[Federal Register Volume 86, Number 8 (Wednesday, January 13, 2021)]
[Notices]
[Pages 2716-2718]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-00528]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release Nos. 33-10918; 34-90874; IA-5664; IC-34166]


Adjustments to Civil Monetary Penalty Amounts

AGENCY: Securities and Exchange Commission.

ACTION: Annual inflation adjustment of civil monetary penalties.

-----------------------------------------------------------------------

SUMMARY: The Securities and Exchange Commission (the ``Commission'') is 
publishing this notice (the ``Notice'') pursuant to the Federal Civil 
Penalties Inflation Adjustment Act Improvements Act of 2015 (the ``2015 
Act''). This Act requires all agencies to annually adjust for inflation 
the civil monetary penalties that can be imposed under the statutes 
administered by the agency and publish the adjusted amounts in the 
Federal Register. This Notice sets forth the annual inflation 
adjustment of the maximum amount of civil monetary penalties (``CMPs'') 
administered by the Commission under the Securities Act of 1933, the 
Securities Exchange Act of 1934 (the ``Exchange Act''), the Investment 
Company Act of 1940, the Investment Advisers Act of 1940, and certain 
penalties under the Sarbanes-Oxley Act of 2002. These amounts are 
effective beginning on January 15, 2021, and will apply to all 
penalties imposed after that date for violations of the aforementioned 
statutes that occurred after November 2, 2015.

FOR FURTHER INFORMATION CONTACT: Stephen M. Ng, Senior Special Counsel, 
Office of the General Counsel, at (202) 551-7957, or Hannah W. Riedel, 
Senior Counsel, Office of the General Counsel, at (202) 551-7918.

SUPPLEMENTARY INFORMATION:

I. Background

    This Notice is being published pursuant to the 2015 Act,\1\ which 
amended the Federal Civil Penalties Inflation Adjustment Act of 1990 
(the ``Inflation Adjustment Act'').\2\ The Inflation Adjustment Act 
previously had been amended by the Debt Collection Improvement Act of 
1996 (the ``DCIA'') \3\ to require that each federal agency adopt 
regulations at least once every four years that adjust for inflation 
the CMPs that can be imposed under the statutes administered by the 
agency. Pursuant to this requirement, the Commission previously adopted 
regulations in 1996, 2001, 2005, 2009, and 2013 to adjust the maximum 
amount of the CMPs that could be imposed under the statutes the 
Commission administers.\4\
---------------------------------------------------------------------------

    \1\ Public Law 114-74 Sec. 701, 129 Stat. 599-601 (Nov. 2, 
2015), codified at 28 U.S.C. 2461 note.
    \2\ Public Law 101-410, 104 Stat. 890-892 (1990), codified at 28 
U.S.C. 2461 note.
    \3\ Public Law 104-134, Title III, Sec.  31001(s)(1), 110 Stat. 
1321-373 (1996), codified at 28 U.S.C. 2461 note.
    \4\ See Release Nos. 33-7361, 34-37912, IA-1596, IC-22310, dated 
November 1, 1996 (effective December 9, 1996), previously found at 
17 CFR 201.1001 and Table I to Subpart E of Part 201; Release Nos. 
33-7946, 34-43897, IA-1921, IC-24846, dated January 31, 2001 
(effective February 2, 2001), previously found at 17 CFR 201.1002 
and Table II to Subpart E of Part 201; Release Nos. 33-8530, 34-
51136, IA-2348, IC-26748, dated February 9, 2005 (effective February 
14, 2005), previously found at 17 CFR 201.1003 and Table III to 
Subpart E of Part 201; Release Nos. 33-9009, 34-59449, IA-2845, IC-
28635, dated February 25, 2009 (effective March 3, 2009), previously 
found at 17 CFR 201.1004 and Table IV to Subpart E of Part 201; and 
Release Nos. 33-9387, 34-68994, IA-3557, IC-30408, dated February 
27, 2013 (effective March 5, 2013), previously found at 17 CFR 
201.1005 and Table V to Subpart E of Part 201. The penalty amounts 
contained in these releases have now been consolidated into Table I 
to 17 CFR 201.1001.
---------------------------------------------------------------------------

