Adjustments to Civil Monetary Penalty Amounts, 43042-43047 [2016-15541]
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Federal Register / Vol. 81, No. 127 / Friday, July 1, 2016 / Rules and Regulations
Subpart 1214.7—The Authority of the
NASA Commander
§ 1214.700
Scope.
This subpart establishes the authority
of the NASA Commander of a NASA
mission, excluding missions related to
the ISS and activities licensed under
Title 51 U.S.C. Chapter 509, to enforce
order and discipline during a mission
and to take whatever action in his/her
judgment is reasonable and necessary
for the protection, safety, and well-being
of all personnel and on-board
equipment, including the spacecraft and
payloads. During the final launch
countdown, following crew ingress, the
NASA Commander has the authority to
enforce order and discipline among all
on-board personnel. During emergency
situations prior to liftoff, the NASA
Commander has the authority to take
whatever action in his/her judgment is
necessary for the protection or security,
safety, and well-being of all personnel
on board.
§ 1214.701
Definitions.
(a) The flight crew consists of the
NASA Commander, astronaut crew
members, and [any] other persons
aboard the spacecraft.
(b) A mission is the period including
the flight-phases from launch to landing
on the surface of the Earth—a single
round trip. (In the case of a forced
landing, the NASA Commander’s
authority continues until a competent
authority takes over the responsibility
for the persons and property aboard).
(c) The flight-phases consist of
launch, in orbit/transit, extraterrestrial
mission, deorbit, entry, and landing,
and post-landing back on Earth.
(d) A payload is a specific
complement of instruments, space
equipment, and support hardware/
software carried into space to
accomplish a scientific mission or
discrete activity.
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§ 1214.702 Authority and responsibility of
the NASA Commander.
(a) During all flight phases, the NASA
Commander shall have the absolute
authority to take whatever action is in
his/her discretion necessary to:
(1) Enhance order and discipline.
(2) Provide for the safety and wellbeing of all personnel on board.
(3) Provide for the protection of the
spacecraft and payloads.
The NASA Commander shall have
authority, throughout the mission, to
use any reasonable and necessary
means, including the use of physical
force, to achieve this end.
(b) The authority of the NASA
Commander extends to any and all
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personnel on board the spacecraft
including Federal officers and
employees and all other persons
whether or not they are U.S. nationals.
(c) The authority of the NASA
Commander extends to all spaceflight
elements, payloads, and activities
originating with or defined to be a part
of the NASA mission.
(d) The NASA Commander may,
when he/she deems such action to be
necessary for the safety of the spacecraft
and personnel on board, subject any of
the personnel on board to such restraint
as the circumstances require until such
time as delivery of such individual or
individuals to the proper authorities is
possible.
§ 1214.703
Chain of command.
(a) The NASA Commander is a
trained NASA astronaut who has been
designated to serve as commander on a
NASA mission and who shall have the
authority described in § 1214.702 of this
part. Under normal flight conditions
(other than emergencies or when
otherwise designated) the NASA
Commander is responsible to the
Mission Flight Director.
(b) Before each flight, the other flight
crewmembers will be designated in the
order in which they will assume the
authority of the NASA Commander
under this subpart in the event that the
NASA Commander is not able to carry
out his/her duties.
(c) The determinations, if any, that a
crewmember in the chain of command
is not able to carry out his or her
command duties and is, therefore, to be
relieved of command, and that another
crewmember in the chain of command
is to succeed to the authority of the
NASA Commander, will be made by the
NASA Administrator or his/her
designee.
§ 1214.704
Violations.
(a) All personnel on board the NASA
mission are subject to the authority of
the NASA Commander and shall
conform to his/her orders and direction
as authorized by this subpart.
(b) This subpart is a regulation within
the meaning of 18 U.S.C. 799, and
whoever willfully violates, attempts to
violate, or conspires to violate any
provision of this subpart or any order or
direction issued under this subpart shall
be subject to fines and imprisonment, as
specified by law.
Subpart 1214.8—[Removed and
Reserved]
8. Remove and reserve subpart 1214.8,
consisting sections 1214.800 through
1214.813.
*
*
*
*
*
■
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Subpart 1214.17—[Removed and
Reserved]
9. Remove and reserve subpart
1214.17, consisting of sections
1214.1700 through 1214.1707.
■
Cheryl E. Parker,
Federal Register Liaison Officer.
[FR Doc. 2016–15431 Filed 6–30–16; 8:45 am]
BILLING CODE P
SECURITIES AND EXCHANGE
COMMISSION
17 CFR Part 201
[Release Nos. 33–10104; 34–78156; IA–
4437; IC–32162; File No. S7–11–16]
RIN 3235–AL94
Adjustments to Civil Monetary Penalty
Amounts
Securities and Exchange
Commission.
ACTION: Interim final rule; request for
comment.
AGENCY:
The Securities and Exchange
Commission (the ‘‘Commission’’) is
adopting an interim final rule to
implement the Federal Civil Penalties
Inflation Adjustment Act Improvements
Act of 2015, which amended the Federal
Civil Penalties Inflation Adjustment Act
of 1990, as previously amended by the
Debt Collection Improvement Act of
1996. This interim final rule adjusts 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: This interim final
rule is effective on August 1, 2016.
Comment Date: Comments on the
interim final rule should be received on
or before August 15, 2016.
ADDRESSES: Comments may be
submitted by any of the following
methods:
SUMMARY:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/proposed.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number S7–
11–16 on the subject line; or
• Use the Federal eRulemaking Portal
(https://www.regulations.gov). Follow the
instructions for submitting comments.
Paper Comments
• Send paper comments to Brent J.
Fields, Secretary, Securities and
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Federal Register / Vol. 81, No. 127 / Friday, July 1, 2016 / Rules and Regulations
Exchange Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number S7–11–16. This file number
should be included on the subject line
if email is used. To help us process and
review your comments more efficiently,
please use only one method. The
Commission will post all comments on
the Commission’s Web site (https://
www.sec.gov/rules/proposed.shtml).
Comments are also available for Web
site viewing and printing in the
Commission’s Public Reference Room,
100 F Street NE., Washington, DC
20549, on official business days
between the hours of 10:00 a.m. and
3:00 p.m. All comments received will be
posted without change; we do not edit
personal identifying information from
submissions. You should submit only
information that you wish to make
available publicly.
FOR FURTHER INFORMATION CONTACT:
James A. Cappoli, Assistant General
Counsel, Office of the General Counsel,
at (202) 551–7923, or Stephen M. Ng,
Senior Counsel, Office of the General
Counsel, at (202) 551–7957.
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I. Background
This interim final rule implements the
Federal Civil Penalties Inflation
Adjustment Act Improvements Act of
2015 (the ‘‘2015 Act’’),1 which amends
the Federal Civil Penalties Inflation
Adjustment Act of 1990 (the ‘‘Inflation
Adjustment Act’’).2 The Inflation
Adjustment Act had previously been
amended by the Debt Collection
Improvement Act of 1996 (‘‘DCIA’’) 3 to
require that each federal agency 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. Pursuant to
the requirements of the DCIA, the
Commission has previously adopted
regulations in 1996, 2001, 2005, 2009,
and 2013 to adjust the maximum
amount of the CMPs under the statutes
the Commission administers.4
The 2015 Act replaces the inflation
adjustment mechanism prescribed in
the DCIA and all previous inflation
adjustments made pursuant to the DCIA
with a new mechanism for calculating
the inflation-adjusted amount of CMPs.
