in the report. Also, CFTC officials provided an
explanation of how they use the futures SRO's sanctions data they
collect, which we included in the body of the report. We also
adjusted our draft recommendation accordingly. Further, in
commenting on our draft recommendation to require SROs to maintain
automated records of fines, they said that they could encourage
but could not require the SROs to maintain automated records. We
revised our draft recommendation language accordingly. CFTC agreed
with our revised recommendations.

We also obtained oral comments from all the SROs included in our
review, except NYMEX, which did not respond to our request. The
SROs provided technical comments, which we incorporated where
appropriate. In addition, the securities SROs provided
documentation not previously made available to us to explain how
they set fines. Amex and NFA commented that our methodology
understated their fine collection rates. We incorporated their
explanations for the differences in the report.

B-275115 Page 33 GAO/GGD-99-8 Fine Imposition and Collection
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We will provide copies of this report to SEC, CFTC, the SROs, and
other interested committees and organizations. We will also make
copies available to others on request. Major contributors to this
report are listed in appendix II. Please call me on (202) 512-
8678 if you have any questions about the report.

Richard J. Hillman Associate Director, Financial Institutions

and Markets Issues

Page 34

Contents 1 Letter 36 Appendix I Comments From SEC

39 Appendix II Major Contributors to This Report

Table 1: Fine Collection Rates for SEC and CFTC for 1992 Through
1996

11 Table 2: Fine Collection Rates for NYSE, Amex, CBOE,

CHX, 1992 Through 1996 11

Table 3: Fine Collection Rates for CBOT, CME, and NYMEX for 1992
Through 1996

12 Table 4: Fine Collection Rates for NFA and NASD for

1992 Through 1996 13

Table 5: Amount of Fines Reported as Paid and Amount Documented as
Actually Collected for Cases Reviewed

15 Table 6: Factors CFTC Considers in Setting Fines 20 Tables

Abbreviations

ALJ administrative law judge Amex American Stock Exchange CBOE
Chicago Board Options Exchange CBOT Chicago Board of Trade CEA
Commodity Exchange Act CFTC Commodity Futures Trading Commission
CHX Chicago Stock Exchange CME Chicago Mercantile Exchange CTR
Currency Transaction Report NASD National Association of
Securities Dealers NFA National Futures Association NYMEX New York
Mercantile Exchange NYSE New York Stock Exchange SEC Securities
and Exchange Commission SRO self- regulatory organization

Page 35 GAO/GGD-99-8 Fine Imposition and Collection Activities

Appendix I Comments From SEC

Page 36 GAO/GGD-99-8 Fine Imposition and Collection Activities

Appendix I Comments From SEC

Page 37 GAO/GGD-99-8 Fine Imposition and Collection Activities

Appendix I Comments From SEC

Page 38 GAO/GGD-99-8 Fine Imposition and Collection Activities

Appendix II Major Contributors to This Report

Page 39 GAO/GGD-99-8 Fine Imposition and Collection Activities

Michael A. Burnett, Assistant Director Joan M. Conway, Senior
Evaluator David P. Tarosky, Senior Evaluator Carl M. Ramirez,
Social Science Analyst Barry L. Reed, Social Science Analyst

Rosemary Healy, Senior Attorney Angela Pun, Evaluator May L. Lee,
Computer Specialist General Government

Division, Washington, D. C.

Office of General Counsel

Chicago Field Office San Francisco Field Office

Page 40 GAO/GGD-99-8 Fine Imposition and Collection Activities

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