2012-26090

Federal Register, Volume 77 Issue 207 (Thursday, October 25, 2012)[Federal Register Volume 77, Number 207 (Thursday, October 25, 2012)]

[Rules and Regulations]

[Pages 65100-65103]

From the Federal Register Online via the Government Printing Office [www.gpo.gov]

[FR Doc No: 2012-26090]

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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 143

RIN 3038-AD76

Adjustment of Civil Monetary Penalties for Inflation

AGENCY: Commodity Futures Trading Commission

ACTION: Final rule.

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SUMMARY: The Commodity Futures Trading Commission (Commission) is

amending its rule that governs the maximum amount of civil monetary

penalties, to adjust for inflation. This rule sets forth the maximum,

inflation-adjusted dollar amount for civil monetary penalties (CMPs)

assessable for violations of the Commodity Exchange Act (CEA) and

Commission rules, regulations and orders thereunder. The rule, as

amended, implements the Federal Civil Penalties Inflation Adjustment

Act of 1990, as amended by the Debt Collection Improvement Act of 1996.

DATES: Effective Date: This final rule will become effective October

25, 2012.

FOR FURTHER INFORMATION CONTACT: Edward J. Riccobene, Associate Chief

Counsel, Division of Enforcement, at (202) 418-5327 or

ericcobene@cftc.gov, Commodity Futures Trading Commission, 1155 21st

Street NW., Washington, DC 20581.

SUPPLEMENTARY INFORMATION:

I. Background

The Federal Civil Penalties Inflation Adjustment Act of 1990

(FCPIAA), 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 one of

the purposes of the inflation adjustments includes maintaining the

deterrent effect of CMPs and promoting compliance with the law, the

Commission monitors the impact of inflation on its CMP maximums and

adjusts them as needed to implement the requirements and purposes of

the FCPIAA.\3\

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\1\ The FCPIAA, Public Law 101-410 (1990), and the relevant

amendments to the FCPIAA contained in the DCIA, Public Law 104-134

(1996), is 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. For the relevant CMPs within the

Commission's jurisdiction, the Act provides only for maximum amounts

that can be assessed for each violation of the Act or the rules,

regulations and orders promulgated thereunder; the Act does not set

forth any minimum penalties. Therefore, the remainder of this

release will refer only to CMP maximums.

\3\ Specifically, the FCPIAA states that the purpose of the

FCPIAA is to establish a mechanism that shall allow for regular

adjustment for inflation of civil monetary penalties; maintain the

deterrent effect of civil monetary penalties and promote compliance

with the law; and improve the collection by the Federal Government

of civil monetary penalties.

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On July 21, 2010, President Obama signed the Dodd-Frank Wall Street

Reform and Consumer Protection Act (Dodd-Frank Act) into law.\4\

Section 753 of the Dodd-Frank Act set maximum CMPs for Sections 6(c)

and 6(d) of the CEA, 7 U.S.C. 9, 13b. Section 753 of the Dodd-Frank Act

is effective August 15, 2011, the effective date for the Commission's

rules implementing this section.\5\

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\4\ See Dodd-Frank Act, Public Law 111-203, 124 Stat. 1376

(2010). The text of the Dodd-Frank Act may be accessed at http://www.cftc.gov/LawRegulation/OTCDERIVATIVES/index.htm.

\5\ Prohibition of Employment, or Attempted Employment, of

Manipulative and Deceptive Devices and Prohibition on Price

Manipulation, 76 FR 41398 (July 14, 2011) (implementing Section 753

of the CEA; effective August 15, 2011).

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II. Commodity Exchange Act Civil Monetary Penalties

The inflation adjustment requirement applies to any penalty, fine

or other sanction that is for a specific monetary amount as provided by

Federal law; or has a maximum amount provided for by Federal law; and

is assessed or enforced by an agency pursuant to Federal law; and is

assessed or enforced pursuant to an administrative proceeding or a

civil action in the Federal courts. [28 U.S.C. 2461 note.] The CEA

provides for CMPs that meet the above definition and are, therefore,

subject to the inflation adjustment in the following instances:

Sections 6(c), 6(d), 6b, and 6c of the CEA.\6\

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\6\ 7 U.S.C. 9, 13a, 13a-1, 13b.