Each agency must first adjust the
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, § 31001(s)(1), Apr.
26, 1996, 110 Stat. 1321–373, codified at 28 U.S.C.
2461 note.
4 See 17 CFR part 201.1001 to 1005, and Tables
I to V to Subpart E.
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maximum amount of CMPs 5 with an
initial ‘‘catch-up’’ adjustment.6 Each
agency must then perform subsequent
annual adjustments for inflation.7 This
interim final rule implements the initial
‘‘catch-up adjustment,’’ which increases
CMP amounts based on the percentage
change between the Consumer Price
Index for all Urban Consumers (‘‘CPI–
U’’) for the month of October in the year
the civil penalty was established or
previously adjusted by a statute or
regulation other than the Inflation
Adjustment Act, and the October 2015
CPI–U.8 Annual inflation adjustments
after this first catch-up adjustment will
then be based on the percentage change
between the October CPI–U preceding
the date of the last adjustment made
pursuant to the 2015 Act and the prior
year’s October CPI–U.9 Thus, in January
2017, the Commission will again adjust
the maximum amount of the CMPs it
administers based on the percentage
change from the 2015 October CPI–U to
the 2016 October CPI–U.
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 of
1933; the Securities Exchange Act of
1934 (the ‘‘Exchange Act’’); the
Investment Company Act of 1940; and
the Investment Advisers Act of 1940. In
addition, the Sarbanes-Oxley Act of
5 The 2015 Act also applies to minimum penalty
amounts and penalty ranges. See 28 U.S.C. 2461
note Sec. 5(a). All of the statutes administered by
the Commission, however, only include maximum
penalty amounts. Thus, in this interim final rule,
we only refer to the effect of the 2015 Act on
maximum penalty amounts.
6 28 U.S.C. 2461 note Sec. 4(b)(1); Office of
Management and Budget, Implementation of the
Federal Civil Penalties Inflation Adjustment Act
Improvements Act of 2015 (February 24, 2016)
(‘‘OMB Guidance’’) at 1, available at https://
www.whitehouse.gov/sites/default/files/omb/
memoranda/2016/m-16-06.pdf.
7 28 U.S.C. 2461 note Sec. 4(b)(2); OMB Guidance
at 1.
8 28 U.S.C. 2461 note Sec. 5(b)(2); OMB Guidance
at 3. The catch-up adjustment excludes prior
adjustments under the Inflation Adjustment Act,
which were capped at 10 percent and thus
contributed to a decline in the real value of
penalties. See OMB Guidance at 3. The 2015 Act
is intended to remedy this decline. See id.
9 28 U.S.C. 2461 note Sec. 5; OMB Guidance at
4.
10 28 U.S.C. 2461 note Sec. 3(2). Thus the
adjustments prescribed by the 2015 Act do not
apply to penalties written as functions of violations
or to civil penalties based on the defendant’s gross
pecuniary gain. OMB Guidance at 2.
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2002 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 1990 Act encompasses such civil
monetary penalties.12
Accordingly, we are revising 17 CFR
201.1001 and Table I to Subpart E, to
establish revised amounts for each CMP
authorized by the Securities Act, the
Exchange Act, the Investment Company
Act, the Investment Advisers Act, and
certain penalties under the SarbanesOxley Act and removing § 201.1002 and
Table II to Subpart E, § 201.1003 and
Table III to Subpart E, § 201.1004 and
Table IV to Subpart E, and § 201.1005
and Table V to Subpart E. The
adjustments set forth in the amendment
apply to all penalties imposed after the
effective date of this interim final rule,
including to penalties imposed for
violations that occur before the effective
date of the amendment.13
II. Summary of the Calculation
In order to complete the catch-up
adjustment required by the 2015 Act,
the Commission must first identify, for
each penalty, the year and
corresponding penalty amount when the
maximum penalty amount was
established (i.e., as originally enacted by
Congress), or last adjusted (i.e., by
Congress in statute, or by the agency
through regulation), whichever is later,
other than pursuant to the Inflation
Adjustment Act.14
The Commission must then modify
the maximum amount of CMPs based on
the percentage by which the CPI–U for
the month of October 2015, not
seasonally adjusted, exceeds the CPI–U
for the month of October for the
calendar year when the penalty amount
was established or last adjusted. OMB
has provided a table to all agencies that
lists multipliers that can be used to
adjust the maximum penalty amount
11 15
U.S.C. 7215(c)(4)(D).
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)].
13 28 U.S.C. 2461 note Sec. 6; OMB Guidance at
3–4.
14 28 U.S.C. 2461 note Sec. 5(b)(2)(A); OMB
Guidance at 3. References to the Inflation
Adjustment Act here and below include the
amendments made to that Act by the DCIA.
12 The
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based on the year the penalty was
established or last adjusted (the ‘‘CPI–U
Multiplier’’).15 After applying this
multiplier, the Commission must round
all penalty amounts to the nearest
dollar. In accordance with the 2015 Act,
however, the Commission shall not
increase catch-up penalty amounts by
more than 150 percent of the
corresponding penalty amount in effect
on November 2, 2015, including penalty
adjustments made pursuant to the
Inflation Adjustment Act prior to that
date.16
To explain the inflation adjustment
calculation for CMP amounts under the
2015 Act, we provide the following
example based on the CMP for certain
insider trading violations by controlling
persons in Exchange Act Section
21A(a)(3).17
Step 1: The Commission identifies the
year that the CMP was established or
last adjusted and the maximum CMP for
that year. The maximum penalty
amount for this provision was
established in 1988 by the Insider
Trading and Securities Fraud
Enforcement Act of 1988.18 When
established, the maximum penalty
amount for a violation of this provision
was $1,000,000.
Step 2: The Commission multiplies
the maximum penalty amount at the
time the penalty amount was
established or last adjusted by the CPI–
U multiplier, representing the
percentage change in the CPI–U from
October in the year the penalty was
established or last adjusted to October
2015, and rounds that number to the
nearest dollar. Thus, we multiply
$1,000,000 by the multiplier for 1988,
15 28 U.S.C. 2461 note Sec. 5(b)(2)(B); OMB
Guidance at 3, Table A.
16 28 U.S.C. 2461 note Sec. 5(b)(2)(C); OMB
Guidance at 3. Because the 150 percent limitation
is on the amount of the increase, the adjusted
penalty will be up to 250 percent above the amount
in effect on November 2, 2015.
17 15 U.S.C. 78u–1(a)(3).
18 Public Law 100–704, Sec. 3(a)(2), 102 Stat.
4677–4679 (1988). The Dodd-Frank Wall Street
Reform and Consumer Protection Act of 2010
authorized the Commission to impose civil
penalties in cease-and-desist proceedings. See 15
U.S.C. 77h–1(g), 15 U.S.C. 78u–2(b), 15 U.S.C. 80a–
9(d)(1)(B), 15 U.S.C. 80b–3(i)(1)(B). For the
Securities Act, Congress provided this authority in
a new section of that Act, whereas for the Exchange
Act, the Investment Company Act, and the
Investment Advisers Act, Congress cross-referenced
pre-existing penalty amounts for administrative
proceedings that were established in 1990.
Therefore, for the purposes of applying the 2015
Act, the amounts of the penalties for cease-anddesist proceedings under the Securities Act were
established in 2010 and the amounts of the
penalties for cease-and-desist proceedings under
the Exchange Act, the Investment Company Act,
and the Investment Advisers Act were established
in 1990.
