2017-00488

Federal Register, Volume 82 Issue 13 (Monday, January 23, 2017)

[Federal Register Volume 82, Number 13 (Monday, January 23, 2017)]

[Rules and Regulations]

[Pages 7643-7645]

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

[FR Doc No: 2017-00488]

[[Page 7643]]

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COMMODITY FUTURES TRADING COMMISSION

17 CFR Part 143

RIN 3038-AE51

Annual Adjustment of Civil Monetary Penalties for Inflation--2017

AGENCY: Commodity Futures Trading Commission.

ACTION: Interim final rule.

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SUMMARY: The Commodity Futures Trading Commission (Commission) is

amending its rule that governs the maximum amount of civil monetary

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

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

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

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

amended, implements the Federal Civil Penalties Inflation Adjustment

Act of 1990, as amended.

DATES: Effective Date: This interim final rule is effective January 23,

2017.

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

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

[email protected], Commodity Futures Trading Commission, 1155 21st

Street NW., Washington, DC 20581.

SUPPLEMENTARY INFORMATION:

I. Background

The Federal Civil Penalties Inflation Adjustment Act of 1990

(FCPIAA) \1\ requires the head of each Federal agency to periodically

adjust for inflation the minimum and maximum amount of CMPs provided by

law within the jurisdiction of that agency.\2\ A 2015 amendment to the

FCPIAA \3\ required agencies to make an initial ``catch-up'' adjustment

to its civil monetary penalties effective no later than August 1,

2016.\4\ For every year thereafter effective not later than January 15,

the FCPIAA, as amended, requires agencies to make annual adjustments

for inflation, with guidance from the Director of the Office of

Management and Budget.\5\

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\1\ The FCPIAA, Public Law 101-410 (1990), as amended, is

codified at 28 U.S.C. 2461 note. The FCPIAA states that the purpose

of the act is to establish a mechanism that (1) allows for regular

adjustment for inflation of civil monetary penalties; (2) maintains

the deterrent effect of civil monetary penalties and promote

compliance with the law; and (3) improves the collection by the

Federal Government of civil monetary penalties.

\2\ For the relevant CMPs within the Commission's jurisdiction,

the Act provides only for maximum amounts that can be assessed for

each violation of the Act or the rules, regulations and orders

promulgated thereunder; the Act does not set forth any minimum

penalties. Therefore, the remainder of this release will refer only

to CMP maximums.

\3\ Federal Civil Penalties Inflation Adjustment Act

Improvements Act of 2015, 2015 Act, Public Law 114-74, 129 Stat. 584

(2015), title VII, Section 701.

\4\ FCPIAA Sections 4 and 5. See also, Adjustment of Civil

Monetary Penalties for Inflation, 81 FR 41435 (June 27, 2016) (to be

codified at 17 CFR 143.8).

\5\ FCPIAA Sections 4 and 5. See also, Executive Office of the

President, Office of Management and Budget Memorandum, M-17-11,

Implementation of the 2017 annual adjustment pursuant to the Federal

Civil Penalties Inflation Adjustment Act Improvements Act of 2015

(Dec. 16, 2016) available at https://www.whitehouse.gov/sites/default/files/omb/memoranda/2017/m-17-11_0.pdf.

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II. Commodity Exchange Act Civil Monetary Penalties

The CEA provides for CMPs that meet the FCPIAA definition \6\ and

these CMPs are, therefore, subject to the inflation adjustment in the

following instances: Sections 6(c), 6(d), 6b, and 6c of the CEA.\7\

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\6\ FCPIAA Section 3(2).

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

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Section 6(c) of the CEA,\8\ as adjusted by the FCPIAA,\9\ currently

sets the maximum CMP that may be imposed by the Commission, in a

proceeding initiated on or after August 1, 2016, 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

$152,243 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 $1,098,190 or triple the monetary

gain to the violator.

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\8\ 7 U.S.C. 9.

\9\ See 17 CFR 143.8(a)(1)(ii).

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Section 6(d) of the CEA,\10\ as adjusted by the FCPIAA,\11\

currently sets the maximum CMP that may be imposed by the Commission,

in a proceeding initiated on or after August 1, 2016, on ``any person

(other than a registered entity)'' \12\ 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 $152,243 or triple the

monetary gain to the violator.

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

\11\ See 17 CFR 143.8(a)(2)(ii).

\12\ The term ``registered entity'' is a defined term under the

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

means (A) a board of trade designated as a contract market under

section 7 of the act; (B) a derivatives clearing organization

registered under section 7a-1 of this act; (C) a board of trade

designated as a contract market under section 7b-1 of the act; (D) a

swap execution facility registered under section 7b-3 of this title;

(E) a swap data repository registered under section 24a of the act;

and (F) with respect to a contract that the Commission determines is

a significant price discovery contract, any electronic trading

facility on which the contract is executed or traded. 7 U.S.C.

1a(40).

