[Federal Register: October 3, 2008 (Volume 73, Number 193)]
[Rules and Regulations]
[Page 57512-57515]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr03oc08-5]
=======================================================================
-----------------------------------------------------------------------
COMMODITY FUTURES TRADING COMMISSION
17 CFR Part 143
RIN 3038-AC13
Adjustment of Civil Monetary Penalties for Inflation
AGENCY: Commodity Futures Trading Commission.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Commodity Futures Trading Commission (Commission) is
amending its rule which governs the maximum amount of civil monetary
penalties, to adjust for inflation. This rule sets forth the maximum,
inflation-adjusted dollar amount for civil monetary penalties (CMPs)
assessable for violations of the Commodity Exchange Act (Act) and
Commission rules and orders thereunder. The rule, as amended,
implements the Federal Civil Penalties Inflation Adjustment Act of
1990, as amended by the Debt Collection Improvement Act of 1996. The
rules also reflect the higher penalties enacted this year by Congress
for violations of the Act prohibiting manipulation and attempted
manipulation.
DATES: Effective Date: October 23, 2008.
FOR FURTHER INFORMATION CONTACT: Thuy Dinh, Esq., Office of General
Counsel, at (202) 418-5128 or tdinh@cftc.gov; or Richard Foelber, Esq.,
Division of Enforcement, at (202) 418-5347 or rfoelber@cftc.gov,
Commodity Futures Trading Commission, 1155 21st Street, NW.,
Washington, DC 20581. This document also is available at http://
www.regulations.gov.
SUPPLEMENTARY INFORMATION:
I. Background
The Federal Civil Penalties Inflation Adjustment Act of 1990
(FCPIAA), as amended by the Debt Collection Improvement Act of 1996
(DCIA),\1\ requires the head of each Federal agency to adjust by
regulation, at least once every four years, the maximum amount of CMPs
provided by law within the jurisdiction of that agency by the cost of
living adjustment defined in the FCPIAA, as amended.\2\ Because the
purposes of the inflation adjustments include maintaining the deterrent
effect of CMPs and promoting compliance with the law, the Commission
monitors the impact of inflation on its CMP maximums and adjusts them
as needed to implement the requirements and purposes of the FCPIAA.\3\
---------------------------------------------------------------------------
\1\ The FCPIAA, Pub. L. 101-410 (1990), and the relevant
amendments to the FCPIAA contained in the DCIA, Public Law 104-134
(1996), are codified at 28 U.S.C. 2461 note.
\2\ The DCIA also requires that the range of minimum and maximum
CMPs be adjusted, if applicable. This is not applicable to the
Commission because, for the relevant CMPs within the Commission's
jurisdiction, the Act provides only for maximum amounts that can be
assessed for each violation of the Act or the rules and orders
thereunder; the Act does not set forth any minimum penalties.
Therefore, the remainder of this release will refer only to CMP
maximums.
\3\ Specifically, the FCPIAA states:
The purpose of [the FCPIAA] is to establish a mechanism that
shall--
(1) Allow for regular adjustment for inflation of civil monetary
penalties;
(2) Maintain the deterrent effect of civil monetary penalties
and promote compliance with the law; and
(3) Improve the collection by the Federal Government of civil
monetary penalties.
---------------------------------------------------------------------------
Congress this year enacted the CFTC Reauthorization Act of 2008 at
Title XIII of the Food, Conservation, and Energy Act of 2008, P.L. 110-
246, 122 Stat. 1651 (eff. May 22, 2008)(Farm Bill). Section 13103(a)-
(c) amends sections 6(c), 6b and 6c of the Act, in each case increasing
the maximum civil monetary penalty that may be imposed ``in any case of
manipulation or attempted manipulation'' in violation of section 6(c),
6(d), or 9(a)(2) to ``the greater of $1,000,000 or triple the monetary
gain'' to the violator.\4\
---------------------------------------------------------------------------
\4\ Section 13103(a) of the Farm Bill states:
(a) ENFORCEMENT POWERS OF THE COMMISSION.--Section 6(c) of the
Commodity Exchange Act (7 U.S.C. 9, 15) is amended in clause (3) of
the 10th sentence--
(1) by inserting ``(A)'' after ``assess such person''; and
(2) by inserting after ``each such violation'' the following:
``, or (B) in any case of manipulation or attempted manipulation
in violation of this subsection, subsection (d) of this section, or
section 9(a)(2), a civil penalty of not more than the greater of
$1,000,000 or triple the monetary gain to the person for each such
violation,''.