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Section 6(c) of the CEA, as amended by Section 753(a) of the Dodd-

Frank Act, sets the maximum CMP that may be imposed by the Commission

in an administrative proceeding on ``any person (other than a

registered entity)'' for: (1) Each violation of Section 6(c) of the CEA

``or any other provisions of [the] Act or of the rules, regulations, or

orders of the Commission thereunder'' to the greater of $140,000 or

triple the monetary gain to the violator; and (2) any ``manipulation or

attempted manipulation in violation of'' Section 6(c) or 9(a)(2) of the

CEA to the greater of $1,000,000 or triple the monetary gain to the

violator.\7\

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\7\ 7 U.S.C. 9.

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Section 6(d) of the CEA, as amended by Section 753(b) of the Dodd-

Frank Act, sets the maximum CMP that may be imposed by the Commission

in an administrative proceeding on ``any person (other than a

registered entity \8\)'' for violations of the CEA ``or any other

provisions of [the CEA] or of the rules, regulations, or orders of the

Commission thereunder'' to ``the greater of $140,000 or triple the

monetary gain'' to the violator.\9\

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\8\ The term ``registered entity'' is a defined term under the

CEA. Section 1a(40) provides that the term ``registered entity''

means a board of trade designated as a contract market under section

7 of the CEA; a derivatives clearing organization registered under

section 7a-1 of the CEA; a board of trade designated as a contract

market under section 7b-1 of the CEA; a swap execution facility

registered under section 7b-3 of the CEA; a swap data repository

registered under section 24a of the CEA; and with respect to a

contract that the Commission determines is a significant price

discovery contract, any electronic trading facility on which the

contract is executed or traded. 7 U.S.C. 1a(40).

\9\ 7 U.S.C. 13b.

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Section 6b of the CEA provides that the Commission in an

administrative proceeding may impose a CMP on: (1) any registered

entity for not enforcing or has not enforced its rules of government

made a condition of its designation or registration'' as set forth in

the CEA, or (2) ``any registered entity, or any director, officer,

agent, or employee of any registered entity,'' for violations of the

CEA ``or any rules, regulations, or orders of the Commission

thereunder.'' \10\ For each violation for which a CMP is assessed

pursuant to

[[Page 65101]]

Section 6b, Rule 143.8(a)(3) sets the current maximum penalty at: the

greater of $1,000,000 or triple the monetary gain to such person for

manipulation or attempted manipulation in violation of Section 6(c),

6(d), or 9(a)(2) of the CEA; and the greater of $675,000 or triple the

monetary gain to such person for all other violations.\11\

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\10\ 7 U.S.C. 13a.

\11\ 17 CFR 143.8(a)(3).

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Section 6c of the CEA provides that Commission may bring an action

in the ``proper district court of the United States or the proper

United States court of any territory or other place subject to the

jurisdiction of the United States'' and the court may impose on a CMP

on ``any registered entity or other person'' found by the court to have

committed any violation of any provision of the CEA ``or any rule,

regulation, or order thereunder, or is restraining trading in any

commodity for future delivery or any swap.'' \12\ For each violation

for which a CMP is assessed pursuant to Section 6c(d), Rule 143.8(a)(2)

sets the current maximum penalty at: the greater of $1,000,000 or

triple the monetary gain to such person for manipulation or attempted

manipulation in violation of Section 6(c), 6(d), or 9(a)(2) of the CEA;

and the greater of $140,000 or triple the monetary gain to such person

for all other violations.\13\

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\12\ 7 U.S.C. 13a-1.

\13\ 17 CFR 143.8(a)(2).

