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[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
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