    The 2015 Act replaces the inflation adjustment formula prescribed 
in the DCIA with a new formula for calculating the inflation-adjusted 
amount of CMPs. The 2015 Act requires that agencies use this new 
formula to re-calculate the inflation-adjusted amounts of the penalties 
they administer on an annual basis and publish these new amounts in the 
Federal Register by January 15 of each year.\5\ The Commission 
previously published the first annual adjustment required by the 2015 
Act on January 6, 2017 (the ``2017 Adjustment'').\6\ As part of the 
2017 Adjustment, the Commission promulgated 17 CFR 201.1001(a) and 
Table I to Subsection 1001, which lists the penalty amounts for all 
violations that occurred on or before November 2, 2015. For violations 
occurring after November 2, 2015, Subsection 1001(b) provides that the 
applicable penalty amounts will be adjusted annually based on the 
formula set forth in the 2015 Act. Subsection 1001(b) further provides 
that these adjusted amounts will be published in

[[Page 2717]]

the Federal Register and on the Commission's website. The Commission 
subsequently published annual adjustments on January 8, 2018 (the 
``2018 Adjustment''),\7\ February 20, 2019 (``2019 Adjustment''),\8\ 
and January 8, 2020 (the ``2020 Adjustment'').\9\
---------------------------------------------------------------------------

    \5\ 28 U.S.C. 2461 note Sec. 4.
    \6\ Release Nos. 33-10276; 34-79749; IA-4599; IC-32414 
(effective Jan. 18, 2017).
    \7\ Release Nos. 33-10451; 34-82455; IA-4842; IC-32963 
(effective Jan. 15, 2018).
    \8\ Release Nos. 33-10604; 34-85118; IA-5111; IC-33373 
(effective Jan. 15, 2019). The publication of the 2019 Adjustment in 
the Federal Register was delayed due to operation of the 
Antideficiency Act during the absence of an appropriations bill to 
fund federal government programs between December 22, 2018 and 
January 25, 2019.
    \9\ Release Nos. 33-10740; 34-87905; IA-5428; IC-33740 
(effective Jan. 15, 2020).
---------------------------------------------------------------------------

    A CMP is defined in relevant part as any penalty, fine, or other 
sanction that: (1) Is for a specific amount, or has a maximum amount, 
as provided by federal law; and (2) is assessed or enforced by an 
agency in an administrative proceeding or by a federal court pursuant 
to federal law.\10\ This definition applies to the monetary penalty 
provisions contained in four statutes administered by the Commission: 
The Securities Act, the Exchange Act, the Investment Company Act, and 
the Investment Advisers Act. In addition, the Sarbanes-Oxley Act 
provides the Public Company Accounting Oversight Board (the ``PCAOB'') 
authority to levy civil monetary penalties in its disciplinary 
proceedings pursuant to 15 U.S.C. 7215(c)(4)(D).\11\ The definition of 
a CMP in the Inflation Adjustment Act encompasses such civil monetary 
penalties.\12\
---------------------------------------------------------------------------

    \10\ 28 U.S.C. 2461 note Sec. 3(2).
    \11\ 15 U.S.C. 7215(c)(4)(D).
    \12\ The Commission may by order affirm, modify, remand, or set 
aside sanctions, including civil monetary penalties, imposed by the 
PCAOB. See Section 107(c) of the Sarbanes-Oxley Act of 2002, 15 
U.S.C. 7217. The Commission may enforce such orders in federal 
district court pursuant to Section 21(e) of the Exchange Act. As a 
result, penalties assessed by the PCAOB in its disciplinary 
proceedings are penalties ``enforced'' by the Commission for 
purposes of the Inflation Adjustment Act. See Adjustments to Civil 
Monetary Penalty Amounts, Release No. 33-8530 (Feb. 4, 2005) [70 FR 
7606 (Feb. 14, 2005)].
---------------------------------------------------------------------------

II. Adjusting the Commission's Penalty Amounts for Inflation

    This Notice sets forth the annual inflation adjustment required by 
the 2015 Act for all CMPs under the Securities Act, the Exchange Act, 
the Investment Company Act, and the Investment Advisers Act, and 
certain civil monetary penalties under the Sarbanes-Oxley Act.
    Pursuant to the 2015 Act, the penalty amounts in the 2020 
Adjustment are adjusted for inflation by increasing them by the 
percentage change between the Consumer Price Index for all Urban 
Consumers (``CPI-U'') for October 2019 and the October 2020 CPI-U.\13\ 
OMB has provided its calculation of this multiplier (the ``CPI-U 
Multiplier'') to agencies.\14\ The new penalty amounts are determined 
by multiplying the amounts in the 2020 Adjustment by the CPI-U 
Multiplier and then rounding to the nearest dollar.
---------------------------------------------------------------------------

