Adjustments to Civil Monetary Penalty Amounts, 9159-9162 [E9-4379]
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9159
Rules and Regulations
Federal Register
Vol. 74, No. 40
Tuesday, March 3, 2009
This section of the FEDERAL REGISTER
contains regulatory documents having general
applicability and legal effect, most of which
are keyed to and codified in the Code of
Federal Regulations, which is published under
50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by
the Superintendent of Documents. Prices of
new books are listed in the first FEDERAL
REGISTER issue of each week.
SECURITIES AND EXCHANGE
COMMISSION
17 CFR Part 201
[Release Nos. 33–9009; 34–59449; IA–2845;
IC–28635]
Adjustments to Civil Monetary Penalty
Amounts
AGENCY: Securities and Exchange
Commission.
ACTION: Final rule.
SUMMARY: This rule implements the
Federal Civil Penalties Inflation
Adjustment Act of 1990, as amended by
the Debt Collection Improvement Act of
1996. The Commission is adopting a
rule adjusting for inflation the
maximum amount of civil monetary
penalties under the Securities Act of
1933, the Securities Exchange Act of
1934, the Investment Company Act of
1940, the Investment Advisers Act of
1940, and certain penalties under the
Sarbanes-Oxley Act of 2002.
DATES: Effective Date: March 3, 2009.
FOR FURTHER INFORMATION CONTACT:
Richard A. Levine, Assistant General
Counsel, at (202) 551–5168, or James A.
Cappoli, Office of the General Counsel,
at (202) 551–7923.
SUPPLEMENTARY INFORMATION:
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I. Background
This rule implements the Debt
Collection Improvement Act of 1996
(‘‘DCIA’’).1 The DCIA amended the
Federal Civil Penalties Inflation
Adjustment Act of 1990 (‘‘FCPIAA’’) 2 to
require each federal agency to adopt
regulations at least once every four years
that adjust for inflation the maximum
amount of the civil monetary penalties
1 Public Law 104–134, 110 Stat. 1321–373 (1996)
(codified at 28 U.S.C. 2461 note).
2 28 U.S.C. 2461 note.
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(‘‘CMPs’’) under the statutes
administered by the agency.3
A civil monetary penalty (‘‘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.4
This definition covers the monetary
penalty provisions contained in the
statutes administered by the
Commission. In addition, this definition
encompasses the civil monetary
penalties that may be imposed by the
Public Company Accounting Oversight
Board (the ‘‘PCAOB’’) in its disciplinary
proceedings pursuant to 15 U.S.C.
7215(c)(4)(D).5
The DCIA requires that the penalties
be adjusted by the cost-of-living
adjustment set forth in Section 5 of the
FCPIAA.6 The cost-of-living adjustment
is defined in the FCPIAA as the
percentage by which the U.S.
Department of Labor’s Consumer Price
Index for all-urban consumers (‘‘CPI–
U’’) 7 for the month of June for the year
preceding the adjustment exceeds the
CPI–U for the month of June for the year
in which the amount of the penalty was
last set or adjusted pursuant to law.8
The statute contains specific rules for
rounding each increase based on the
size of the penalty.9 Agencies do not
have discretion over whether to adjust
a maximum CMP, or the method used
to determine the adjustment. Although
the DCIA imposes a 10 percent
maximum increase for each penalty for
the first adjustment pursuant thereto,
that limitation does not apply to
subsequent adjustments.
3 Increased CMPs apply only to violations that
occur after the increase takes effect.
4 28 U.S.C. 2461 note (3)(2).
5 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 Securities Exchange Act of 1934. As a
result, penalties assessed by the PCAOB in its
disciplinary proceedings are penalties ‘‘enforced’’
by the Commission for purposes of the Act. See
Adjustments to Civil Monetary Penalty Amounts,
Release No. 33–8530 (Feb. 4, 2005) [70 FR 7606
(Feb. 14, 2005)].
6 28 U.S.C. 2461 note (5).
7 28 U.S.C. 2461 note (3)(3).
8 28 U.S.C. 2461 note (5)(b).
9 28 U.S.C. 2461 note (5)(a)(1)–(6).
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The Commission administers four
statutes that provide for civil monetary
penalties: the Securities Act of 1933; the
Securities Exchange Act of 1934; the
Investment Company Act of 1940; and
the Investment Advisers Act of 1940. In
addition, the Sarbanes-Oxley Act of
2002 provides the PCAOB (over which
the Commission has jurisdiction)
authority to levy civil monetary
penalties in its disciplinary
proceedings.10 Penalties administered
by the Commission were last adjusted
by rules effective February 14, 2005.11
The DCIA requires the civil monetary
penalties to be adjusted for inflation at
least once every four years. The
Commission is therefore obligated by
statute to increase the maximum
amount of each penalty by the
appropriate formulated amount.