Section 13103(b) of the Farm Bill states:
(b) NONENFORCEMENT OF RULES OF GOVERNMENT OR OTHER VIOLATIONS.--
Section 6b of such Act (7 U.S.C. 13a) is amended--
(1) In the first sentence, by inserting before the period at the
end the following: ``, or, in any case of manipulation or attempted
manipulation in violation of section 6(c), 6(d), or 9(a)(2), a civil
penalty of not more than $1,000,000 for each such violation''; and
(2) In the second sentence, by inserting before the period at
the end the following: ``, except that if the failure or refusal to
obey or comply with the order involved any offense under section
9(a)(2), the registered entity, director, officer, agent, or
employee shall be guilty of a felony and, on conviction, shall be
subject to penalties under section 9(a)(2)''.
Section 13103(c) of the Farm Bill states:
(c) ACTION TO ENJOIN OR RESTRAIN VIOLATIONS.--Section 6c(d) of
such Act (7 U.S.C. 13a-1(d)) is amended by striking all that
precedes paragraph (2) and inserting the following:
``(d) CIVIL PENALTIES.--
``(1) IN GENERAL.--In any action brought under this section, the
Commission may seek and the court shall have jurisdiction to impose,
on a proper showing, on any person found in the action to have
committed any violation--
``(A) a civil penalty in the amount of not more than the greater
of $100,000 or triple the monetary gain to the person for each
violation; or
``(B) in any case of manipulation or attempted manipulation in
violation of section 6(c), 6(d), or 9(a)(2), a civil penalty in the
amount of not more than the greater of $1,000,000 or triple the
monetary gain to the person for each violation.''
---------------------------------------------------------------------------
II. Relevant Commission CMPs
The inflation adjustment requirement applies to:
[A]ny penalty, fine or other sanction that--
(A) Is for a specific monetary amount as provided by Federal law;
or
(ii) Has a maximum amount provided for by Federal law; and
(B) Is assessed or enforced by an agency pursuant to Federal law;
and
(C) Is assessed or enforced pursuant to an administrative
proceeding or a civil action in the Federal courts[.] 28 U.S.C. 2661
note. The Act provides for CMPs that meet the above definition, and are
therefore subject to the inflation adjustment, in three instances:
Sections 6(c), 6b, and 6c of the Act.\5\
---------------------------------------------------------------------------
\5\ 7 U.S.C. 9, 13a and 13a-1.
---------------------------------------------------------------------------
[[Page 57513]]
Penalties may be assessed in a Commission administrative proceeding
pursuant to Section 6(c) of the Act, 7 U.S.C. 9, against ``any person''
found by the Commission to have:
(1) Engaged in the manipulation of the price of any commodity, in
interstate commerce, or for future delivery;
(2) Willfully made a false or misleading statement or omitted a
material fact in an application or report filed with the Commission; or
(3) Violated any provision of the Act or the Commission's rules,
regulations or orders thereunder.
Penalties may be assessed in a Commission administrative proceeding
pursuant to Section 6b of the Act, 7 U.S.C. 13a, against: (1) Any
registered entity that the Commission finds is not enforcing or has not
enforced its rules, or (2) any registered entity, or any director,
officer, agent, or employee of any registered entity, that is violating
or has violated any of the provisions of the Act or the Commission's
rules, regulations or orders thereunder.
Penalties may be assessed pursuant to Section 6c of the Act, 7
U.S.C. 13a-l, against ``any person'' found by ``the proper district
court of the United States'' to have committed any violation of any
provision of the Act or any rule, regulation or order thereunder.
III. Relevant Cost-of-Living Adjustment
The formula for determining the cost-of-living adjustment, first
defined by the FCPIAA, and amended by the DCIA, consists of a four-step
process.
The first step entails determining the inflation adjustment factor.
This is done by calculating the percentage increase by which the
Consumer Price Index for the month of June of the calendar year
preceding the adjustment exceeds the Consumer Price Index for the month
of June of the calendar year in which the amount of such civil monetary
penalty was last set or adjusted pursuant to law.\6\ Accordingly, the
inflation adjustment factor for the present adjustment equals the
Consumer Price Index for all-urban consumers published by the
Department of Labor for June 2007 (i.e., June of the year preceding
this year), divided by that index for June 2004.\7\
---------------------------------------------------------------------------
\6\ The Consumer Price Index means the Consumer Price Index for
all urban consumers (CPI-U) published by the Department of Labor.