    \13\ 28 U.S.C. 2461 note Sec. 5.
    \14\ Office of Management and Budget, Implementation of Penalty 
Inflation Adjustments for 2021, Pursuant to the Federal Civil 
Penalties Inflation Adjustment Act Improvements Act of 2015 
(December 23, 2020), available at https://www.whitehouse.gov/wp-content/uploads/2020/12/M-21-10.pdf. This multiplier represents the 
percentage increase between the October 2019 CPI-U and the October 
2020 CPI-U, plus 1.
---------------------------------------------------------------------------

    For example, the CMP for certain insider trading violations by 
controlling persons under Exchange Act Section 21A(a)(3) \15\ was 
readjusted for inflation as part of the 2020 Adjustment to $2,140,973. 
To determine the new CMP under this provision, the Commission 
multiplies this amount by the CPI-U Multiplier of 1.01182, and rounds 
to the nearest dollar. Thus, the new CMP for Exchange Act Section 
21A(a)(3) is $2,166,279.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78u-1(a)(3).
---------------------------------------------------------------------------

    Below is the Commission's calculation of the new penalty amounts 
for the penalties it administers:

----------------------------------------------------------------------------------------------------------------
                                                                       2020
                                        Civil monetary penalty      adjustment         CPI-U       2021 adjusted
         U.S. code citation                  description              penalty       multiplier        penalty
                                                                      amounts                         amounts
----------------------------------------------------------------------------------------------------------------
15 U.S.C. 77h-1(g) (Securities Act   For natural person.........          $8,824         1.01182          $8,928
 Sec. 8A(g)).                        For any other person.......          88,248         1.01182          89,291
                                     For natural person/fraud...          88,248         1.01182          89,291
                                     For any other person/fraud.         441,240         1.01182         446,455
                                     For natural person/fraud/           176,496         1.01182         178,582
                                      substantial losses or risk
                                      of losses to others or
                                      gains to self.
                                     For any other person/fraud/         853,062         1.01182         863,145
                                      substantial losses or risk
                                      of losses to others or
                                      gain to self.
15 U.S.C. 77t(d) (Securities Act     For natural person.........           9,639         1.01182           9,753
 Sec. 20(d)).                        For any other person.......          96,384         1.01182          97,523
                                     For natural person/fraud...          96,384         1.01182          97,523
                                     For any other person/fraud.         481,920         1.01182         487,616
                                     For natural person/fraud/           192,768         1.01182         195,047
                                      substantial losses or risk
                                      of losses to others.
                                     For any other person/fraud/         963,837         1.01182         975,230
                                      substantial losses or risk
                                      of losses to others.
15 U.S.C. 78u(d)(3) (Exchange Act    For natural person.........           9,639         1.01182           9,753
 Sec. 21(d)(3)).                     For any other person.......          96,384         1.01182          97,523
                                     For natural person/fraud...          96,384         1.01182          97,523
                                     For any other person/fraud.         481,920         1.01182         487,616
                                     For natural person/fraud/           192,768         1.01182         195,047
                                      substantial losses or risk
                                      of losses to others or
                                      gains to self.
                                     For any other person/fraud/         963,837         1.01182         975,230
                                      substantial losses or risk
                                      of losses to others or
                                      gain to self.
15 U.S.C. 78u-1(a)(3) (Exchange Act  Insider Trading--                 2,140,973         1.01182       2,166,279
 Sec. 21A(a)(3)).                     controlling person.
15 U.S.C. 78u-2 (Exchange Act Sec.   For natural person.........           9,639         1.01182           9,753
 21B).                               For any other person.......          96,384         1.01182          97,523
                                     For natural person/fraud...          96,384         1.01182          97,523
                                     For any other person/fraud.         481,920         1.01182         487,616

[[Page 2718]]