Accordingly, the Commission is
adopting an amendment to 17 CFR Part
201 to add § 201.1004 and Table IV to
Subpart E, increasing the amount of
each civil monetary penalty authorized
by the Securities Act of 1933, the
Securities Exchange Act of 1934, the
Investment Company Act of 1940, the
Investment Advisers Act of 1940, and
certain penalties under the SarbanesOxley Act of 2002. The adjustments set
forth in the amendment apply to
violations occurring after the effective
date of the amendment.
II. Summary of the Calculation
To explain the inflation adjustment
calculation for CMP amounts that were
last adjusted in 2005, we will use the
following example. Under the current
provisions, the Commission may impose
a maximum CMP of $1,275,000 for
certain insider trading violations by a
controlling person. To determine the
new CMP amounts under the
amendment, first we determine the
appropriate CPI–U for June of the
calendar year preceding the year of
adjustment. Because we are adjusting
CMPs in 2009, we use the CPI–U for
June of 2008, which was 218.815. We
must also determine the CPI–U for June
of the year the CMP was last adjusted
for inflation. Because the Commission
last adjusted this CMP in 2005, we use
the CPI–U for June of 2005, which was
194.5.
Second, we calculate the cost-ofliving adjustment or inflation factor. To
10 15
U.S.C. 7215(c)(4)(D).
17 CFR 201.1003.
11 See
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Federal Register / Vol. 74, No. 40 / Tuesday, March 3, 2009 / Rules and Regulations
do this we divide the CPI for June of
2008 (218.815) by the CPI for June of
2005 (194.5). Our result is 1.1250.
Third, we calculate the raw inflation
adjustment (the inflation adjustment
before rounding). To do this, we
multiply the maximum penalty amounts
by the inflation factor. In our example,
$1,275,000 multiplied by the inflation
factor of 1.1250 equals $1,434,391.
Fourth, we round the raw inflation
amounts according to the rounding rules
in Section 5(a) of the FCPIAA. Since we
round only the increase amount, we
calculate the increased amount by
subtracting the current maximum
penalty amounts from the raw
maximum inflation adjustments.
Accordingly, the increase amount for
the maximum penalty in our example is
$159,391 (i.e., $1,434,391 less
$1,275,000). Under the rounding rules,
if the penalty is greater than $200,000,
we round the increase to the nearest
multiple of $25,000. Therefore, the
maximum penalty increase in our
example is $150,000.
Fifth, we add the rounded increase to
the maximum penalty amount last set or
adjusted. In our example, $1,275,000
plus $150,000 yields a maximum
inflation adjustment penalty amount of
$1,425,000.12
III. Related Matters
that good cause exists to dispense with
public notice and comment pursuant to
the notice and comment provisions of
the APA.14 Specifically, the
Commission finds that because the
adjustment is mandated by Congress
and does not involve the exercise of
Commission discretion or any policy
judgments, public notice and comment
is unnecessary.15
Under the DCIA, agencies must make
the required inflation adjustment to
civil monetary penalties: (1) According
to a very specific formula in the statute;
and (2) within four years of the last
inflation adjustment. Agencies have no
discretion as to the amount of the
adjustment and have limited discretion
as to the timing of the adjustment, in
that agencies are required to make the
adjustment at least once every four
years. The regulation discussed herein
is ministerial, technical, and
noncontroversial. Furthermore, because
the regulation concerns penalties for
conduct that is already illegal under
existing law, there is no need for
affected parties to have thirty days prior
to the effectiveness of the regulation and
amendments to adjust their conduct.
Accordingly, the Commission believes
that there is good cause to make this
regulation effective immediately upon
publication.16
A. Administrative Procedure Act—
Immediate Effectiveness of Final Rule
Under the Administrative Procedure
Act (‘‘APA’’), a final rule may be issued
without public notice and comment if
the agency finds good cause that notice
and comment are impractical,
unnecessary, or contrary to public
interest.13 Because the Commission is
required by statute to adjust the civil
monetary penalties within its
jurisdiction by the cost-of-living
adjustment formula set forth in Section
5 of the FCPIAA, the Commission finds
B. Cost-Benefit Analysis
The Commission is sensitive to the
costs and benefits that result from its
rules. This regulation merely adjusts
civil monetary penalties in accordance
with inflation as required by the DCIA,
and has no impact on disclosure or
compliance costs. The benefit provided
by the inflationary adjustment to the
maximum civil monetary penalties is
that of maintaining the level of
deterrence effectuated by the civil
monetary penalties, and not allowing
such deterrent effect to be diminished
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12 The adjustments in Table IV to Subpart E of
Part 201 reflect that the operation of the statutorily
mandated computation, together with rounding
rules, does not result in any adjustment to one
penalty. This particular penalty will be subject to
slightly different treatment when calculating the
next adjustment. Under the statute, when we next
adjust these penalties, we will be required to use
the CPI–U for June of the year when this particular
penalty was ‘‘last adjusted,’’ rather than the CPI–U
for 2009.
13 5 U.S.C. 553(b)(3)(B).
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14 5
U.S.C. 553(b)(3)(B).
regulatory flexibility analysis under the
Regulatory Flexibility Act (‘‘RFA’’) is required only
when an agency must publish a general notice of
proposed rulemaking for notice and comment. See
5 U.S.C. 603. As noted above, notice and comment
are not required for this final rule. Therefore, the
RFA does not apply.