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1.97869, to determine a new inflationadjusted maximum CMP of $1,978,690.
Step 3: The Commission identifies the
maximum CMP for the penalty
provision as of November 2, 2015,
including adjustments made pursuant to
the Inflation Adjustment Act. For
Section 21A(a)(3), the maximum CMP
was previously adjusted in 2013
pursuant to the Inflation Adjustment
Act to $1,525,000.19
Step 4: The Commission multiplies
the November 2, 2015 maximum CMP
by 2.5 to determine what a 150 percent
increase from the current penalty would
be. This is the maximum increase in the
CMP that can be made pursuant to the
catch-up adjustment. For Section
21A(a)(3), a 150 percent increase from
the current penalty would be
$3,812,500.
Step 5: The Commission compares the
amount in Step 2 to the amount in Step
4. The lesser of these two amounts will
be the new inflation-adjusted penalty
amount. Because the adjusted penalty
amount in Step 2, $1,978,690, is less
than the maximum penalty allowed in
Step 4, $3,812,500, the new inflation
adjusted penalty amount for Section
21A(a)(3) is $1,978,690.20
III. The Commission Declines To Seek
a Reduced Catch-Up Adjustment
Determination
The 2015 Act allows agencies, after
obtaining concurrence from OMB, to
adjust penalties pursuant to a reduced
catch-up adjustment determination.21 In
making such an adjustment, the agency
must publish a notice of proposed
rulemaking, provide an opportunity for
comment, and determine in a final rule
that a reduced catch-up adjustment
determination is warranted because the
otherwise required increase of a
maximum penalty amount would have
a negative economic impact, or because
the social costs of the otherwise
required adjustment would outweigh
the benefits.22
We have concluded that such a
reduced catch-up adjustment
determination is not necessary and
19 17
CFR 201.1005, Table V.
all of the new inflation-adjusted
penalty amounts listed below were obtained by
multiplying the penalty amount in the year the
penalty was established or last adjusted by the CPI–
U multiplier. The only exception is the civil penalty
for violations of Exchange Act Section 32(b), 15
U.S.C. 78ff(b), in which the inflation-adjusted
penalty amount would have been greater than the
maximum 150 percent increase allowed by the 2015
Act.
21 OMB has stated its expectation that it will only
rarely concur with a proposal to reduce penalty
amounts below that required by the 2015 Act. See
OMB Guidance at 3.
22 28 U.S.C. 2461 note Sec. 4(c); OMB Guidance
at 3.
20 Almost
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instead have adopted the adjustments
prescribed by the 2015 Act. The
increases envisioned by the 2015 Act
ensure that the Commission’s CMPs
maintain their deterrent and remedial
effect and prevent these desired effects
from being diminished by inflation. We
do not believe they will have a negative
economic impact.23 Further, while the
adjustments required by the 2015 Act do
raise the maximum amounts of the
Commission’s CMPs, the percentage
increases in the maximum amounts are
generally consistent with previous
inflation adjustments and the
Commission and the courts always
maintain the discretion to impose a
lower penalty amount if the new
maximum amount would be unjust or
inappropriate in a particular case.
IV. Request for Comment
We request and encourage interested
persons to submit comments on any
aspect of this interim final rule, other
matters that might have an impact on
the rule, and any suggestions for
additional changes. In particular, we
invite comments on whether, contrary
to the conclusion set forth above, the
Commission should seek a reduced
catch-up adjustment determination.
Comments on this topic should address
the statutory bases for requesting a
reduced catch-up adjustment
determination: (1) Whether the
otherwise required increase of the
maximum amount of the CMPs
administered by the Commission would
have a negative economic impact, or (2)
whether the social costs of adopting the
otherwise required increase of the
maximum amount of these CMPs would
outweigh the benefits. With respect to
any such comments, they are of greatest
assistance if accompanied by supporting
data and analysis of the issues listed
above.
V. Procedural and Other Matters
Given that the Commission is not
seeking a reduced catch-up adjustment
determination, the Commission is
required by the 2015 Act to adjust the
CMPs within its jurisdiction for
inflation using a statutorily prescribed
formula and the 2015 Act mandates that
the initial catch-up adjustment be made
through an interim final rule effective
not later than August 1, 2016.24 In light
of this Congressional mandate, the
Commission finds that good cause exists
to dispense with public notice and
comment pursuant to the notice and
comment provisions of the
23 See infra Section VI for the Commission’s
Economic Analysis.
24 28 U.S.C. 2461 note Sec. 4(b)(1).
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Administrative Procedure Act
(‘‘APA’’).25 Under the Regulatory
Flexibility Act (‘‘RFA’’), a regulatory
flexibility analysis is required only
when an agency must publish a general
notice of proposed rulemaking.26 As
noted above, public notice and
comment is not required for this interim
final rule; therefore, a regulatory
flexibility analysis is not required.
Further, this rule does not contain any
collection of information requirements
as defined by the Paperwork Reduction
Act of 1995 as amended.27
VI. Economic Analysis
The Commission is sensitive to the
costs and benefits that result from its
rules. The baseline for this analysis is
the statutory framework described above
in Section I. In enacting the 2015 Act,
Congress directed the Commission to
adjust CMPs in accordance with
inflation. The Commission notes that
this regulation has no impact on
disclosure or compliance costs. The
Commission further notes that the CMPs
ordered in SEC proceedings and PCAOB
disciplinary proceedings in fiscal year
2015 totaled approximately $1,176
million. The inflationary adjustment
required by the 2015 Act results in the
increase of the maximum amount of the
CMPs administered by the Commission
of approximately 7.67% to 11.3%.
Assuming that the Commission is
successful in obtaining civil monetary
penalties in fiscal years subsequent to
the enactment of this regulation in
similar proportion to that obtained in
fiscal year 2015, the inflationary
adjustment pursuant to the new
regulation would result in an increase in
the civil monetary penalties ordered of
approximately $90.1 million to $132.9
million.
24 28
U.S.C. 2461 note Sec. 4(b)(1).
U.S.C. 553(b)(3)(B). This finding also satisfies
the requirements of 5 U.S.C. 808(2), allowing the
amendment to become effective notwithstanding
the requirement of 5 U.S.C. 801 (if a federal agency
finds that notice and public comment are
impractical, unnecessary or contrary to the public
interest, a rule shall take effect at such time as the
federal agency promulgating the rule determines).
26 5 U.S.C. 603.
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This potential increase, however,
overstates the effect of the rule. First,
these figures represent the amount of
penalties that could be potentially
ordered, whereas the amount of
penalties collected in any given year—
the amount of penalties that would
affect the economy—can be lower than
the ordered amount. Second, penalties
imposed in insider trading cases
brought in district court are based on
the profit gained or loss avoided as a
result of the violation rather than by
reference to a statutory dollar amount
that is affected by this regulation.28 The
average annual amount of penalties
obtained in insider trading cases from
FY 2010 through FY 2015 is $108.2
million. Third, in many cases where the
Commission has obtained large civil
monetary penalties, such penalties were
calculated on the basis of the
defendant’s gross pecuniary gain rather
than the maximum penalty dollar
amount set by statute that will be
adjusted by the proposed rule.29 In
addition, the intent of the new
regulation is merely to keep pace with
changes in the economy, not to impose
new costs. Therefore, for the instances
in which CMPs affected by this
rulemaking are imposed, the
Commission does not believe that
adjusting civil monetary penalties
pursuant to the 2015 Act will
significantly affect the amount of
penalties it obtains beyond that
necessary to keep pace with inflation.
