[Federal Register Volume 85, Number 8 (Monday, January 13, 2020)]
[Notices]
[Pages 1833-1835]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-00306]
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SECURITIES AND EXCHANGE COMMISSION
[Release Nos. 33-10740; 34-87905; IA-5428; IC-33740]
Adjustments to Civil Monetary Penalty Amounts
AGENCY: Securities and Exchange Commission.
ACTION: Notice of annual inflation adjustment of civil monetary
penalties.
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SUMMARY: The Securities and Exchange Commission (the ``Commission'') is
publishing this notice (the ``Notice'') pursuant to the Federal Civil
Penalties Inflation Adjustment Act Improvements Act of 2015 (the ``2015
Act''). This Act requires all agencies to annually adjust for inflation
the civil monetary penalties that can be imposed under the statutes
administered by the agency and publish the adjusted amounts in the
Federal Register. This Notice sets forth the annual inflation
adjustment of the maximum amount of civil monetary penalties (``CMPs'')
administered by the Commission under the Securities Act of 1933, the
Securities Exchange Act of 1934 (the ``Exchange Act''), the Investment
Company Act of 1940, the Investment Advisers Act of 1940, and certain
penalties under the Sarbanes-Oxley Act of 2002. These amounts are
effective beginning on January 15, 2020, and will apply to all
penalties imposed after that date for violations of the aforementioned
statutes that occurred after November 2, 2015.
FOR FURTHER INFORMATION CONTACT: Stephen M. Ng, Senior Special Counsel,
Office of the General Counsel, at (202) 551-7957, or Hannah W. Riedel,
Senior Counsel, Office of the General Counsel, at (202) 551-7918.
SUPPLEMENTARY INFORMATION:
I. Background
This Notice is being published pursuant to the 2015 Act,\1\ which
amended the Federal Civil Penalties Inflation Adjustment Act of 1990
(the ``Inflation Adjustment Act'').\2\ The Inflation Adjustment Act
previously had been amended by the Debt Collection Improvement Act of
1996 (the ``DCIA'') \3\ to require that each federal agency adopt
regulations at least once every four years that adjust for inflation
the CMPs that can be imposed under the statutes administered by the
agency. Pursuant to this requirement, the Commission previously adopted
regulations in 1996, 2001, 2005, 2009, and 2013 to adjust the maximum
amount of the CMPs that could be imposed under the statutes the
Commission administers.\4\
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\1\ Public Law 114-74 Sec. 701, 129 Stat. 599-601 (Nov. 2,
2015), codified at 28 U.S.C. 2461 note.
\2\ Public Law 101-410, 104 Stat. 890-892 (1990), codified at 28
U.S.C. 2461 note.
\3\ Public Law 104-134, Title III, Sec. 31001(s)(1), 110 Stat.
1321-373 (1996), codified at 28 U.S.C. 2461 note.
\4\ See Release Nos. 33-7361, 34-37912, IA-1596, IC-22310, dated
November 1, 1996 (effective December 9, 1996), previously found at
17 CFR 201.1001 and Table I to Subpart E of Part 201; Release Nos.
33-7946, 34-43897, IA-1921, IC-24846, dated January 31, 2001
(effective February 2, 2001), previously found at 17 CFR 201.1002
and Table II to Subpart E of Part 201; Release Nos. 33-8530, 34-
51136, IA-2348, IC-26748, dated February 9, 2005 (effective February
14, 2005), previously found at 17 CFR 201.1003 and Table III to
Subpart E of Part 201; Release Nos. 33-9009, 34-59449, IA-2845, IC-
28635, dated February 25, 2009 (effective March 3, 2009), previously
found at 17 CFR 201.1004 and Table IV to Subpart E of Part 201; and
Release Nos. 33-9387, 34-68994, IA-3557, IC-30408, dated February
27, 2013 (effective March 5, 2013), previously found at 17 CFR
201.1005 and Table V to Subpart E of Part 201. The penalty amounts
contained in these releases have now been consolidated into Table I
to 17 CFR 201.1001.