16 Additionally, this finding satisfies the
requirements for immediate effectiveness under the
Small Business Regulatory Enforcement Fairness
Act. See 5 U.S.C. 808(2); see also id. 801(a)(4).
15 A
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by inflation. Furthermore, Congress, in
mandating the inflationary adjustments,
has already determined that any
possible increase in costs is justified by
the overall benefits of such adjustments.
C. Paperwork Reduction Act
This rule does not contain any
collection of information requirements
as defined by the Paperwork Reduction
Act of 1995 as amended.17
D. Statutory Basis
The Commission is adopting these
amendments to 17 CFR Part 201,
Subpart E pursuant to the directives and
authority of the DCIA, Public Law 104–
134, 110 Stat. 1321–373 (1996).
List of Subjects in 17 CFR Part 201
Administrative practice and
procedure, Claims, Confidential
business information, Lawyers,
Securities.
Text of Amendment
For the reasons set forth in the
preamble, part 201, title 17, chapter II of
the Code of Federal Regulations is
amended as follows:
■
PART 201—RULES OF PRACTICE
Subpart E—Adjustment of Civil
Monetary Penalties
1. The authority citation for part 201,
Subpart E, is revised to read as follows:
■
Authority: 28 U.S.C. 2461 note.
2. Section 201.1004 and Table IV to
Subpart E are added to read as follows:
■
§ 201.1004 Adjustment of civil monetary
penalties—2009.
As required by the Debt Collection
Improvement Act of 1996, the maximum
amounts of all civil monetary penalties
under the Securities Act of 1933, the
Securities Exchange Act of 1934, the
Investment Company Act of 1940, the
Investment Advisers Act of 1940, and
certain penalties under the SarbanesOxley Act of 2002 are adjusted for
inflation in accordance with Table IV to
this subpart. The adjustments set forth
in Table IV apply to violations occurring
after March 3, 2009.
17 44
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U.S.C. 3501 et seq.
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Federal Register / Vol. 74, No. 40 / Tuesday, March 3, 2009 / Rules and Regulations
Table IV to Subpart E
Civil monetary penalty inflation adjustments
U.S. Code citation
Civil monetary penalty description
Securities and Exchange Commission:
15 U.S.C. 77t(d) .......................................
....................................................................
For natural person ..........................................
For any other person .....................................
For natural person/fraud ................................
For any other person/fraud ............................
For natural person/substantial losses or risk
of losses to others.
For any other person/substantial losses or
risk of losses to others.
Exchange Act/failure to file information documents, reports.
Foreign Corrupt Practices—any issuer ..........
Foreign Corrupt Practices—any agent or
stockholder acting on behalf of issuer.
Insider Trading—controlling person ...............
For natural person ..........................................
For any other person .....................................
For natural person/fraud ................................
For any other person/fraud ............................
For natural person/substantial losses to others/gains to self.
For any other person/substantial losses to
others/gain to self.
For natural person ..........................................
For any other person .....................................
For natural person/fraud ................................
For any other person/fraud ............................
For natural person/substantial losses or risk
of losses to others.
For any other person/substantial losses or
risk of losses to others.
For natural person ..........................................
For any other person .....................................
For natural person/fraud ................................
For any other person/fraud ............................
For natural person/substantial losses to others/gains to self.
For any other person/substantial losses to
others/gain to self.
For natural person ..........................................
For any other person .....................................
For natural person/fraud ................................
For any other person/fraud ............................
For natural person/substantial losses or risk
of losses to others.
For any other person/substantial losses or
risk of losses to others.
For natural person ..........................................
For any other person .....................................
For natural person/fraud ................................
For any other person/fraud ............................
For natural person/substantial losses to others/gains to self.
For any other person/substantial losses to
others/gain to self.
For natural person ..........................................
For any other person .....................................
For natural person/fraud ................................
For any other person/fraud ............................
For natural person/substantial losses or risk
of losses to others.
For any other person/substantial losses or
risk of losses to others.
For natural person ..........................................
For any other person .....................................
For natural person ..........................................
For any other person .....................................