Interested parties may find the relevant Consumer Price Index over
the Internet. To access this information, go to the Consumer Price
Index Home Page at: http:// www.bls.gov/data/. Under the Prices and
Living Conditions Section, select Most Requested Statistics for
CPI--All Urban Consumers (Current Series). Then check the box for
CPI for U.S. All Items, 1967=100-CUUR0000AA0, and click the Retrieve
Data button.
\7\ The Consumer Price Index for all-urban consumers published
by the Department of Labor for June 2007 was 624.129, and for June
2004 was 568.2. Therefore, the relevant inflation adjustment factor
equals 624.129 divided by 568.2. The result is a 9.8 percent
increase in the CPI between June 2003 and June 2007. Accordingly,
our inflation adjustment factor is 9.8 percent, or 0.0984 for
computational purposes.
---------------------------------------------------------------------------
Once the inflation adjustment factor is determined, it is then
multiplied by the current maximum CMP set forth in Rule 143.8 to
calculate the raw inflation increase.\8\ This raw inflation increase is
then rounded according to the guidelines set forth by the FCPIAA.\9\
Finally, once the inflation increase has been rounded pursuant to the
FCPIAA, it is added to the current CMP maximum to obtain the new CMP
maximum penalty.\10\ As a result, the maximum, inflation-adjusted CMP
for each violation of the Act or Commission rules or orders thereunder
assessed against any person pursuant to Sections 6(c) and 6c of the Act
will be $140,000 or triple the monetary gain to such person for each
violation, and $675,000 for each such violation when assessed pursuant
to Section 6b of the Act.
---------------------------------------------------------------------------
\8\ The current CMP maximum listed in Rule 143.8, as amended in
2004, for purposes of Sections 6(c) and 6c of the Act is $130,000.
The current CMP maximum for purposes of Section 6b of the Act is
$625,000.
Accordingly, the calculations for the raw inflation increase are
the following:
Sections 6(c) and 6c: (0.0984 x $130,000) = $12,792
Section 6b: (0.0984 x $625,000) = $61,500
\9\ The FCPIAA, as amended by the DCIA, provides in relevant
part that any increase ``shall be rounded to the nearest--
(5) multiple of $10,000 in the case of penalties greater than
$100,000 but less than or equal to $200,000; and
(6) multiple of $25,000 in the case of penalties greater than
$200,000.''
Accordingly, the raw inflation increase for purposes of Sections
6(c) and 6c of the Act ($12,792) is rounded to $10,000, while the
raw inflation increase for purposes of Section 6b ($61,500) is
rounded to $50,000.
\10\ For purposes of Sections 6(c) and 6c of the Act, the
rounded inflation increase ($10,000) is added to the current CMP
maximum ($130,000), totaling $140,000. For purposes of Section 6b of
the Act, the rounded inflation increase ($50,000) is added to the
current CMP maximum ($575,000), totaling $625,000.
---------------------------------------------------------------------------
The FCPIAA provides that ``any increase under [FCPIAA] in a civil
monetary penalty shall apply only to violations which occur after the
date the increase takes effect.'' \11\ Thus, the new CMP maximum may be
applied only to violations of the Act that occur after the effective
date of this amendment, October 23, 2004. The new statutory maximum for
manipulation and attempted manipulation shall apply to violations that
occur after the effective date of the Farm Bill, i.e., May 22, 2008.
---------------------------------------------------------------------------
\11\ See also Landgraf v. USI Film Products, 511 U.S. 244 (1994)
(holding that there is a presumption against retroactivity in
changes to damage remedies or civil penalties in the absence of
clear statutory language to the contrary).
---------------------------------------------------------------------------
IV. Related Matters
A. Notice Requirement
This amendment to Rule 143.8 will implement a statutory change
regarding agency procedure or practice within the meaning of 5 U.S.C.
553(b)(3)(A) and therefore does not require notice.\12\ The Commission
also believes that opportunity for public comment is unnecessary under
5 U.S.C. 553(b)(3)(B). This amendment does not effect any substantive
change in Commission rules, nor alter any obligation that a party has
under Commission rules, regulations or orders. No party must change its
manner of doing business, either with the public or the Commission, to
comply with the rule amendment. This change is undertaken pursuant to a
statutory requirement that all agencies make such adjustments and is
intended to prevent inflation from eroding the deterrent effect of
CMPs. The change also recognizes amendments to the Act contained in the
Farm Bill.