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. The costs of implementing
this rule should be negligible because
the only change from the current,
baseline situation is determining
potential penalties using a new
maximum dollar amount.
27 44
28 15
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U.S.C. 3501 et. seq.
U.S.C. 78u–1(a)(2).
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VII. Statutory Basis
The Commission is adopting these
revisions to 17 CFR part 201, subpart E
pursuant to the directives and authority
of the Federal Civil Penalties Inflation
Adjustment Act Improvements Act of
2015, Public Law 114–74, 129 Stat. 599–
601 (Nov. 2, 2015).
List of Subjects in 17 CFR Part 201
Administrative practice and
procedure, Claims, Confidential
business information, Lawyers,
Penalties, 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 by revising Subpart E as set
forth below:
PART 201—RULES OF PRACTICE
Subpart E—Adjustment of Civil Monetary
Penalties
Sec.
201.1001 Adjustment of civil monetary
penalties—2016.
Table I to Subpart E of Part 201— Civil
monetary penalty inflation adjustments.
Authority: 28 U.S.C. 2461 note.
Subpart E—Adjustment of Civil
Monetary Penalties
§ 201.1001 Adjustment of civil monetary
penalties—2016.
As required by the Federal Civil
Penalties Inflation Adjustment Act
Improvements Act of 2015, 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, and the Investment Advisers Act
of 1940, and certain penalties under the
Sarbanes-Oxley Act of 2002 are adjusted
for inflation in accordance with Table I
to this subpart E. The adjustments set
forth in Table I to this subpart E apply
to all penalties imposed after August 1,
2016, including to penalties imposed for
violations that occur before August 1,
2016.
E:\FR\FM\01JYR1.SGM
01JYR1
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Federal Register / Vol. 81, No. 127 / Friday, July 1, 2016 / Rules and Regulations
TABLE I TO SUBPART E OF PART 201—CIVIL MONETARY PENALTY INFLATION ADJUSTMENTS
U.S. Code citation
Securities and Exchange
Commission:
15 U.S.C. 77h–1(g) ................
15 U.S.C. 77t(d) .....................
15 U.S.C. 78ff(b) ....................
15 U.S.C. 78ff(c)(1)(B) ...........
15 U.S.C. 78ff(c)(2)(B) ...........
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) ..............
asabaliauskas on DSK3SPTVN1PROD with RULES
15 U.S.C. 80b–3(i) .................
15 U.S.C. 80b–9(e) ................
VerDate Sep<11>2014
16:44 Jun 30, 2016
Civil monetary penalty description
PO 00000
Frm 00064
Fmt 4700
New adjusted
maximum
penalty
amount
effective
August 1,
2016
Maximum
penalty
amount when
established or
last adjusted
2010
2010
2010
2010
2010
$7,500
75,000
75,000
375,000
150,000
$7,500
80,000
80,000
400,000
160,000
$8,156
81,559
81,559
407,794
163,118
2010
725,000
775,000
788,401
1990
1990
1990
1990
1990
5,000
50,000
50,000
250,000
100,000
7,500
80,000
80,000
400,000
160,000
8,908
89,078
89,078
445,390
178,156
1990
500,000
775,000
890,780
1936
100
210
525
1988
1988
10,000
10,000
16,000
16,000
19,787
19,787
1988
1990
1990
1990
1990
1990
1,000,000
5,000
50,000
50,000
250,000
100,000
1,525,000
7,500
80,000
80,000
400,000
160,000
1,978,690
8,908
89,078
89,078
445,390
178,156
1990
500,000
775,000
890,780
1990
1990
1990
1990
1990
5,000
50,000
50,000
250,000
100,000
7,500
80,000
80,000
400,000
160,000
8,908
89,078
89,078
445,390
178,156
1990
500,000
775,000
890,780
1990
1990
1990
1990
1990
5,000
50,000
50,000
250,000
100,000
7,500
80,000
80,000
400,000
160,000
8,908
89,078
89,078
445,390
178,156
1990
500,000
775,000
890,780
1990
1990
1990
1990
1990
5,000
50,000
50,000
250,000
100,000
7,500
80,000
80,000
400,000
160,000
8,908
89,078
89,078
445,390
178,156
1990
500,000
775,000
890,780
1990
1990
1990
1990
1990
5,000
50,000
50,000
250,000
100,000
7,500
80,000
80,000
400,000
160,000
8,908
89,078
89,078
445,390
178,156
1990
500,000
775,000
890,780
1990
1990
1990
5,000
50,000
50,000
7,500
80,000
80,000
8,908
89,078
89,078
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 or gains to self.
For any other person/substantial losses or
risk of losses to others or 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.
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 or
risk of losses to others or gains to self.
For any other person/substantial losses or
risk of losses to others or 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 or
risk of losses to others or gains to self.
For any other person/substantial losses or
risk of losses to others or 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 or
risk of losses to others or gains to self.
For any other person/substantial losses or
risk of losses to others or gain to self.
For natural person .......................................
For any other person ...................................
For natural person/fraud ..............................
Jkt 238001
Maximum
penalty
amount in
effect on
November 2,
2015
Year penalty
amount was
established or
last adjusted *
Sfmt 4700
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Federal Register / Vol. 81, No. 127 / Friday, July 1, 2016 / Rules and Regulations
TABLE I TO SUBPART E OF PART 201—CIVIL MONETARY PENALTY INFLATION ADJUSTMENTS—Continued
U.S. Code citation
15 U.S.C. 7215(c)(4)(D)(i) .....
15 U.S.C. 7215(c)(4)(D)(ii) ....
Maximum
penalty
amount in
effect on
November 2,
2015
New adjusted
maximum
penalty
amount
effective
August 1,
2016
Year penalty
amount was
established or
last adjusted *
Civil monetary penalty description
Maximum
penalty
amount when
established or
last adjusted
1990
1990
250,000
100,000
400,000
160,000
445,390
178,156
1990
500,000
775,000
890,780
2002
2002
2002
2002
100,000
2,000,000
750,000
15,000,000
130,000
2,525,000
950,000
18,925,000
131,185
2,623,700
983,888
19,677,750
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 ...................................
* Adjustments include any revisions by Congress in statute, or by the agency through regulation, other than pursuant to the Inflation Adjustment Act.
Dated: June 27, 2016.
By the Commission.
Brent J. Fields,
Secretary.
[FR Doc. 2016–15541 Filed 6–30–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
17 CFR Part 232
[Release Nos. 33–10095; 34–78044; 39–
2510; IC–32145]
Adoption of Updated EDGAR Filer
Manual
Securities and Exchange
Commission.
ACTION: Final rule.
AGENCY:
The Securities and Exchange
Commission (the Commission) is
adopting revisions to the Electronic Data
Gathering, Analysis, and Retrieval
System (EDGAR) Filer Manual and
related rules to reflect updates to the
EDGAR system. The updates are being
made primarily to support the
submission of asset-backed securities
(ABS) related form types by registrants
whose Standard Industrial Classification
(SIC) code is not 6189; terminate
support for the US–GAAP–2014, EXCH–
2014, COUNTRY–2012, and
CURRENCY–2012 taxonomies; and
allow certain filers to use Inline XBRL
in their Related Official Filing, provided
that the structured information satisfies
all other submission requirements. The
EDGAR system is scheduled to be
upgraded to support these
functionalities on June 13, 2016.