15 U.S.C. 78ff(b) ......................................
15 U.S.C. 78ff(c)(1)(B) .............................
15 U.S.C. 78ff(c)(2)(C) ............................
15 U.S.C. 78u–1(a)(3) .............................
15 U.S.C. 78u–2 ......................................
15 U.S.C. 78u(d)(3) .................................
15 U.S.C. 80a–9(d) ..................................
15 U.S.C. 80a–41(e) ................................
15 U.S.C. 80b–3(i) ...................................
15 U.S.C. 80b–9(e) ..................................
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Year penalty
amount was
last
adjusted
15 U.S.C. 7215(c)(4)(D)(i) .......................
15 U.S.C. 7215(c)(4)(D)(ii) ......................
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Maximum
penalty
amount
pursuant to
last
adjustment
9161
Adjusted
maximum
penalty
amount
2001
2005
2005
2005
2005
$6,500
65,000
65,000
325,000
130,000
$7,500
75,000
75,000
375,000
150,000
2005
650,000
725,000
1996
110
110
1996
1996
11,000
11,000
16,000
16,000
2005
2001
2005
2005
2005
2005
1,275,000
6,500
65,000
65,000
325,000
130,000
1,425,000
7,500
75,000
75,000
375,000
150,000
2005
650,000
725,000
2001
2005
2005
2005
2005
6,500
65,000
65,000
325,000
130,000
7,500
75,000
75,000
375,000
150,000
2005
650,000
725,000
2001
2005
2005
2005
2005
6,500
65,000
65,000
325,000
130,000
7,500
75,000
75,000
375,000
150,000
2005
650,000
725,000
2001
2005
2005
2005
2005
6,500
65,000
65,000
325,000
130,000
7,500
75,000
75,000
375,000
150,000
2005
650,000
725,000
2001
2005
2005
2005
2005
6,500
65,000
65,000
325,000
130,000
7,500
75,000
75,000
375,000
150,000
2005
650,000
725,000
2001
2005
2005
2005
2005
6,500
65,000
65,000
325,000
130,000
7,500
75,000
75,000
375,000
150,000
2005
650,000
725,000
2005
2005
2005
2005
110,000
2,100,000
800,000
15,825,000
120,000
2,375,000
900,000
17,800,000
03MRR1
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Federal Register / Vol. 74, No. 40 / Tuesday, March 3, 2009 / Rules and Regulations
Dated: February 25, 2009.
By the Commission.
Elizabeth M. Murphy,
Secretary.
[FR Doc. E9–4379 Filed 3–2–09; 8:45 am]
Kay Morice (technical issues), Office of
Energy Market Regulation, Federal
Energy Regulatory Commission, 888
First Street, NE., Washington, DC
20426, (202) 502–6507.
Caroline Daly (technical issues), Office
of Energy Market Regulation, Federal
Energy Regulatory Commission, 888
First Street, NE., Washington, DC
20426, (202) 502–8931.
Gary D. Cohen (legal issues), Office of
the General Counsel, Federal Energy
Regulatory Commission, 888 First
Street, NE., Washington, DC 20426,
(202) 502–8321.
SUPPLEMENTARY INFORMATION:
BILLING CODE 8011–01–P
DEPARTMENT OF ENERGY
Federal Energy Regulatory
Commission
18 CFR Part 284
[Docket No. RM96–1–029; Order No.
587–T]
Standards for Business Practices for
Interstate Natural Gas Pipelines
Issued February 24, 2009.
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AGENCY: Federal Energy Regulatory
Commission.
ACTION: Final Rule.
SUMMARY: The Federal Energy
Regulatory Commission (Commission) is
amending its regulations that establish
standards for interstate natural gas
pipeline business practices and
electronic communications to
incorporate by reference into its
regulations the most recent version of
the standards, Version 1.8, adopted by
the Wholesale Gas Quadrant (WGQ) of
the North American Energy Standards
Board (NAESB) and to make other
minor corrections. This rule upgrades
the Commission’s current business
practice and communication standards
to reflect the latest version approved by
the NAESB WGQ (i.e., the Version 1.8
Standards), and is necessary to increase
the efficiency of the pipeline grid, make
pipelines’ electronic communications
more secure, and is consistent with the
mandate that agencies provide for
electronic disclosure of information.
DATES: This rule will become effective
April 2, 2009. Natural gas pipelines are
required to implement these standards
on the first day of the month three
months after the effective date of this
rule and file tariff sheets to reflect the
changed standards on the first day of the
month one month after the effective date
of this rule. The Director of the Federal
Register has approved the incorporation
by reference of the standards addressed
in this Final Rule effective April 2,
2009.
FOR FURTHER INFORMATION CONTACT:
William Lohrman (technical issues),
Office of Energy Market Regulation,
Federal Energy Regulatory
Commission, 888 First Street, NE.,
Washington, DC 20426, (202) 502–
8070.
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Before Commissioners: Jon Wellinghoff,
Acting Chairman; Suedeen G. Kelly,
Marc Spitzer, and Philip D. Moeller
1. The Federal Energy Regulatory
Commission (Commission) is amending
§ 284.12 of its regulations (which
establishes standards for natural gas
pipeline business practices and
electronic communications) 1 to
incorporate by reference the most recent
version (Version 1.8) of the standards
promulgated by the Wholesale Gas
Quadrant (WGQ) of the North American
Energy Standards Board (NAESB). In
addition, the Commission is amending
§ 284.12(b) of its regulations to make
minor corrections.
I. Background
2. Since 1996, in the Order No. 587
series,2 the Commission has adopted
regulations to standardize the business
practices and communication
methodologies of interstate pipelines in
order to create a more integrated and
efficient pipeline grid. In this series of
orders, the Commission incorporated by
reference consensus standards
developed by the WGQ (formerly the
Gas Industry Standards Board or GISB),
a private consensus standards developer
composed of members from all segments
of the natural gas industry. The WGQ is
an accredited standards organization
under the auspices of the American
National Standards Institute (ANSI).