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Section 6b of the CEA \13\ 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. In actions

initiated on or after August 1, 2016, for each violation for which a

CMP is assessed pursuant to Section 6b, the current, FCPIAA-adjusted

maximum penalty is set at: The greater of $1,098,190 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 $838,640 or triple the monetary gain to such person for all

other violations.\14\

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

\14\ 17 CFR 143.8(a)(3)(ii).

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Section 6c of the CEA \15\ 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. In actions initiated on or

after August 1, 2016, for each violation for which a CMP is assessed

pursuant to Section 6c(d), the current, FCPIAA-adjusted maximum penalty

is set at: The greater of $1,098,190 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 $167,728

or triple the monetary gain to such person for all other

violations.\16\

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\15\ 7 U.S.C. 13a-1.

\16\ 17 CFR 143.8(a)(4)(ii).

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III. Annual Inflation Adjustment for Commodity Exchange Act Civil

Monetary Penalties

A. Methodology

The annual inflation adjustment under the FCPIAA, in the context of

the CFTC's CMPs, is determined by increasing the maximum penalty by a

``cost-of-living adjustment,'' rounded to

[[Page 7644]]

the nearest multiple of one dollar.\17\ Annual inflation adjustments

are based on the percent change between the October Consumer Price

Index for all Urban Consumers (CPI-U) preceding the date of the

adjustment, and the prior year's October CPI-U.\18\ In this case,

October 2016 CPI-U (241.729)/October 2015 CPI-U (237.838) =

1.01636.\19\ In order to complete the 2017 annual adjustment, the CFTC

must multiply each of its most recent CMP amounts by the multiplier,

1.01636, and round to the nearest dollar.

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\17\ FCPIAA Sections 4 and 5.

\18\ FCPIAA Section 5(b)(1).

\19\ The CPI-U is published by the Department of Labor.

Interested parties may find the relevant Consumer Price Index on the

Internet. To access this information, go to the Consumer Price Index

Home Page at: http://www.bls.gov/cpi/. Under the ``CPI Databases''

heading, select ``All Urban Consumers (Current Series)'', ``Top

Picks.'' Then check the box for ``U.S. All items, 1982-84 = 100-

CUUR0000SA0'', and click the ``Retrieve data'' button.

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B. Civil Monetary Penalty Adjustments

Applying the FCPIAA annual inflation adjustment methodology results

in the following amended CMPs:

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Current 2017 Annual

inflation inflation

Citation Description adjusted CMP adjusted CMP

amount amount

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Section 6(c) of the CEA, 7 U.S.C. 9........ Prohibition Regarding Manipulation $152,243 $154,734

and False Information [Other

Violation (Non-Manipulation)].

Section 6(c) of the CEA, 7 U.S.C. 9........ Prohibition Regarding Manipulation 1,098,190 1,116,156

and False Information

[Manipulation or Attempted

Manipulation].

Section 6(d) of the CEA, 7 U.S.C. 13b...... Manipulations or Other Violations; 152,243 154,734

Cease and Desist Orders Against

Persons Other Than Registered

Entities; Punishment; Misdemeanor

or Felony; Separate Offenses.

Section 6b of the CEA, 7 U.S.C. 13a........ Nonenforcement of Rules of 838,640 852,360

Government or Other Violations;

Cease and Desist Orders; Fines and

Penalties; Imprisonment;

Misdemeanor; Separate Offenses

[Other Violation (Non-

Manipulation)].

Section 6b of the CEA, 7 U.S.C. 13a........ Nonenforcement of Rules of 1,098,190 1,116,156

Government or Other Violations;

Cease and Desist Orders; Fines and

Penalties; Imprisonment;

Misdemeanor; Separate Offenses

[Manipulation or Attempted

Manipulation].

Section 6c of the CEA, 7 U.S.C. 13a-1...... Enjoining or Restraining Violations 167,728 170,472

[Other Violation (Non-

Manipulation)].

Section 6c of the CEA, 7 U.S.C. 13a-1...... Enjoining or Restraining Violations 1,098,190 1,116,156

[Manipulation or Attempted

Manipulation].

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The FCPIAA provides that any increase under [the FCPIAA] in a civil

monetary penalty shall apply only to civil monetary penalties,

including those whose associated violation predated such increase,

which are assessed after the date the increase takes effect.\20\ Thus,

the new CMP amounts established by this rulemaking may be applied only

in Commission administrative or civil injunctive enforcement

proceedings that are initiated on or after the effective date of this

amendment, January 15, 2017.

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\20\ FCPIAA Section 6.

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IV. Administrative Compliance

A. Notice Requirement

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

this rulemaking because the Commission is acting herein pursuant to

statutory language which mandates that the Commission act in a

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

(D.C. Cir. 2011).\21\

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\21\ The Commission has determined that the amendment to rule

143.8 is exempt from the provisions of the Administrative Procedure

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

rulemaking and provide other opportunities for public participation,

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

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

being revised herein.