DATES: Effective July 1, 2016. The
incorporation by reference of the
EDGAR Filer Manual is approved by the
asabaliauskas on DSK3SPTVN1PROD with RULES
SUMMARY:
VerDate Sep<11>2014
16:44 Jun 30, 2016
Jkt 238001
Director of the Federal Register as of
July 1, 2016.
FOR FURTHER INFORMATION CONTACT: In
the Division of Corporate Finance, for
questions concerning Asset-Backed
Securities related submission form
types, contact Vik Sheth at (202) 551–
3818; and in the Division of Economic
and Risk Analysis, for questions
concerning unsupported taxonomies
and Inline XBRL, contact Walter
Hamscher at (202) 551–5397.
SUPPLEMENTARY INFORMATION: We are
adopting an updated EDGAR Filer
Manual, Volume II. The Filer Manual
describes the technical formatting
requirements for the preparation and
submission of electronic filings through
the EDGAR system.1 It also describes
the requirements for filing using
EDGARLink Online and the Online
Forms/XML Web site.
The revisions to the Filer Manual
reflect changes within Volume II
entitled EDGAR Filer Manual, Volume
II: ‘‘EDGAR Filing,’’ Version 37 (June
2016). The updated manual will be
incorporated by reference into the Code
of Federal Regulations.
The Filer Manual contains all the
technical specifications for filers to
submit filings using the EDGAR system.
Filers must comply with the applicable
provisions of the Filer Manual in order
to assure the timely acceptance and
processing of filings made in electronic
format.2 Filers may consult the Filer
Manual in conjunction with our rules
governing mandated electronic filing
29 For example, 15 U.S.C. 77t(d)(2)(A), after
adjusting for inflation as required by the 2015 Act,
provides that the amount of the penalty shall not
exceed the greater of $8,908 for a natural person or
$89,708 for any other person, or the gross amount
of pecuniary gain to such defendant as a result of
the violation.
1 We originally adopted the Filer Manual on April
1, 1993, with an effective date of April 26, 1993.
PO 00000
Frm 00065
Fmt 4700
Sfmt 4700
when preparing documents for
electronic submission.3
The EDGAR system will be upgraded
to Release 16.2 on June 13, 2016 and
will introduce the following changes:
EDGAR will be updated to allow
registrants whose Standard Industrial
Classification (SIC) code is not 6189
(asset-backed securities) to file the
following asset-backed securities related
submission form types:
• SF–1, SF–1/A, SF–3, SF–3/A, SF–
3MEF, 424H, 424H/A, ABS–EE, ABS–
EE/A, 8–K, 8–K/A, 10–D, and 10–D/A.
The following fields will now be
required for all filers submitting form
types 10–D and 10–D/A and providing
Item 6 or attaching an EX–36 on
submission form types 8–K and 8–K/A,
irrespective of the filer’s SIC code:
• Sponsor CIK
• Depositor CIK
• ABS Asset Class
EDGAR will no longer provide
support for the US–GAAP–2014, EXCH–
2014, COUNTRY–2012, and
CURRENCY–2012 taxonomies. Please
see https://www.sec.gov/info/edgar/
edgartaxonomies.shtml for a complete
listing of supported standard
taxonomies.
Pursuant to a Commission exemptive
order issued on June 13, 2016, certain
filers will be able to use Inline XBRL in
their Related Official Filing for a limited
period of time until March of the year
2020, provided that the structured
information satisfies all other
submission requirements and
conditions specified in the order are
met. Inline XBRL is a file format
permitting both HTML and Interactive
Data tags. Instructions for formatting
3 See Release No. 33–10071 in which we
implemented EDGAR Release 16.1. For additional
history of Filer Manual rules, please see the cites
therein.
E:\FR\FM\01JYR1.SGM
01JYR1
]]>Agencies
[Federal Register Volume 81, Number 127 (Friday, July 1, 2016)]
[Rules and Regulations]
[Pages 43042-43047]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-15541]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
17 CFR Part 201
[Release Nos. 33-10104; 34-78156; IA-4437; IC-32162; File No. S7-11-16]
RIN 3235-AL94
Adjustments to Civil Monetary Penalty Amounts
AGENCY: Securities and Exchange Commission.
ACTION: Interim final rule; request for comment.
-----------------------------------------------------------------------
SUMMARY: The Securities and Exchange Commission (the ``Commission'') is
adopting an interim final rule to implement the Federal Civil Penalties
Inflation Adjustment Act Improvements Act of 2015, which amended the
Federal Civil Penalties Inflation Adjustment Act of 1990, as previously
amended by the Debt Collection Improvement Act of 1996. This interim
final rule adjusts 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: This interim final rule is effective on August
1, 2016. Comment Date: Comments on the interim final rule should be
received on or before August 15, 2016.
ADDRESSES: Comments may be submitted by any of the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/proposed.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number S7-11-16 on the subject line; or
Use the Federal eRulemaking Portal (https://www.regulations.gov). Follow the instructions for submitting comments.
Paper Comments
Send paper comments to Brent J. Fields, Secretary,
Securities and
[[Page 43043]]
Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number S7-11-16. This file number
should be included on the subject line if email is used. To help us
process and review your comments more efficiently, please use only one
method. The Commission will post all comments on the Commission's Web
site (https://www.sec.gov/rules/proposed.shtml). Comments are also
available for Web site viewing and printing in the Commission's Public
Reference Room, 100 F Street NE., Washington, DC 20549, on official
business days between the hours of 10:00 a.m. and 3:00 p.m. All
comments received will be posted without change; we do not edit
personal identifying information from submissions. You should submit
only information that you wish to make available publicly.
FOR FURTHER INFORMATION CONTACT: James A. Cappoli, Assistant General
Counsel, Office of the General Counsel, at (202) 551-7923, or Stephen
M. Ng, Senior Counsel, Office of the General Counsel, at (202) 551-
7957.
I. Background
This interim final rule implements the Federal Civil Penalties
Inflation Adjustment Act Improvements Act of 2015 (the ``2015
Act''),\1\ which amends the Federal Civil Penalties Inflation
Adjustment Act of 1990 (the ``Inflation Adjustment Act'').\2\ The
Inflation Adjustment Act had previously been amended by the Debt
Collection Improvement Act of 1996 (``DCIA'') \3\ to require that each
federal agency 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. Pursuant to
the requirements of the DCIA, the Commission has previously adopted
regulations in 1996, 2001, 2005, 2009, and 2013 to adjust the maximum
amount of the CMPs 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), Apr. 26,
1996, 110 Stat. 1321-373, codified at 28 U.S.C. 2461 note.
\4\ See 17 CFR part 201.1001 to 1005, and Tables I to V to
Subpart E.
---------------------------------------------------------------------------
The 2015 Act replaces the inflation adjustment mechanism prescribed
in the DCIA and all previous inflation adjustments made pursuant to the
DCIA with a new mechanism for calculating the inflation-adjusted amount
of CMPs. Each agency must first adjust the maximum amount of CMPs \5\
with an initial ``catch-up'' adjustment.\6\ Each agency must then
perform subsequent annual adjustments for inflation.\7\ This interim
final rule implements the initial ``catch-up adjustment,'' which
increases CMP amounts based on the percentage change between the
Consumer Price Index for all Urban Consumers (``CPI-U'') for the month
of October in the year the civil penalty was established or previously
adjusted by a statute or regulation other than the Inflation Adjustment
Act, and the October 2015 CPI-U.\8\ Annual inflation adjustments after
this first catch-up adjustment will then be based on the percentage
change between the October CPI-U preceding the date of the last
adjustment made pursuant to the 2015 Act and the prior year's October
CPI-U.\9\ Thus, in January 2017, the Commission will again adjust the
maximum amount of the CMPs it administers based on the percentage
change from the 2015 October CPI-U to the 2016 October CPI-U.