---------------------------------------------------------------------------
\12\ U.S.C. 553(b) generally requires notice of proposed
rulemaking to be published in the Federal Register. That provision
states, however, that ``[e]xcept when notice or hearing is required
by statute, [notice is not required]--
(A) [for] interpretive rules, general statements of policy, or
rules of agency organization, procedure, or practice; or
(B) when the agency for good cause finds (and incorporates the
finding and a brief statement of reasons therefor in the rules
issued) that notice and public procedure thereon are impracticable,
unnecessary, or contrary to the public interest.''
---------------------------------------------------------------------------
While higher maximum CMPs may expose persons to potentially higher
financial liability, in nominal terms, for violations of the Act or
Commission rules or orders thereunder, the rule amendment does not
require that the maximum penalty be imposed on any party, nor does it
alter any substantive due process rights that a party has in an
administrative proceeding or a court of law that protect against
imposition of excessive penalties. Further, as previously noted, the
rule amendment applies only to violations of the Act or Commission
rules or orders that occur after the effective date of this amendment.
B. Regulatory Flexibility Act
The Regulatory Flexibility Act, 5 U.S.C. 601 et seq., requires that
agencies consider the impact of their rules on small businesses. The
amended rule potentially will affect those persons who are found by the
Commission or the Federal courts to have violated the
[[Page 57514]]
Act or Commission rules or orders. Some of these affected parties could
be small businesses. Nevertheless, the Acting Chairman, on behalf of
the Commission, certifies that this rule will not have a significant
economic impact on a substantial number of small entities. While the
Commission recognizes that certain persons assessed a CMP for violating
Act or Commission rules or orders may be small businesses, the rule
does not mandate the imposition of the maximum CMP set forth in the
rule on any party. As is currently the case, the imposition of the
maximum CMP will occur only where the administrative law judge, the
Commission or a Federal court finds that the gravity of the offense
warrants a CMP in that amount.\13\
---------------------------------------------------------------------------
\13\ Section 6(e) of the Act, 7 U.S.C. 9a(1), directs the
Commission to ``consider the appropriateness of [a] penalty to the
gravity violation'' when assessing a CMP pursuant to Section 6(c) of
the Act. In addition, the Commission's penalty guidelines state that
the Commission, when assessing any CMP, will consider the gravity of
the offense in question. In assessing the gravity of an offense, the
Community may consider such factors as whether the violations
resulted in harm to the victims, whether the violations involved
core provisions of the Act, and whether the violator acted
intentionally or willfully, as well as other factors. See CFTC
Policy Statement Relating to the Commission's Authority to Impose
Civil Money Penalties and Futures Self-Regulatory Organizations'
Authority to Impose Sanction; Penalty Guidelines, [1994-1996
Transfer Binder] Comm. Fut. L. Rep. (CCH) ] 26,265 (CFTC November
1994).
---------------------------------------------------------------------------
The rule should not increase in real terms the economic burden of
the maximum CMPs set forth in the Act. Instead, the rule implements a
statutory requirement that agencies adjust for inflation existing CMPs
so that the real economic value of such penalties, and therefore the
Congressionally-intended deterrent effect of such CMPs, is not reduced
over time by inflation. Nor does the rule impose any new, affirmative
duty on any party or change any existing requirements, and thus no
party who is currently complying with the Act and Commission
regulations will incur any expense in order to comply with the amended
rule. Therefore, the Commission believes that this final rule will not
have a significant economic impact on a substantial number of small
entities.\14\
---------------------------------------------------------------------------
\14\ Any agency that regulates the activities of small entities
must establish a policy or program to reduce and, when appropriate,
to waive civil penalties for violations of statutory or regulatory
requirements by small entities. An agency is not required to reduce
or waive civil penalties, however, if: (1) An entity has been the
subject of multiple enforcement actions; (2) an entity's violations
involve willful or criminal conduct; or (3) the violations involve
serious health, safety or environmental threats. See Small Business
Regulatory Enforcement Fairness Act of 1996 (``SBREFA''), Public Law
104-121, Sec. 223, 110 Stat. 862 (March 29, 1996). The Commission
takes these provisions of SBREFA into account when it considers
whether to seek or impose a civil monetary penalty in a particular
case involving a small entity.
---------------------------------------------------------------------------
C. Paperwork Reduction Act
The Paperwork Reduction Act of 1995 (PRA), 44 U.S.C. 3507(d), which
imposes certain requirements on Federal agencies, including the
Commission, connection with their conducting or sponsoring any
collection of information as defined by the PRA, does not apply to this
rule. The Commission believes this rule amendment does not contain
information collection requirements that require the approval of the
Office of Management and Budget.
List of Subjects in 17 CFR Part 143
Civil monetary penalty, Claims.