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III. Cost-of-Living Adjustment for Commodity Exchange Act Civil

Monetary Penalties

A. Methodology

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 all-urban consumers published by the

Department of Labor (CPI) \14\ for the month of June of the calendar

year preceding the adjustment exceeds the CPI for the month of June of

the calendar year in which the amount of such CMP was last set or

adjusted pursuant to law. The CMPs for Sections 6(c) and 6(d) of the

CEA were last set by the Dodd-Frank Act, effective in the calendar year

2011. The CMPs for Sections 6b and 6c of the CEA were last set by

Commission Rule, effective in the calendar year 2008.\15\ Accordingly,

the inflation adjustment factor for Sections 6(c) and 6(d) of the CEA

equals the CPI for June 2011 (i.e., June of the year preceding this

year) divided by that index for June 2011, and the inflation adjustment

factor for Sections 6b and 6c of the CEA equals the CPI for June 2011

divided by that index for June 2008.\16\

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\14\ The Consumer Price Index means the Consumer Price Index for

all urban consumers published by the Department of Labor. Interested

parties may find the relevant Consumer Price Index on the Internet.

To access this information, go to the Consumer Price Index Home Page

at: http://www.bls.gov/cpi/. Under the ``CPI Databases'' heading,

select ``CPI--All Urban Consumers (Current Series)'', ``Top Picks.''

Then check the box for ``U.S. All Items, 1967 = 100-CUUR0000AA0'',

and click the ``Retrieve data'' button.

\15\ See Adjustment of Civil Monetary Penalties for Inflation,

73 FR 57512 (Oct. 3, 2008) (effective Oct. 23, 2008).

\16\ The CPI for June 2011 was 676.162, and the CPI for June

2008 was 655.474. Therefore, the relevant inflation adjustment

factor for Sections 6(c) and 6(d) of the Act equals 676.162 divided

by 676.162, which is 0.0 for computational purposes, and for

Sections 6b and 6c equals 676.162 divided by 655.474, which is

0.0316 for computational purposes.

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Second, the inflation adjustment factors are then multiplied by the

current maximum CMPs to calculate the raw inflation increase. Third,

this raw inflation increase is then rounded according to the guidelines

set forth by the FCPIAA to calculate the final inflation increase.\17\

Fourth, the final inflation increase is added to the current CMP

maximum to obtain the new CMP maximum penalty.

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\17\ The FCPIAA, as amended by the DCIA, provides in relevant

part that any increase shall be rounded to the nearest multiple of

$10,000 in the case of penalties greater than $100,000 but less than

or equal to $200,000; and multiple of $25,000 in the case of

penalties greater than $200,000.

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B. Civil Monetary Penalty Adjustments

In Commission actions pursuant to Sections 6(c) or (d) of the CEA,

the amount set for the maximum CMP for manipulation or attempted

manipulation violations is $1,000,000, and the amount set for the

maximum CMP for all other violations is $140,000. Applying the CPI

adjustment methodology, no adjustment to these CMP amounts is

required.\18\

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\18\ Because the inflation adjustment factor for these CMPs is

0.0, the CMP amounts are not required to be revised pursuant to

FCPIAA.

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In Commission actions pursuant to Section 6b of the CEA, the amount

set for the CMP for manipulation and attempted manipulation violations

is $1,000,000 (or triple the monetary gain) and the amount set for the

CMP for all other violations is $675,000 (or triple the monetary gain).

Applying the CPI adjustment methodology, these CMP amounts must be

increased by $25,000 each, and the new CMP maximums are $1,025,000 (or

triple the monetary gain) for manipulation and attempted manipulation

violations, and $700,000 (or triple the monetary gain) for all other

violations.\19\

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\19\ Multiplying the CMP amounts by the inflation adjustment

factor results in a raw adjustment amount of $31,562 for

manipulation and attempted manipulation violations (0.03156 x

$1,000,000), and a raw adjustment amount of $21,304 for all other

violations (0.03156 x $675,000). Because the CMP amounts are greater

than $200,000, the raw adjustment amounts must be rounded to the

nearest $25,000, which results in a final adjustment amount of

$25,000 for all violations, including manipulation and attempted

manipulation violations.

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In Commission actions pursuant to Section 6c of the CEA, the amount

set for the CMP for manipulation and attempted manipulation violations

is $1,000,000 (or triple the monetary gain) and the amount set for the

CMP for all other violations is $140,000 (or triple the monetary gain).