3. On September 14, 2007, NAESB
submitted a report to the Commission
stating that it had adopted a new
version of its standards, Version 1.8,
dated September 30, 2006.3 NAESB
reported that the Version 1.8 Standards
include a new set of standards for
1 18
CFR 284.12.
for Business Practices of Interstate
Natural Gas Pipelines, Order No. 587, 61 FR 39053
(July 26, 1996), FERC Stats. & Regs., ¶ 31,038
(1996).
3 Some of the standards subsequently were
corrected and these minor corrections were applied
to the Version 1.8 Capacity Release Related
Standards on Dec. 13, 2006.
2 Standards
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‘‘Internet Electronic Transport’’ that is
applicable to the retail gas and electric
markets as well as the wholesale gas
market,4 changes to the Electronic
Delivery Mechanism (EDM) Related
Standards, an additional standard
related to reporting on gas quality, and
maintenance changes to the Nomination
Related Standards and Flowing Gas
Related Standards. NAESB also reported
that the Version 1.8 standards included
several standards already adopted by
the Commission, including gas-electric
coordination standards to support
communications between pipelines and
gas-fired generators,5 gas quality
reporting standards to support reporting
of gas quality specifications and
reporting of the underlying assumptions
and methodologies, and business
practice standards to support
implementation of Order No. 2004 on
Standards of Conduct.6
4. On September 18, 2008, the
Commission issued a Notice of
Proposed Rulemaking (NOPR) 7 that
proposed to incorporate by reference the
WGQ’s Version 1.8 Standards and to
make minor corrections to § 284.12(b) of
the Commission’s regulations. The sole
comment was filed by American Gas
Association (AGA), which supported
the adoption of Version 1.8 of the
standards, but requested modifications
to the Commission’s relationship with
NAESB.
II. Discussion
5. The Commission’s NOPR proposal
to amend part 284 of its regulations to
incorporate by reference Version 1.8 of
the NAESB WGQ’s consensus
standards,8 with the two exceptions
4 In this Final Rule, the Commission is requiring
interstate natural gas pipelines to comply with
these standards. We are not making these standards
mandatory for retail transactions.
5 Standards for Business Practices for Interstate
Natural Gas Pipelines; Standards for Business
Practices for Public Utilities, Order No. 698, 72 FR
38757 (July 16, 2007), FERC Stats, & Regs ¶ 31,251
(2007); order granting clarification and denying
reh’g, Order No. 698–A, 121 FERC ¶ 61,264 (2007).
6 Standards of Conduct for Transmission
Providers, Order No. 2004, 68 FR 69134 (Dec. 11,
2003), FERC Stats. & Regs., ¶ 31,155 (2003); order
on reh’g, Order No. 2004–B, 69 FR 23562 (Apr. 29,
2004), FERC Stats. & Regs., ¶ 31,161 (2004); order
on reh’g, Order No. 2004–B, 69 FR 48371 (Aug. 10,
2004), FERC Stats. & Regs., ¶ 31,166 (2004); order
on reh’g, Order No. 2004–C, 70 FR 284 (Jan. 4,
2005), FERC Stats. & Regs., ¶ 31,172 (2004); order
on clarification and reh’g, Order No. 2004–D, 110
FERC ¶ 61,320 (2005).
7 Standards for Business Practices for Interstate
Natural Gas Pipelines, Notice of Proposed
Rulemaking, 73 FR 55460 (Sep. 18, 2008), FERC
Stats. & Regs. ¶ 32,636 (2008).
8 In its Version 1.8 Standards, the WGQ made the
following changes to its Version 1.7 standards:
It revised Principles 1.1.9, 4.1.2, 4.1.6, and 4.1.7,
Definitions 2.2.4, 4.2.1, 4.2.11, 4.2.12, 4.2.13, and
4.2.20, Standards 1.3.54, 1.3.60, 1.3.61, 1.3.63,
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]]>Agencies
[Federal Register Volume 74, Number 40 (Tuesday, March 3, 2009)]
[Rules and Regulations]
[Pages 9159-9162]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-4379]
========================================================================
Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
Prices of new books are listed in the first FEDERAL REGISTER issue of each
week.
========================================================================
Federal Register / Vol. 74, No. 40 / Tuesday, March 3, 2009 / Rules
and Regulations
[[Page 9159]]
SECURITIES AND EXCHANGE COMMISSION
17 CFR Part 201
[Release Nos. 33-9009; 34-59449; IA-2845; IC-28635]
Adjustments to Civil Monetary Penalty Amounts
AGENCY: Securities and Exchange Commission.
ACTION: Final rule.
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SUMMARY: This rule implements the Federal Civil Penalties Inflation
Adjustment Act of 1990, as amended by the Debt Collection Improvement
Act of 1996. The Commission is adopting a rule adjusting for inflation
the maximum amount of civil monetary penalties under the Securities Act
of 1933, the Securities Exchange Act of 1934, the Investment Company
Act of 1940, the Investment Advisers Act of 1940, and certain penalties
under the Sarbanes-Oxley Act of 2002.