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The 2015 Act replaces the inflation adjustment formula prescribed
in the DCIA with a new formula for calculating the inflation-adjusted
amount of CMPs. The 2015 Act requires that agencies use this new
formula to re-calculate the inflation-adjusted amounts of the penalties
they administer on an annual basis and publish these new amounts in the
Federal Register by January 15 of each year.\5\ The Commission
previously published the first annual adjustment required by the 2015
Act on January 6, 2017 (the ``2017 Adjustment'').\6\ As part of the
2017 Adjustment, the Commission promulgated 17 CFR 201.1001(a) and
Table I to Subsection 1001, which lists the penalty amounts for all
violations that occurred on or before November 2, 2015. For violations
occurring after November 2, 2015, Subsection 1001(b) provides that the
applicable penalty amounts will be adjusted annually based on the
formula set forth in the 2015 Act. Subsection 1001(b) further provides
that these adjusted amounts will be published in the Federal Register
and on the Commission's website. The Commission subsequently published
annual adjustments on January 8, 2018 (the ``2018 Adjustment'') \7\ and
February 20, 2019 (``2019 Adjustment'').\8\
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\5\ 28 U.S.C. 2461 note Sec. 4.
\6\ Release Nos. 33-10276; 34-79749; IA-4599; IC-32414
(effective Jan. 18, 2017).
\7\ Release Nos. 33-10451; 34-82455; IA-4842; IC-32963
(effective Jan. 15, 2018).
\8\ Release Nos. 33-10604; 34-85118; IA-5111; IC-33373
(effective Jan. 15, 2019). The publication of the 2019 Adjustment in
the Federal Register was delayed due to operation of the
Antideficiency Act during the absence of an appropriations bill to
fund federal government programs between December 22, 2018 and
January 25, 2019.
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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.\9\ This definition applies to the monetary penalty
provisions contained in four statutes administered by the Commission:
The Securities Act, the Exchange Act, the Investment Company Act, and
the Investment Advisers Act. In addition, the Sarbanes-Oxley Act
provides the Public Company Accounting Oversight Board (the ``PCAOB'')
authority to levy civil monetary penalties in its disciplinary
proceedings pursuant to 15 U.S.C. 7215(c)(4)(D).\10\ The definition of
a CMP in the Inflation Adjustment Act encompasses such civil monetary
penalties.\11\
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\9\ 28 U.S.C. 2461 note Sec. 3(2).
\10\ 15 U.S.C. 7215(c)(4)(D).
\11\ The Commission may by order affirm, modify, remand, or set
aside sanctions, including civil monetary penalties, imposed by the
PCAOB. See Section 107(c) of the Sarbanes-Oxley Act of 2002, 15
U.S.C. 7217. The Commission may enforce such orders in federal
district court pursuant to Section 21(e) of the Exchange Act. As a
result, penalties assessed by the PCAOB in its disciplinary
proceedings are penalties ``enforced'' by the Commission for
purposes of the Inflation Adjustment Act. See Adjustments to Civil
Monetary Penalty Amounts, Release No. 33-8530 (Feb. 4, 2005) [70 FR
7606 (Feb. 14, 2005)].
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II. Adjusting the Commission's Penalty Amounts for Inflation
This Notice sets forth the annual inflation adjustment required by
the 2015 Act for all CMPs under the Securities Act, the Exchange Act,
the Investment Company Act, and the Investment Advisers Act, and
certain civil monetary penalties under the Sarbanes-Oxley Act.
Pursuant to the 2015 Act, the penalty amounts in the 2019
Adjustment are adjusted for inflation by increasing them by the
percentage change between the Consumer Price Index for all Urban
Consumers (``CPI-U'') for October 2018
[[Page 1834]]
and the October 2019 CPI-U.\12\ OMB has provided its calculation of
this multiplier (the ``CPI-U Multiplier'') to agencies.\13\ The new
penalty amounts are determined by multiplying the amounts in the 2019
Adjustment by the CPI-U Multiplier and then rounding to the nearest
dollar.