 
                                     For natural person/fraud/           192,768         1.01182         195,047
                                      substantial losses or risk
                                      of losses to others.
                                     For any other person/fraud/         963,837         1.01182         975,230
                                      substantial losses or risk
                                      of losses to others.
15 U.S.C. 78ff(b) (Exchange Act      Exchange Act/failure to                 569         1.01182             576
 Sec. 32(b)).                         file information
                                      documents, reports.
15 U.S.C. 78ff(c)(1)(B) (Exchange    Foreign Corrupt Practices--          21,410         1.01182          21,663
 Act Sec. 32(c)(1)(B)).               any issuer.
15 U.S.C. 78ff(c)(2)(B) (Exchange    Foreign Corrupt Practices--          21,410         1.01182          21,663
 Act Sec. 32(c)(2)(B)).               any agent or stockholder
                                      acting on behalf of issuer.
15 U.S.C. 80a-9(d) (Investment       For natural person.........           9,639         1.01182           9,753
 Company Act Sec. 9(d)).             For any other person.......          96,384         1.01182          97,523
                                     For natural person/fraud...          96,384         1.01182          97,523
                                     For any other person/fraud.         481,920         1.01182         487,616
                                     For natural person/fraud/           192,768         1.01182         195,047
                                      substantial losses or risk
                                      of losses to others or
                                      gains to self.
                                     For any other person/fraud/         963,837         1.01182         975,230
                                      substantial losses or risk
                                      of losses to others or
                                      gain to self.
15 U.S.C. 80a-41(e) (Investment      For natural person.........           9,639         1.01182           9,753
 Company Act Sec. 42(e)).            For any other person.......          96,384         1.01182          97,523
                                     For natural person/fraud...          96,384         1.01182          97,523
                                     For any other person/fraud.         481,920         1.01182         487,616
                                     For natural person/fraud/           192,768         1.01182         195,047
                                      substantial losses or risk
                                      of losses to others.
                                     For any other person/fraud/         963,837         1.01182         975,230
                                      substantial losses or risk
                                      of losses to others.
15 U.S.C. 80b-3(i) (Investment       For natural person.........           9,639         1.01182           9,753
 Advisers Act Sec. 203(i)).          For any other person.......          96,384         1.01182          97,523
                                     For natural person/fraud...          96,384         1.01182          97,523
                                     For any other person/fraud.         481,920         1.01182         487,616
                                     For natural person/fraud/           192,768         1.01182         195,047
                                      substantial losses or risk
                                      of losses to others or
                                      gains to self.
                                     For any other person/fraud/         963,837         1.01182         975,230
                                      substantial losses or risk
                                      of losses to others or
                                      gain to self.
15 U.S.C. 80b-9(e) (Investment       For natural person.........           9,639         1.01182           9,753
 Advisers Act Sec. 209(e)).          For any other person.......          96,384         1.01182          97,523
                                     For natural person/fraud...          96,384         1.01182          97,523
                                     For any other person/fraud.         481,920         1.01182         487,616
                                     For natural person/fraud/           192,768         1.01182         195,047
                                      substantial losses or risk
                                      of losses to others.
                                     For any other person/fraud/         963,837         1.01182         975,230
                                      substantial losses or risk
                                      of losses to others.
15 U.S.C. 7215(c)(4)(D)(i)           For natural person.........         141,943         1.01182         143,621
 (Sarbanes-Oxley Act Sec.            For any other person.......       2,838,885         1.01182       2,872,441
 105(c)(4)(D)(i)).
15 U.S.C. 7215(c)(4)(D)(ii)          For natural person.........       1,064,582         1.01182       1,077,165
 (Sarbanes-Oxley Act Sec.            For any other person.......      21,291,632         1.01182      21,543,299
 105(c)(4)(D)(ii)).
----------------------------------------------------------------------------------------------------------------

    Pursuant to the 2015 Act and 17 CFR 201.1001, the adjusted penalty 
amounts in this Notice (and all penalty adjustments performed pursuant 
to the 2015 Act) apply to penalties imposed after the date the 
adjustment is effective for violations that occurred after November 2, 
2015, the 2015 Act's enactment date. These penalty amounts supersede 
the amounts in the 2020 Adjustment.\16\ For violations that occurred on 
or before November 2, 2015, the penalty amounts in Table I to 17 CFR 
201.1001 continue to apply.\17\
---------------------------------------------------------------------------

    \16\ The penalty amounts in this Notice are being published in 
the Federal Register and will not be added to the Code of Federal 
Regulations in accordance with the 2015 Act and 17 CFR 201.1001(b). 
See 28 U.S.C. 2461 note Sec. 4(a)(2); 17 CFR 201.1001(b). In 
addition to being published in the Federal Register, the penalty 
amounts in this Notice will be made available on the Commission's 
website at https://www.sec.gov/enforce/civil-penalties-inflation-adjustments.htm, as detailed in 17 CFR 201.1001(b). This website 
also lists the penalty amounts for violations that occurred on or 
before November 2, 2015.
    \17\ 17 CFR 201.1001(a).

---------------------------------------------------------------------------
    By the Commission.

    Dated: January 8, 2021.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-00528 Filed 1-12-21; 8:45 am]
BILLING CODE 8011-01-P