DATES: Effective Date: March 3, 2009.
FOR FURTHER INFORMATION CONTACT: Richard A. Levine, Assistant General
Counsel, at (202) 551-5168, or James A. Cappoli, Office of the General
Counsel, at (202) 551-7923.
SUPPLEMENTARY INFORMATION:
I. Background
This rule implements the Debt Collection Improvement Act of 1996
(``DCIA'').\1\ The DCIA amended the Federal Civil Penalties Inflation
Adjustment Act of 1990 (``FCPIAA'') \2\ to require each federal agency
to adopt regulations at least once every four years that adjust for
inflation the maximum amount of the civil monetary penalties (``CMPs'')
under the statutes administered by the agency.\3\
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\1\ Public Law 104-134, 110 Stat. 1321-373 (1996) (codified at
28 U.S.C. 2461 note).
\2\ 28 U.S.C. 2461 note.
\3\ Increased CMPs apply only to violations that occur after the
increase takes effect.
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A civil monetary penalty (``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.\4\ This definition covers the
monetary penalty provisions contained in the statutes administered by
the Commission. In addition, this definition encompasses the civil
monetary penalties that may be imposed by the Public Company Accounting
Oversight Board (the ``PCAOB'') in its disciplinary proceedings
pursuant to 15 U.S.C. 7215(c)(4)(D).\5\
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\4\ 28 U.S.C. 2461 note (3)(2).
\5\ 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 Securities Exchange
Act of 1934. As a result, penalties assessed by the PCAOB in its
disciplinary proceedings are penalties ``enforced'' by the
Commission for purposes of the Act. See Adjustments to Civil
Monetary Penalty Amounts, Release No. 33-8530 (Feb. 4, 2005) [70 FR
7606 (Feb. 14, 2005)].
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The DCIA requires that the penalties be adjusted by the cost-of-
living adjustment set forth in Section 5 of the FCPIAA.\6\ The cost-of-
living adjustment is defined in the FCPIAA as the percentage by which
the U.S. Department of Labor's Consumer Price Index for all-urban
consumers (``CPI-U'') \7\ for the month of June for the year preceding
the adjustment exceeds the CPI-U for the month of June for the year in
which the amount of the penalty was last set or adjusted pursuant to
law.\8\ The statute contains specific rules for rounding each increase
based on the size of the penalty.\9\ Agencies do not have discretion
over whether to adjust a maximum CMP, or the method used to determine
the adjustment. Although the DCIA imposes a 10 percent maximum increase
for each penalty for the first adjustment pursuant thereto, that
limitation does not apply to subsequent adjustments.
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\6\ 28 U.S.C. 2461 note (5).
\7\ 28 U.S.C. 2461 note (3)(3).
\8\ 28 U.S.C. 2461 note (5)(b).
\9\ 28 U.S.C. 2461 note (5)(a)(1)-(6).
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The Commission administers four statutes that provide for civil
monetary penalties: the Securities Act of 1933; the Securities Exchange
Act of 1934; the Investment Company Act of 1940; and the Investment
Advisers Act of 1940. In addition, the Sarbanes-Oxley Act of 2002
provides the PCAOB (over which the Commission has jurisdiction)
authority to levy civil monetary penalties in its disciplinary
proceedings.\10\ Penalties administered by the Commission were last
adjusted by rules effective February 14, 2005.\11\ The DCIA requires
the civil monetary penalties to be adjusted for inflation at least once
every four years. The Commission is therefore obligated by statute to
increase the maximum amount of each penalty by the appropriate
formulated amount.
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\10\ 15 U.S.C. 7215(c)(4)(D).
\11\ See 17 CFR 201.1003.
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Accordingly, the Commission is adopting an amendment to 17 CFR Part
201 to add Sec. 201.1004 and Table IV to Subpart E, increasing the
amount of each civil monetary penalty authorized by the Securities Act
of 1933, the Securities Exchange Act of 1934, the Investment Company
Act of 1940, the Investment Advisers Act of 1940, and certain penalties
under the Sarbanes-Oxley Act of 2002. The adjustments set forth in the
amendment apply to violations occurring after the effective date of the
amendment.
II. Summary of the Calculation
To explain the inflation adjustment calculation for CMP amounts
that were last adjusted in 2005, we will use the following example.
Under the current provisions, the Commission may impose a maximum CMP
of $1,275,000 for certain insider trading violations by a controlling
person. To determine the new CMP amounts under the amendment, first we
determine the appropriate CPI-U for June of the calendar year preceding
the year of adjustment. Because we are adjusting CMPs in 2009, we use
the CPI-U for June of 2008, which was 218.815. We must also determine
the CPI-U for June of the year the CMP was last adjusted for inflation.
Because the Commission last adjusted this CMP in 2005, we use the CPI-U
for June of 2005, which was 194.5.
Second, we calculate the cost-of-living adjustment or inflation
factor. To
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do this we divide the CPI for June of 2008 (218.815) by the CPI for
June of 2005 (194.5). Our result is 1.1250.