---------------------------------------------------------------------------
\5\ The 2015 Act also applies to minimum penalty amounts and
penalty ranges. See 28 U.S.C. 2461 note Sec. 5(a). All of the
statutes administered by the Commission, however, only include
maximum penalty amounts. Thus, in this interim final rule, we only
refer to the effect of the 2015 Act on maximum penalty amounts.
\6\ 28 U.S.C. 2461 note Sec. 4(b)(1); Office of Management and
Budget, Implementation of the Federal Civil Penalties Inflation
Adjustment Act Improvements Act of 2015 (February 24, 2016) (``OMB
Guidance'') at 1, available at https://www.whitehouse.gov/sites/default/files/omb/memoranda/2016/m-16-06.pdf.
\7\ 28 U.S.C. 2461 note Sec. 4(b)(2); OMB Guidance at 1.
\8\ 28 U.S.C. 2461 note Sec. 5(b)(2); OMB Guidance at 3. The
catch-up adjustment excludes prior adjustments under the Inflation
Adjustment Act, which were capped at 10 percent and thus contributed
to a decline in the real value of penalties. See OMB Guidance at 3.
The 2015 Act is intended to remedy this decline. See id.
\9\ 28 U.S.C. 2461 note Sec. 5; OMB Guidance at 4.
---------------------------------------------------------------------------
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 of 1933; the Securities Exchange Act of 1934 (the
``Exchange Act''); the Investment Company Act of 1940; and the
Investment Advisers Act of 1940. In addition, the Sarbanes-Oxley Act of
2002 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 1990 Act encompasses such civil monetary
penalties.\12\
---------------------------------------------------------------------------
\10\ 28 U.S.C. 2461 note Sec. 3(2). Thus the adjustments
prescribed by the 2015 Act do not apply to penalties written as
functions of violations or to civil penalties based on the
defendant's gross pecuniary gain. OMB Guidance at 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 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)].
---------------------------------------------------------------------------
Accordingly, we are revising 17 CFR 201.1001 and Table I to Subpart
E, to establish revised amounts for each CMP authorized by the
Securities Act, the Exchange Act, the Investment Company Act, the
Investment Advisers Act, and certain penalties under the Sarbanes-Oxley
Act and removing Sec. 201.1002 and Table II to Subpart E, Sec.
201.1003 and Table III to Subpart E, Sec. 201.1004 and Table IV to
Subpart E, and Sec. 201.1005 and Table V to Subpart E. The adjustments
set forth in the amendment apply to all penalties imposed after the
effective date of this interim final rule, including to penalties
imposed for violations that occur before the effective date of the
amendment.\13\
---------------------------------------------------------------------------
\13\ 28 U.S.C. 2461 note Sec. 6; OMB Guidance at 3-4.
---------------------------------------------------------------------------
II. Summary of the Calculation
In order to complete the catch-up adjustment required by the 2015
Act, the Commission must first identify, for each penalty, the year and
corresponding penalty amount when the maximum penalty amount was
established (i.e., as originally enacted by Congress), or last adjusted
(i.e., by Congress in statute, or by the agency through regulation),
whichever is later, other than pursuant to the Inflation Adjustment
Act.\14\
---------------------------------------------------------------------------
\14\ 28 U.S.C. 2461 note Sec. 5(b)(2)(A); OMB Guidance at 3.
References to the Inflation Adjustment Act here and below include
the amendments made to that Act by the DCIA.
---------------------------------------------------------------------------
The Commission must then modify the maximum amount of CMPs based on
the percentage by which the CPI-U for the month of October 2015, not
seasonally adjusted, exceeds the CPI-U for the month of October for the
calendar year when the penalty amount was established or last adjusted.
OMB has provided a table to all agencies that lists multipliers that
can be used to adjust the maximum penalty amount
[[Page 43044]]
based on the year the penalty was established or last adjusted (the
``CPI-U Multiplier'').\15\ After applying this multiplier, the
Commission must round all penalty amounts to the nearest dollar. In
accordance with the 2015 Act, however, the Commission shall not
increase catch-up penalty amounts by more than 150 percent of the
corresponding penalty amount in effect on November 2, 2015, including
penalty adjustments made pursuant to the Inflation Adjustment Act prior
to that date.\16\
---------------------------------------------------------------------------
\15\ 28 U.S.C. 2461 note Sec. 5(b)(2)(B); OMB Guidance at 3,
Table A.
\16\ 28 U.S.C. 2461 note Sec. 5(b)(2)(C); OMB Guidance at 3.
Because the 150 percent limitation is on the amount of the increase,
the adjusted penalty will be up to 250 percent above the amount in
effect on November 2, 2015.
---------------------------------------------------------------------------
To explain the inflation adjustment calculation for CMP amounts
under the 2015 Act, we provide the following example based on the CMP
for certain insider trading violations by controlling persons in
Exchange Act Section 21A(a)(3).\17\
---------------------------------------------------------------------------
\17\ 15 U.S.C. 78u-1(a)(3).
---------------------------------------------------------------------------
Step 1: The Commission identifies the year that the CMP was
established or last adjusted and the maximum CMP for that year. The
maximum penalty amount for this provision was established in 1988 by
the Insider Trading and Securities Fraud Enforcement Act of 1988.\18\
When established, the maximum penalty amount for a violation of this
provision was $1,000,000.
---------------------------------------------------------------------------
\18\ Public Law 100-704, Sec. 3(a)(2), 102 Stat. 4677-4679
(1988). The Dodd-Frank Wall Street Reform and Consumer Protection
Act of 2010 authorized the Commission to impose civil penalties in
cease-and-desist proceedings. See 15 U.S.C. 77h-1(g), 15 U.S.C. 78u-
2(b), 15 U.S.C. 80a-9(d)(1)(B), 15 U.S.C. 80b-3(i)(1)(B). For the
Securities Act, Congress provided this authority in a new section of
that Act, whereas for the Exchange Act, the Investment Company Act,
and the Investment Advisers Act, Congress cross-referenced pre-
existing penalty amounts for administrative proceedings that were
established in 1990. Therefore, for the purposes of applying the
2015 Act, the amounts of the penalties for cease-and-desist
proceedings under the Securities Act were established in 2010 and
the amounts of the penalties for cease-and-desist proceedings under
the Exchange Act, the Investment Company Act, and the Investment
Advisers Act were established in 1990.
---------------------------------------------------------------------------
Step 2: The Commission multiplies the maximum penalty amount at the
time the penalty amount was established or last adjusted by the CPI-U
multiplier, representing the percentage change in the CPI-U from
October in the year the penalty was established or last adjusted to
October 2015, and rounds that number to the nearest dollar. Thus, we
multiply $1,000,000 by the multiplier for 1988, 1.97869, to determine a
new inflation-adjusted maximum CMP of $1,978,690.