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B. Regulatory Flexibility Act

The Regulatory Flexibility Act \22\ 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 rules for which the agency publishes a general notice of proposed

rulemaking pursuant to section 553(b) or any other law. Because the

Commission is not obligated by section 553(b) or any other law to

publish a general notice of proposed rulemaking with respect to the

revisions being made to regulation 143.8, the Commission additionally

is not obligated to conduct a regulatory flexibility analysis.

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\22\ 5 U.S.C. 601-612.

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C. Paperwork Reduction Act

The Paperwork Reduction Act of 1995 (PRA),\23\ which imposes

certain requirements on Federal agencies, including the Commission, in

connection with their conducting or sponsoring any collection of

information as defined by the PRA, does not apply to this rule. This

rule amendment does not contain information collection requirements

that require the approval of the Office of Management and Budget.

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\23\ 44 U.S.C. 3507(d).

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D. Consideration of Costs and Benefits

Section 15(a) of the CEA \24\ requires the Commission to consider

the costs and benefits of its action before issuing a new regulation.

Section 15(a) further specifies that costs and benefits shall be

evaluated in light of five broad areas of market and public concern:

(1) Protection of market participants and the public; (2) efficiency,

competitiveness, and financial integrity of futures markets; (3) price

discovery; (4) sound risk management practices; and (5) other public

interest considerations.

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\24\ 7 U.S.C. 19(a).

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The Commission believes that benefits of this rulemaking greatly

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

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

to the CMPs in regulation 143.8 were enacted to ensure that CMPs do not

lose their deterrence value because of inflation. An analysis of the

costs and benefits of these adjustments were made before enactment of

the statutory provisions under which the Commission is operating, and

limit the discretion of the Commission to the extent that there are

[[Page 7645]]

no regulatory choices the Commission could make that would supersede

the pre-enactment analysis with respect to the five factors enumerated

in section 15(a), or any other factors.

List of Subjects in 17 CFR Part 143

Civil monetary penalties, Claims.

For the reasons stated in the preamble, the Commodity Futures

Trading Commission amends part 17 CFR part 143 as follows:

PART 143--COLLECTION OF CLAIMS OWED THE UNITED STATES ARISING FROM

ACTIVITIES UNDER THE COMMISSION'S JURISDICTION

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. 3701-3720E; 28 U.S.C. 2461 note.

2. Amend Sec. 143.8 as follows:

a. Revise paragraphs (a)(1)(ii) introductory text, (a)(2)(ii),

(a)(3)(ii) introductory text, and (a)(4)(ii) introductory text; and

b. Add paragraphs (a)(1)(iii), (a)(2)(iii), (a)(3)(iii), and

(a)(4)(iii).

The revisions and additions read as follows:

Sec. 143.8 Inflation-adjusted civil monetary penalties.

(a) * * *

(1) * * *

(ii) In an administrative proceeding before the Commission or a

civil action in Federal court initiated on August 1, 2016 through

January 14, 2017:

* * * * *

(iii) In an administrative proceeding before the Commission or a

civil action in Federal court initiated on or after January 15, 2017:

(A) For manipulation or attempted manipulation violations, not more

than the greater of $1,116,156 or triple the monetary gain to such

person for each such violation; and

(B) For all other violations, not more than the greater of $154,734

or triple the monetary gain to such person for each such violation; and

(2) * * *

(ii) In an administrative proceeding before the Commission or a

civil action in Federal court initiated on August 1, 2016 through

January 14, 2017, not more than the greater of $152,243 or triple the

monetary gain to such person for each such violation;

(iii) In an administrative proceeding before the Commission or a

civil action in Federal court initiated on or after January 15, 2017,

not more than the greater of $154,734 or triple the monetary gain to

such person for each such violation; and

(3) * * *

(ii) In an administrative proceeding before the Commission or a

civil action in Federal court initiated on August 1, 2016 through

January 14, 2017:

* * * * *

(iii) In an administrative proceeding before the Commission or a

civil action in Federal court initiated on or after January 15, 2017:

(A) For manipulation or attempted manipulation violations, not more

than the greater of $1,116,156 or triple the monetary gain to such

person for each such violation; and

(B) For all other violations, not more than the greater of $852,360

or triple the monetary gain to such person for each such violation; and

(4) * * *

(ii) In an administrative proceeding before the Commission or a

civil action in Federal court initiated on August 1, 2016 through

January 14, 2017:

* * * * *

(iii) In an administrative proceeding before the Commission or a

civil action in Federal court initiated on or after January 15, 2017:

(A) For manipulation or attempted manipulation violations, not more

than the greater of $1,116,156 or triple the monetary gain to such

person for each such violation; and

(B) For all other violations, not more than the greater of $170,472

or triple the monetary gain to such person for each such violation.

* * * * *

Issued in Washington, DC, on January 6, 2017, by the Commission.

Robert N. Sidman,

Deputy 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--

2017--Commission Voting Summary

On this matter, Chairman Massad and Commissioners Bowen and

Giancarlo voted in the affirmative. No Commissioner voted in the

negative.

[FR Doc. 2017-00488 Filed 1-19-17; 8:45 am]

BILLING CODE 6351-01-P

Last Updated: January 23, 2017

2017-00488

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