Applying the CPI adjustment methodology, the CMP amount for

manipulation and attempted manipulation violations must be increased by

$25,000 to $1,025,000 (or triple the monetary gain), while the CMP

amount for all other violations remains unchanged at $140,000 (or

triple the monetary gain).\20\

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\20\ Multiplying the CMP amounts by the inflation adjustment

factor results in a raw adjustment amount of $31,562 for

manipulation and attempted manipulation violations (0.03156 x

$1,000,000), and a raw adjustment amount of $3,156 for all other

violations (0.03156 x $140,000). Because the CMP amount for

manipulation and attempted manipulation violations is greater than

$200,000, the raw adjustment amount must be rounded to the nearest

$25,000, which results in a final adjustment amount of $25,000 for

these violations. Because the CMP amount for all other violations is

less than $200,000, the raw adjustment amount must be rounded to the

nearest $10,000, which results in a final adjustment amount of $0

for these violations.

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The FCPIAA provides that ``any increase under [FCPIAA] in a CMP

shall apply only to violations which occur after the date the increase

takes effect.'' \21\ Thus, the new CMP amounts may be applied only to

violations of the CEA that occur after the effective date of this

amendment, October 23, 2012.

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\21\ See also Landgraf v. USI Film Products, 511 U.S. 244 (1994)

(holding that there is a presumption against retroactivity in

changes to damage remedies or civil penalties in the absence of

clear statutory language to the contrary).

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IV. Administrative Compliance

A. Notice Requirement

The notice and comment procedures of 5 U.S.C. 553 do not apply to

this rulemaking because the Commission is acting herein pursuant to

statutory language which mandates that the Commission act in a

nondiscretionary matter. Lake Carriers' Ass'n v. E.P.A., 652 F.3d 1, 10

(DC Cir. 2011).\22\

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\22\ The Commission has determined that the amendment to Rule

143.8 is exempt from the provisions of the Administrative Procedure

Act, 5 U.S.C. 553, which generally require notice of proposed

rulemaking and provide other opportunities for public participation,

but excludes rules of agency practice, such as those found in part

143 of the Commission's regulations, and in particular rule 143.8

being revised herein.

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[[Page 65102]]

B. Regulatory Flexibility Act

The Regulatory Flexibility Act \23\ requires agencies with

rulemaking authority to consider the impact of certain of their rules

on small businesses. A regulatory flexibility analysis is only required

for ``rule[s] for which the agency publishes a general notice of

proposed rulemaking pursuant to section 553(b) * * * or any other

law.'' As the Commission is not obligated by section 553(b) or any

other law to publish a general notice of proposed rulemaking with

respect to the revisions being made to regulation 143.8, the Commission

additionally is not obligated to conduct a regulatory flexibility

analysis.

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\23\ 5 U.S.C. 601-612.

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C. Paperwork Reduction Act

The Paperwork Reduction Act of 1995 (PRA), 44 U.S.C. 3507(d), which

imposes certain requirements on Federal agencies, including the

Commission, in connection with their conducting or sponsoring any

collection of information as defined by the PRA, does not apply to this

rule. This rule amendment does not contain information collection

requirements that require the approval of the Office of Management and

Budget.

D. Consideration of Costs and Benefits

Section 15(a) of the CEA, 7 U.S.C. 19(a), requires the Commission

to consider the costs and benefits of its action before issuing a new

regulation. Section 15(a) further specifies that costs and benefits

shall be evaluated in light of five broad areas of market and public

concern: (1) Protection of market participants and the public; (2)

efficiency, competitiveness, and financial integrity of futures

markets; (3) price discovery; (4) sound risk management practices; and

(5) other public interest considerations.

The Commission believes that benefits of this rulemaking greatly

outweigh the costs, if any. As the Commission understands, the

statutory provisions by which it is making cost-of-living adjustments

to the civil money penalties in regulation 143.8 were enacted to ensure

that civil money penalties do not lose their deterrence value because

of inflation. An analysis of the costs and benefits of these

adjustments were made before enactment of the statutory provisions

under which the Commission is operating, and limit the discretion of

the Commission to the extent that there are no regulatory choices the

Commission could make that would supersede the pre-enactment analysis

with respect to the five factors enumerated in section 15(a), or any

other factors.