Third, we calculate the raw inflation adjustment (the inflation
adjustment before rounding). To do this, we multiply the maximum
penalty amounts by the inflation factor. In our example, $1,275,000
multiplied by the inflation factor of 1.1250 equals $1,434,391.
Fourth, we round the raw inflation amounts according to the
rounding rules in Section 5(a) of the FCPIAA. Since we round only the
increase amount, we calculate the increased amount by subtracting the
current maximum penalty amounts from the raw maximum inflation
adjustments. Accordingly, the increase amount for the maximum penalty
in our example is $159,391 (i.e., $1,434,391 less $1,275,000). Under
the rounding rules, if the penalty is greater than $200,000, we round
the increase to the nearest multiple of $25,000. Therefore, the maximum
penalty increase in our example is $150,000.
Fifth, we add the rounded increase to the maximum penalty amount
last set or adjusted. In our example, $1,275,000 plus $150,000 yields a
maximum inflation adjustment penalty amount of $1,425,000.\12\
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\12\ The adjustments in Table IV to Subpart E of Part 201
reflect that the operation of the statutorily mandated computation,
together with rounding rules, does not result in any adjustment to
one penalty. This particular penalty will be subject to slightly
different treatment when calculating the next adjustment. Under the
statute, when we next adjust these penalties, we will be required to
use the CPI-U for June of the year when this particular penalty was
``last adjusted,'' rather than the CPI-U for 2009.
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III. Related Matters
A. Administrative Procedure Act--Immediate Effectiveness of Final Rule
Under the Administrative Procedure Act (``APA''), a final rule may
be issued without public notice and comment if the agency finds good
cause that notice and comment are impractical, unnecessary, or contrary
to public interest.\13\ Because the Commission is required by statute
to adjust the civil monetary penalties within its jurisdiction by the
cost-of-living adjustment formula set forth in Section 5 of the FCPIAA,
the Commission finds that good cause exists to dispense with public
notice and comment pursuant to the notice and comment provisions of the
APA.\14\ Specifically, the Commission finds that because the adjustment
is mandated by Congress and does not involve the exercise of Commission
discretion or any policy judgments, public notice and comment is
unnecessary.\15\
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\13\ 5 U.S.C. 553(b)(3)(B).
\14\ 5 U.S.C. 553(b)(3)(B).
\15\ A regulatory flexibility analysis under the Regulatory
Flexibility Act (``RFA'') is required only when an agency must
publish a general notice of proposed rulemaking for notice and
comment. See 5 U.S.C. 603. As noted above, notice and comment are
not required for this final rule. Therefore, the RFA does not apply.
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Under the DCIA, agencies must make the required inflation
adjustment to civil monetary penalties: (1) According to a very
specific formula in the statute; and (2) within four years of the last
inflation adjustment. Agencies have no discretion as to the amount of
the adjustment and have limited discretion as to the timing of the
adjustment, in that agencies are required to make the adjustment at
least once every four years. The regulation discussed herein is
ministerial, technical, and noncontroversial. Furthermore, because the
regulation concerns penalties for conduct that is already illegal under
existing law, there is no need for affected parties to have thirty days
prior to the effectiveness of the regulation and amendments to adjust
their conduct. Accordingly, the Commission believes that there is good
cause to make this regulation effective immediately upon
publication.\16\
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\16\ Additionally, this finding satisfies the requirements for
immediate effectiveness under the Small Business Regulatory
Enforcement Fairness Act. See 5 U.S.C. 808(2); see also id.
801(a)(4).
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B. Cost-Benefit Analysis
The Commission is sensitive to the costs and benefits that result
from its rules. This regulation merely adjusts civil monetary penalties
in accordance with inflation as required by the DCIA, and has no impact
on disclosure or compliance costs. The benefit provided by the
inflationary adjustment to the maximum civil monetary penalties is that
of maintaining the level of deterrence effectuated by the civil
monetary penalties, and not allowing such deterrent effect to be
diminished by inflation. Furthermore, Congress, in mandating the
inflationary adjustments, has already determined that any possible
increase in costs is justified by the overall benefits of such
adjustments.
C. Paperwork Reduction Act
This rule does not contain any collection of information
requirements as defined by the Paperwork Reduction Act of 1995 as
amended.\17\
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\17\ 44 U.S.C. 3501 et seq.
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D. Statutory Basis
The Commission is adopting these amendments to 17 CFR Part 201,
Subpart E pursuant to the directives and authority of the DCIA, Public
Law 104-134, 110 Stat. 1321-373 (1996).
List of Subjects in 17 CFR Part 201
Administrative practice and procedure, Claims, Confidential
business information, Lawyers, Securities.
Text of Amendment
0
For the reasons set forth in the preamble, part 201, title 17, chapter
II of the Code of Federal Regulations is amended as follows:
PART 201--RULES OF PRACTICE
Subpart E--Adjustment of Civil Monetary Penalties
0
1. The authority citation for part 201, Subpart E, is revised to read
as follows:
Authority: 28 U.S.C. 2461 note.