Step 3: The Commission identifies the maximum CMP for the penalty
provision as of November 2, 2015, including adjustments made pursuant
to the Inflation Adjustment Act. For Section 21A(a)(3), the maximum CMP
was previously adjusted in 2013 pursuant to the Inflation Adjustment
Act to $1,525,000.\19\
---------------------------------------------------------------------------
\19\ 17 CFR 201.1005, Table V.
---------------------------------------------------------------------------
Step 4: The Commission multiplies the November 2, 2015 maximum CMP
by 2.5 to determine what a 150 percent increase from the current
penalty would be. This is the maximum increase in the CMP that can be
made pursuant to the catch-up adjustment. For Section 21A(a)(3), a 150
percent increase from the current penalty would be $3,812,500.
Step 5: The Commission compares the amount in Step 2 to the amount
in Step 4. The lesser of these two amounts will be the new inflation-
adjusted penalty amount. Because the adjusted penalty amount in Step 2,
$1,978,690, is less than the maximum penalty allowed in Step 4,
$3,812,500, the new inflation adjusted penalty amount for Section
21A(a)(3) is $1,978,690.\20\
---------------------------------------------------------------------------
\20\ Almost all of the new inflation-adjusted penalty amounts
listed below were obtained by multiplying the penalty amount in the
year the penalty was established or last adjusted by the CPI-U
multiplier. The only exception is the civil penalty for violations
of Exchange Act Section 32(b), 15 U.S.C. 78ff(b), in which the
inflation-adjusted penalty amount would have been greater than the
maximum 150 percent increase allowed by the 2015 Act.
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III. The Commission Declines To Seek a Reduced Catch-Up Adjustment
Determination
The 2015 Act allows agencies, after obtaining concurrence from OMB,
to adjust penalties pursuant to a reduced catch-up adjustment
determination.\21\ In making such an adjustment, the agency must
publish a notice of proposed rulemaking, provide an opportunity for
comment, and determine in a final rule that a reduced catch-up
adjustment determination is warranted because the otherwise required
increase of a maximum penalty amount would have a negative economic
impact, or because the social costs of the otherwise required
adjustment would outweigh the benefits.\22\
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\21\ OMB has stated its expectation that it will only rarely
concur with a proposal to reduce penalty amounts below that required
by the 2015 Act. See OMB Guidance at 3.
\22\ 28 U.S.C. 2461 note Sec. 4(c); OMB Guidance at 3.
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We have concluded that such a reduced catch-up adjustment
determination is not necessary and instead have adopted the adjustments
prescribed by the 2015 Act. The increases envisioned by the 2015 Act
ensure that the Commission's CMPs maintain their deterrent and remedial
effect and prevent these desired effects from being diminished by
inflation. We do not believe they will have a negative economic
impact.\23\ Further, while the adjustments required by the 2015 Act do
raise the maximum amounts of the Commission's CMPs, the percentage
increases in the maximum amounts are generally consistent with previous
inflation adjustments and the Commission and the courts always maintain
the discretion to impose a lower penalty amount if the new maximum
amount would be unjust or inappropriate in a particular case.
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\23\ See infra Section VI for the Commission's Economic
Analysis.
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IV. Request for Comment
We request and encourage interested persons to submit comments on
any aspect of this interim final rule, other matters that might have an
impact on the rule, and any suggestions for additional changes. In
particular, we invite comments on whether, contrary to the conclusion
set forth above, the Commission should seek a reduced catch-up
adjustment determination. Comments on this topic should address the
statutory bases for requesting a reduced catch-up adjustment
determination: (1) Whether the otherwise required increase of the
maximum amount of the CMPs administered by the Commission would have a
negative economic impact, or (2) whether the social costs of adopting
the otherwise required increase of the maximum amount of these CMPs
would outweigh the benefits. With respect to any such comments, they
are of greatest assistance if accompanied by supporting data and
analysis of the issues listed above.
V. Procedural and Other Matters
Given that the Commission is not seeking a reduced catch-up
adjustment determination, the Commission is required by the 2015 Act to
adjust the CMPs within its jurisdiction for inflation using a
statutorily prescribed formula and the 2015 Act mandates that the
initial catch-up adjustment be made through an interim final rule
effective not later than August 1, 2016.\24\ In light of this
Congressional mandate, the Commission finds that good cause exists to
dispense with public notice and comment pursuant to the notice and
comment provisions of the
[[Page 43045]]
Administrative Procedure Act (``APA'').\25\ Under the Regulatory
Flexibility Act (``RFA''), a regulatory flexibility analysis is
required only when an agency must publish a general notice of proposed
rulemaking.\26\ As noted above, public notice and comment is not
required for this interim final rule; therefore, a regulatory
flexibility analysis is not required. Further, this rule does not
contain any collection of information requirements as defined by the
Paperwork Reduction Act of 1995 as amended.\27\
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\24\ 28 U.S.C. 2461 note Sec. 4(b)(1).
\25\ 5 U.S.C. 553(b)(3)(B). This finding also satisfies the
requirements of 5 U.S.C. 808(2), allowing the amendment to become
effective notwithstanding the requirement of 5 U.S.C. 801 (if a
federal agency finds that notice and public comment are impractical,
unnecessary or contrary to the public interest, a rule shall take
effect at such time as the federal agency promulgating the rule
determines).
\26\ 5 U.S.C. 603.
\27\ 44 U.S.C. 3501 et. seq.
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VI. Economic Analysis
The Commission is sensitive to the costs and benefits that result
from its rules. The baseline for this analysis is the statutory
framework described above in Section I. In enacting the 2015 Act,
Congress directed the Commission to adjust CMPs in accordance with
inflation. The Commission notes that this regulation has no impact on
disclosure or compliance costs. The Commission further notes that the
CMPs ordered in SEC proceedings and PCAOB disciplinary proceedings in
fiscal year 2015 totaled approximately $1,176 million. The inflationary
adjustment required by the 2015 Act results in the increase of the
maximum amount of the CMPs administered by the Commission of
approximately 7.67% to 11.3%. Assuming that the Commission is
successful in obtaining civil monetary penalties in fiscal years
subsequent to the enactment of this regulation in similar proportion to
that obtained in fiscal year 2015, the inflationary adjustment pursuant
to the new regulation would result in an increase in the civil monetary
penalties ordered of approximately $90.1 million to $132.9 million.
This potential increase, however, overstates the effect of the
rule. First, these figures represent the amount of penalties that could
be potentially ordered, whereas the amount of penalties collected in
any given year--the amount of penalties that would affect the economy--
can be lower than the ordered amount. Second, penalties imposed in
insider trading cases brought in district court are based on the profit
gained or loss avoided as a result of the violation rather than by
reference to a statutory dollar amount that is affected by this
regulation.\28\ The average annual amount of penalties obtained in
insider trading cases from FY 2010 through FY 2015 is $108.2 million.
Third, in many cases where the Commission has obtained large civil
monetary penalties, such penalties were calculated on the basis of the
defendant's gross pecuniary gain rather than the maximum penalty dollar
amount set by statute that will be adjusted by the proposed rule.\29\
In addition, the intent of the new regulation is merely to keep pace
with changes in the economy, not to impose new costs. Therefore, for
the instances in which CMPs affected by this rulemaking are imposed,
the Commission does not believe that adjusting civil monetary penalties
pursuant to the 2015 Act will significantly affect the amount of
penalties it obtains beyond that necessary to keep pace with inflation.
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\28\ 15 U.S.C. 78u-1(a)(2).