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\12\ 28 U.S.C. 2461 note Sec. 5.
\13\ Office of Management and Budget, Implementation of Penalty
Inflation Adjustments for 2020, Pursuant to the Federal Civil
Penalties Inflation Adjustment Act Improvements Act of 2015
(December 16, 2019), available at https://www.whitehouse.gov/wp-content/uploads/2019/12/M-20-05.pdf. This multiplier represents the
percentage increase between the October 2018 CPI-U and the October
2019 CPI-U, plus 1.
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For example, the CMP for certain insider trading violations by
controlling persons under Exchange Act Section 21A(a)(3) \14\ was
readjusted for inflation as part of the 2019 Adjustment to $2,103,861.
To determine the new CMP under this provision, the Commission
multiplies this amount by the CPI-U Multiplier of 1.01764, and rounds
to the nearest dollar. Thus, the new CMP for Exchange Act Section
21A(a)(3) is $2,140,973.
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\14\ 15 U.S.C. 78u-1(a)(3).
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Below is the Commission's calculation of the new penalty amounts
for the penalties it administers:
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2019
Civil monetary penalty Adjustment CPI-U 2020 Adjusted
U.S. code citation description penalty multiplier penalty
amounts amounts
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15 U.S.C. 77h-1(g) (Securities Act For natural person......... $8,671 1.01764 $8,824
Sec. 8A(g)).
For any other person....... 86,718 1.01764 88,248
For natural person/fraud... 86,718 1.01764 88,248
For any other person/fraud. 433,591 1.01764 441,240
For natural person/fraud/ 173,437 1.01764 176,496
substantial losses or risk
of losses to others or
gains to self.
For any other person/fraud/ 838,275 1.01764 853,062
substantial losses or risk
of losses to others or
gain to self.
15 U.S.C. 77t(d) (Securities Act For natural person......... 9,472 1.01764 9,639
Sec. 20(d)).
For any other person....... 94,713 1.01764 96,384
For natural person/fraud... 94,713 1.01764 96,384
For any other person/fraud. 473,566 1.01764 481,920
For natural person/fraud/ 189,427 1.01764 192,768
substantial losses or risk
of losses to others.
For any other person/fraud/ 947,130 1.01764 963,837
substantial losses or risk
of losses to others.
15 U.S.C. 78u(d)(3) (Exchange Act For natural person......... 9,472 1.01764 9,639
Sec. 21(d)(3)).
For any other person....... 94,713 1.01764 96,384
For natural person/fraud... 94,713 1.01764 96,384
For any other person/fraud. 473,566 1.01764 481,920
For natural person/fraud/ 189,427 1.01764 192,768
substantial losses or risk
of losses to others or
gains to self.
For any other person/fraud/ 947,130 1.01764 963,837
substantial losses or risk
of losses to others or
gain to self.
15 U.S.C. 78u-1(a)(3) (Exchange Act Insider Trading-- 2,103,861 1.01764 2,140,973
Sec. 21A(a)(3)). controlling person.
15 U.S.C. 78u-2 (Exchange Act Sec. For natural person......... 9,472 1.01764 9,639
21B).
For any other person....... 94,713 1.01764 96,384
For natural person/fraud... 94,713 1.01764 96,384
For any other person/fraud. 473,566 1.01764 481,920
For natural person/fraud/ 189,427 1.01764 192,768
substantial losses or risk
of losses to others.
For any other person/fraud/ 947,130 1.01764 963,837
substantial losses or risk
of losses to others.
15 U.S.C. 78ff(b) (Exchange Act Exchange Act/failure to 559 1.01764 569
Sec. 32(b)). file information
documents, reports.
15 U.S.C. 78ff(c)(1)(B) (Exchange Foreign Corrupt Practices-- 21,039 1.01764 21,410
Act Sec. 32(c)(1)(B)). any issuer.
15 U.S.C. 78ff(c)(2)(B) (Exchange Foreign Corrupt Practices-- 21,039 1.01764 21,410
Act Sec. 32(c)(2)(B)). any agent or stockholder
acting on behalf of issuer.