0
2. Section 201.1004 and Table IV to Subpart E are added to read as
follows:
Sec. 201.1004 Adjustment of civil monetary penalties--2009.
As required by the Debt Collection Improvement Act of 1996, the
maximum amounts of all civil monetary penalties under the Securities
Act of 1933, the Securities Exchange Act of 1934, the Investment
Company Act of 1940, the Investment Advisers Act of 1940, and certain
penalties under the Sarbanes-Oxley Act of 2002 are adjusted for
inflation in accordance with Table IV to this subpart. The adjustments
set forth in Table IV apply to violations occurring after March 3,
2009.
[[Page 9161]]
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Table IV to Subpart E Civil monetary penalty Maximum
------------------------------------ inflation adjustments penalty Adjusted
----------------------------- Year penalty amount maximum
amount was pursuant to penalty
U.S. Code citation Civil monetary penalty last adjusted last amount
description adjustment
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Securities and Exchange Commission: ........................... .............. .............. ..............
15 U.S.C. 77t(d)............... For natural person......... 2001 $6,500 $7,500
For any other person....... 2005 65,000 75,000
For natural person/fraud... 2005 65,000 75,000
For any other person/fraud. 2005 325,000 375,000
For natural person/ 2005 130,000 150,000
substantial losses or risk
of losses to others.
For any other person/ 2005 650,000 725,000
substantial losses or risk
of losses to others.
15 U.S.C. 78ff(b).............. Exchange Act/failure to 1996 110 110
file information
documents, reports.
15 U.S.C. 78ff(c)(1)(B)........ Foreign Corrupt Practices-- 1996 11,000 16,000
any issuer.
15 U.S.C. 78ff(c)(2)(C)........ Foreign Corrupt Practices-- 1996 11,000 16,000
any agent or stockholder
acting on behalf of issuer.
15 U.S.C. 78u-1(a)(3).......... Insider Trading-- 2005 1,275,000 1,425,000
controlling person.
15 U.S.C. 78u-2................ For natural person......... 2001 6,500 7,500
For any other person....... 2005 65,000 75,000
For natural person/fraud... 2005 65,000 75,000
For any other person/fraud. 2005 325,000 375,000
For natural person/ 2005 130,000 150,000
substantial losses to
others/gains to self.
For any other person/ 2005 650,000 725,000
substantial losses to
others/gain to self.
15 U.S.C. 78u(d)(3)............ For natural person......... 2001 6,500 7,500
For any other person....... 2005 65,000 75,000
For natural person/fraud... 2005 65,000 75,000
For any other person/fraud. 2005 325,000 375,000
For natural person/ 2005 130,000 150,000
substantial losses or risk
of losses to others.
For any other person/ 2005 650,000 725,000
substantial losses or risk
of losses to others.
15 U.S.C. 80a-9(d)............. For natural person......... 2001 6,500 7,500
For any other person....... 2005 65,000 75,000
For natural person/fraud... 2005 65,000 75,000
For any other person/fraud. 2005 325,000 375,000
For natural person/ 2005 130,000 150,000
substantial losses to
others/gains to self.
For any other person/ 2005 650,000 725,000
substantial losses to
others/gain to self.
15 U.S.C. 80a-41(e)............ For natural person......... 2001 6,500 7,500
For any other person....... 2005 65,000 75,000
For natural person/fraud... 2005 65,000 75,000
For any other person/fraud. 2005 325,000 375,000
For natural person/ 2005 130,000 150,000
substantial losses or risk
of losses to others.
For any other person/ 2005 650,000 725,000
substantial losses or risk
of losses to others.
15 U.S.C. 80b-3(i)............. For natural person......... 2001 6,500 7,500
For any other person....... 2005 65,000 75,000
For natural person/fraud... 2005 65,000 75,000
For any other person/fraud. 2005 325,000 375,000
For natural person/ 2005 130,000 150,000
substantial losses to
others/gains to self.
For any other person/ 2005 650,000 725,000
substantial losses to
others/gain to self.
15 U.S.C. 80b-9(e)............. For natural person......... 2001 6,500 7,500
For any other person....... 2005 65,000 75,000
For natural person/fraud... 2005 65,000 75,000
For any other person/fraud. 2005 325,000 375,000
For natural person/ 2005 130,000 150,000
substantial losses or risk
of losses to others.
For any other person/ 2005 650,000 725,000
substantial losses or risk
of losses to others.
15 U.S.C. 7215(c)(4)(D)(i)..... For natural person......... 2005 110,000 120,000
For any other person....... 2005 2,100,000 2,375,000
15 U.S.C. 7215(c)(4)(D)(ii).... For natural person......... 2005 800,000 900,000
For any other person....... 2005 15,825,000 17,800,000
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[[Page 9162]]
Dated: February 25, 2009.
By the Commission.
Elizabeth M. Murphy,
Secretary.
[FR Doc. E9-4379 Filed 3-2-09; 8:45 am]
BILLING CODE 8011-01-P