\29\ For example, 15 U.S.C. 77t(d)(2)(A), after adjusting for
inflation as required by the 2015 Act, provides that the amount of
the penalty shall not exceed the greater of $8,908 for a natural
person or $89,708 for any other person, or the gross amount of
pecuniary gain to such defendant as a result of the violation.
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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. The costs of
implementing this rule should be negligible because the only change
from the current, baseline situation is determining potential penalties
using a new maximum dollar amount.
VII. Statutory Basis
The Commission is adopting these revisions to 17 CFR part 201,
subpart E pursuant to the directives and authority of the Federal Civil
Penalties Inflation Adjustment Act Improvements Act of 2015, Public Law
114-74, 129 Stat. 599-601 (Nov. 2, 2015).
List of Subjects in 17 CFR Part 201
Administrative practice and procedure, Claims, Confidential
business information, Lawyers, Penalties, 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 by revising
Subpart E as set forth below:
PART 201--RULES OF PRACTICE
Subpart E--Adjustment of Civil Monetary Penalties
Sec.
201.1001 Adjustment of civil monetary penalties--2016.
Table I to Subpart E of Part 201-- Civil monetary penalty inflation
adjustments.
Authority: 28 U.S.C. 2461 note.
Subpart E--Adjustment of Civil Monetary Penalties
Sec. 201.1001 Adjustment of civil monetary penalties--2016.
As required by the Federal Civil Penalties Inflation Adjustment Act
Improvements Act of 2015, 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, and the Investment
Advisers Act of 1940, and certain penalties under the Sarbanes-Oxley
Act of 2002 are adjusted for inflation in accordance with Table I to
this subpart E. The adjustments set forth in Table I to this subpart E
apply to all penalties imposed after August 1, 2016, including to
penalties imposed for violations that occur before August 1, 2016.
[[Page 43046]]
Table I to Subpart E of Part 201--Civil Monetary Penalty Inflation Adjustments
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Maximum New adjusted
Year penalty Maximum penalty maximum
amount was penalty amount in penalty
U.S. Code citation Civil monetary penalty description established or amount when effect on amount
last adjusted established or November 2, effective
* last adjusted 2015 August 1, 2016
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Securities and Exchange Commission:
15 U.S.C. 77h-1(g)........................ For natural person.......................... 2010 $7,500 $7,500 $8,156
For any other person........................ 2010 75,000 80,000 81,559
For natural person/fraud.................... 2010 75,000 80,000 81,559
For any other person/fraud.................. 2010 375,000 400,000 407,794
For natural person/substantial losses or 2010 150,000 160,000 163,118
risk of losses to others or gains to self.
For any other person/substantial losses or 2010 725,000 775,000 788,401
risk of losses to others or gain to self.
15 U.S.C. 77t(d).......................... For natural person.......................... 1990 5,000 7,500 8,908
For any other person........................ 1990 50,000 80,000 89,078
For natural person/fraud.................... 1990 50,000 80,000 89,078
For any other person/fraud.................. 1990 250,000 400,000 445,390
For natural person/substantial losses or 1990 100,000 160,000 178,156
risk of losses to others.
For any other person/substantial losses or 1990 500,000 775,000 890,780
risk of losses to others.
15 U.S.C. 78ff(b)......................... Exchange Act/failure to file information 1936 100 210 525
documents, reports.
15 U.S.C. 78ff(c)(1)(B)................... Foreign Corrupt Practices--any issuer....... 1988 10,000 16,000 19,787
15 U.S.C. 78ff(c)(2)(B)................... Foreign Corrupt Practices--any agent or 1988 10,000 16,000 19,787
stockholder acting on behalf of issuer.
15 U.S.C. 78u-1(a)(3)..................... Insider Trading--controlling person......... 1988 1,000,000 1,525,000 1,978,690
15 U.S.C. 78u-2........................... For natural person.......................... 1990 5,000 7,500 8,908
For any other person........................ 1990 50,000 80,000 89,078
For natural person/fraud.................... 1990 50,000 80,000 89,078
For any other person/fraud.................. 1990 250,000 400,000 445,390
For natural person/substantial losses or 1990 100,000 160,000 178,156
risk of losses to others or gains to self.
For any other person/substantial losses or 1990 500,000 775,000 890,780
risk of losses to others or gain to self.
15 U.S.C. 78u(d)(3)....................... For natural person.......................... 1990 5,000 7,500 8,908
For any other person........................ 1990 50,000 80,000 89,078
For natural person/fraud.................... 1990 50,000 80,000 89,078
For any other person/fraud.................. 1990 250,000 400,000 445,390
For natural person/substantial losses or 1990 100,000 160,000 178,156
risk of losses to others.
For any other person/substantial losses or 1990 500,000 775,000 890,780
risk of losses to others.
15 U.S.C. 80a-9(d)........................ For natural person.......................... 1990 5,000 7,500 8,908
For any other person........................ 1990 50,000 80,000 89,078
For natural person/fraud.................... 1990 50,000 80,000 89,078
For any other person/fraud.................. 1990 250,000 400,000 445,390
For natural person/substantial losses or 1990 100,000 160,000 178,156
risk of losses to others or gains to self.
For any other person/substantial losses or 1990 500,000 775,000 890,780
risk of losses to others or gain to self.
15 U.S.C. 80a-41(e)....................... For natural person.......................... 1990 5,000 7,500 8,908
For any other person........................ 1990 50,000 80,000 89,078
For natural person/fraud.................... 1990 50,000 80,000 89,078
For any other person/fraud.................. 1990 250,000 400,000 445,390
For natural person/substantial losses or 1990 100,000 160,000 178,156
risk of losses to others.
For any other person/substantial losses or 1990 500,000 775,000 890,780
risk of losses to others.
15 U.S.C. 80b-3(i)........................ For natural person.......................... 1990 5,000 7,500 8,908
For any other person........................ 1990 50,000 80,000 89,078
For natural person/fraud.................... 1990 50,000 80,000 89,078
For any other person/fraud.................. 1990 250,000 400,000 445,390
For natural person/substantial losses or 1990 100,000 160,000 178,156
risk of losses to others or gains to self.
For any other person/substantial losses or 1990 500,000 775,000 890,780
risk of losses to others or gain to self.
15 U.S.C. 80b-9(e)........................ For natural person.......................... 1990 5,000 7,500 8,908
For any other person........................ 1990 50,000 80,000 89,078
For natural person/fraud.................... 1990 50,000 80,000 89,078
[[Page 43047]]
For any other person/fraud.................. 1990 250,000 400,000 445,390
For natural person/substantial losses or 1990 100,000 160,000 178,156
risk of losses to others.
For any other person/substantial losses or 1990 500,000 775,000 890,780
risk of losses to others.
15 U.S.C. 7215(c)(4)(D)(i)................ For natural person.......................... 2002 100,000 130,000 131,185
For any other person........................ 2002 2,000,000 2,525,000 2,623,700
15 U.S.C. 7215(c)(4)(D)(ii)............... For natural person.......................... 2002 750,000 950,000 983,888
For any other person........................ 2002 15,000,000 18,925,000 19,677,750
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* Adjustments include any revisions by Congress in statute, or by the agency through regulation, other than pursuant to the Inflation Adjustment Act.
Dated: June 27, 2016.
By the Commission.
Brent J. Fields,
Secretary.
[FR Doc. 2016-15541 Filed 6-30-16; 8:45 am]
BILLING CODE 8011-01-P