0
In consideration of the foregoing and pursuant to authority contained
in Sections 6(c), 6b and 6c of the Act, 7 U.S.C. 9, 13a, and 13a-1(d),
and 28 U.S.C. 2461 note as amended by Pub. L. 104-134, the Commission
hereby amends part 143 of chapter I of title 17 of the Code of Federal
Regulations as follows:
PART 143--COLLECTION OF CLAIMS OWED THE UNITED STATES ARISING FROM
ACTIVITIES UNDER THE COMMISSION'S JURISDICTION
0
1. The authority citation for part 143 reads as follows:
Authority: 7 U.S.C. 9 and 15, 9a, 12a(5), 13a, 13a-1(d) and
13(a); 31 U.S.C. 3701-3719; 28 U.S.C. 2461 note.
0
2. Section 143.8 is amended by revising paragraph (a) to read as
follows:
Sec. 143.8 Inflation-adjusted civil monetary penalties.
(a) Unless otherwise amended by an act of Congress, the inflation-
adjusted maximum civil monetary penalty for each violation of the
Commodity Exchange Act or the rules or orders promulgated thereunder
that may be assessed or enforced by the Commission under the Commodity
Exchange Act pursuant to an administrative proceeding or a civil action
in Federal court will be:
(1) Except as provided in paragraph (v) hereof, for each violation
for which a civil monetary penalty is assessed against any person
(other than a registered entity) pursuant to Section 6(c) of the
Commodity Exchange Act, 7 U.S.C. 9:
(i) For violations committed between November 27, 1996 and October
22, 2000, not more than the greater of $110,000 or triple the monetary
gain to such person for each such violation;
(ii) For violations committed between October 23, 2000 and October
22, 2004, not more than the greater of $120,000 or triple the monetary
gain to such person for each such violation;
(iii) For violations committed between October 23, 2004 and October
22, 2008, not more than the greater of $130,000 or triple the monetary
gain to such person for each such violation; and
(iv) For violations committed on or after October 23, 2008, not
more than the greater of $140,000 or triple the monetary gain to such
person for each such violation; provided that--
(v) In any case of manipulation or attempted manipulation in
violation of Section 6(c), 6(d), or 9(a)(2) of the Act committed on or
after May 22, 2008, not more than the greater of $1,000,000 or triple
the monetary gain to such person for each such violation; and
(2) Except as provided in paragraph (v) hereof, for each violation
for which a civil monetary penalty is assessed against any registered
entity or other person pursuant to Section 6c of the Commodity Exchange
Act, 7 U.S.C. 13a-l:
(i) For violations committed between November 27, 1996 and October
22, 2000, not more than the greater of $110,000 or triple the monetary
gain to such person for each such violation;
(ii) For violations committed between October 23, 2000 and October
22, 2004, not more than the greater of $120,000 or triple the monetary
gain to such person for each such violation;
(iii) For violations committed between October 23, 2004 and October
22, 2008, not more than the greater of $130,000 or triple the monetary
gain to such person for each such violation; and
(iv) For violations committed on or after October 23, 2008, not
more than the greater of $140,000 or triple the monetary gain to such
person for each such violation; provided that--
(v) In any case of manipulation or attempted manipulation in
violation of Section 6(c), 6(d), or 9(a)(2) of the Act committed on or
after May 22, 2008, not more than the greater of $1,000,000 or triple
the monetary gain to such person for each such violation;
(3) For each violation for which a civil monetary penalty is
assessed against any registered entity or any director, officer, agent,
or employee of any registered entity pursuant to Section 6b of the
Commodity Exchange Act, 7 U.S.C. 13a:
(i) For violations committed between November 27, 1996 and October
22, 2000, not more than $550,000 for each such violation;
[[Page 57515]]
(ii) For violations committed between October 23, 2000 and October
22, 2004, not more than $575,000 for each such violation;
(iii) For violations committed between October 23, 2004 and October
22, 2008, not more than $625,000 for each such violation; and
(iv) For violations committed on or after October 23, 2008, not
more than the greater of $675,000 or triple the monetary gain to such
person for each such violation, provided that--
(v) In any case of manipulation or attempted manipulation in
violation of Section 6(c), 6(d), or 9(a)(2) of the Act committed on or
after May 22, 2008, not more than the greater of $1,000,000 or triple
the monetary gain each such violation.
* * * * *
Issued in Washington, DC, on September 30, 2008 by the
Commission.
David A. Stawick,
Secretary of the Commission.
[FR Doc. E8-23417 Filed 10-2-08; 8:45 am]
BILLING CODE 6351-01-P