List of Subjects in 17 CFR Part 143

Civil monetary penalties, Claims.

In consideration of the foregoing and pursuant to authority

contained in Sections 6(c), 6(d), 6b and 6c of the CEA, 7 U.S.C. 9,

13a, 13a-1(d), 13b, and 28 U.S.C. 2461 note, 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 continues to read as follows:

Authority: 7 U.S.C. 9, 15, 9a, 12a(5), 13a, 13a-1(d), 13(a),

13b; 31 U.S.C. 3701-3719; 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, regulations or orders promulgated

thereunder that may be assessed or enforced under the Commodity

Exchange Act in an administrative proceeding before the Commission or a

civil action in Federal court will be:

(1) For a civil penalty assessed pursuant to Section 6(c) of the

Commodity Exchange Act, 7 U.S.C. 9, against any person (other than a

registered entity):

(i) For manipulation or attempted manipulation violations:

(A) 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

(ii) For all other violations:

(A) 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;

(B) 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;

(C) 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

(D) 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; and

(2) For a civil monetary penalty assessed pursuant to Section 6(d)

of the Commodity Exchange Act, 7 U.S.C. 13b, against any person (other

than a registered entity):

(i) For violations committed on or after August 15, 2011, not more

than the greater of $140,000 or triple the monetary gain to such person

for each such violation; and

(ii) [Reserved]

(3) For a civil monetary penalty assessed pursuant to Section 6b of

the Commodity Exchange Act, 7 U.S.C. 13a, against any registered entity

or any director, officer, agent, or employee of any registered entity:

(i) For manipulation or attempted manipulation violations:

(A) Committed between May 22, 2008 and August 14, 2011, not more

than the greater of $1,000,000 or triple the monetary gain to such

person for each such violation;

(B) committed on or after August 15, 2011, not more than the

greater of $1,025,000 or triple the monetary gain to such person for

each such violation; and

(ii) For all other violations:

(A) Committed between November 27, 1996 and October 22, 2000, not

more than $550,000 for each such violation;

(B) Committed between October 23, 2000 and October 22, 2004, not

more than $575,000 for each such violation;

(C) Committed between October 23, 2004 and October 22, 2008, not

more than $625,000 for each such violation;

(D) Committed between October 23, 2008 and October 22, 2012, not

more than the greater of $675,000 or triple the monetary gain to such

person for each such violation; and

(E) Committed on or after October 23, 2012, not more than the

greater of $700,000 or triple the monetary gain to such person for each

such violation; and

(4) For a civil monetary penalty assessed pursuant to Section 6c of

the Commodity Exchange Act, 7 U.S.C. 13a-1, against any registered

entity or other person:

(i) For manipulation or attempted manipulation violations:

(A) Committed between May 22, 2008 and August 14, 2011, not more

than the greater of $1,000,000 or triple the monetary gain to such

person for each such violation; and

[[Page 65103]]

(B) Committed on or after August 15, 2011, not more than the

greater of $1,025,000 or triple the monetary gain to such person for

each such violation; and

(ii) For all other violations:

(A) 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;

(B) 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;

(C) 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

(D) 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.

* * * * *

Issued in Washington, DC, on October 18, 2012, by the

Commission.

Sauntia S. Warfield,

Assistant Secretary of the Commission.

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

Federal Regulations.

Appendix to Adjustment of Civil Monetary Penalties for Inflation--

Commission Voting Summary and Statements of Commissioners

Appendix 1--Commission Voting Summary

On this matter, Chairman Gensler and Commissioners Sommers,

Chilton, O'Malia and Wetjen voted in the affirmative; no

Commissioner voted in the negative.

[FR Doc. 2012-26090 Filed 10-24-12; 8:45 am]

BILLING CODE 6351-01-P

Last Updated: October 25, 2012