15 U.S.C. 80a-9(d) (Investment For natural person......... 9,472 1.01764 9,639
Company Act Sec. 9(d)).
For any other person....... 94,713 1.01764 96,384
For natural person/fraud... 94,713 1.01764 96,384
For any other person/fraud. 473,566 1.01764 481,920
For natural person/fraud/ 189,427 1.01764 192,768
substantial losses or risk
of losses to others or
gains to self.
For any other person/fraud/ 947,130 1.01764 963,837
substantial losses or risk
of losses to others or
gain to self.
15 U.S.C. 80a-41(e) (Investment For natural person......... 9,472 1.01764 9,639
Company Act Sec. 42(e)).
For any other person....... 94,713 1.01764 96,384
For natural person/fraud... 94,713 1.01764 96,384
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For any other person/fraud. 473,566 1.01764 481,920
For natural person/fraud/ 189,427 1.01764 192,768
substantial losses or risk
of losses to others.
For any other person/fraud/ 947,130 1.01764 963,837
substantial losses or risk
of losses to others.
15 U.S.C. 80b-3(i) (Investment For natural person......... 9,472 1.01764 9,639
Advisers Act Sec. 203(i)).
For any other person....... 94,713 1.01764 96,384
For natural person/fraud... 94,713 1.01764 96,384
For any other person/fraud. 473,566 1.01764 481,920
For natural person/fraud/ 189,427 1.01764 192,768
substantial losses or risk
of losses to others or
gains to self.
For any other person/fraud/ 947,130 1.01764 963,837
substantial losses or risk
of losses to others or
gain to self.
15 U.S.C. 80b-9(e) (Investment For natural person......... 9,472 1.01764 9,639
Advisers Act Sec. 209(e)).
For any other person....... 94,713 1.01764 96,384
For natural person/fraud... 94,713 1.01764 96,384
For any other person/fraud. 473,566 1.01764 481,920
For natural person/fraud/ 189,427 1.01764 192,768
substantial losses or risk
of losses to others.
For any other person/fraud/ 947,130 1.01764 963,837
substantial losses or risk
of losses to others.
15 U.S.C. 7215(c)(4)(D)(i) For natural person......... 139,483 1.01764 141,943
(Sarbanes-Oxley Act Sec.
105(c)(4)(D)(i)).
For any other person....... 2,789,675 1.01764 2,838,885
15 U.S.C. 7215(c)(4)(D)(ii) For natural person......... 1,046,128 1.01764 1,064,582
(Sarbanes-Oxley Act Sec.
105(c)(4)(D)(ii)).
For any other person....... 20,922,558 1.01764 21,291,632
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Pursuant to the 2015 Act and 17 CFR 201.1001, the adjusted penalty
amounts in this Notice (and all penalty adjustments performed pursuant
to the 2015 Act) apply to penalties imposed after the date the
adjustment is effective for violations that occurred after November 2,
2015, the 2015 Act's enactment date. These penalty amounts supersede
the amounts in the 2018 Adjustment.\15\ For violations that occurred on
or before November 2, 2015, the penalty amounts in Table I to 17 CFR
201.1001 continue to apply.\16\
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\15\ The penalty amounts in this Notice are being published in
the Federal Register and will not be added to the Code of Federal
Regulations in accordance with the 2015 Act and 17 CFR 201.1001(b).
See 28 U.S.C. 2461 note Sec. 4(a)(2); 17 CFR 201.1001(b). In
addition to being published in the Federal Register, the penalty
amounts in this Notice will be made available on the Commission's
website at https://www.sec.gov/enforce/civil-penalties-inflation-adjustments.htm, as detailed in 17 CFR 201.1001(b). This website
also lists the penalty amounts for violations that occurred on or
before November 2, 2015.
\16\ 17 CFR 201.1001(a).
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By the Commission.
Dated: January 8, 2020.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2020-00306 Filed 1-10-20; 8:45 am]
BILLING CODE 8011-01-P