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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



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