==========================================START OF PAGE 1====== SECURITIES AND EXCHANGE COMMISSION 17 CFR Part 201 [Release Nos. 33-7361; 34-37912; IC-22310; IA-1596] Adjustments to Civil Monetary Penalty Amounts AGENCY: Securities and Exchange Commission ACTION: Final rule. SUMMARY: This rule implements the Debt Collection Improvement Act of 1996, which requires that the Commission adopt a regulation 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 and the Investment Advisers Act of 1940. EFFECTIVE DATE: [30 days after publication in Federal Register] FOR FURTHER INFORMATION CONTACT: Richard A. Levine, Senior Special Counsel, or Laura Leedy Gansler, Senior Counsel, Office of the General Counsel, at (202) 942-0900. SUPPLEMENTARY INFORMATION: This regulation implements the Debt Collection Improvement Act of 1996 ("DCIA").-[1]- The DCIA amended the Federal Civil Penalties Inflation Adjustment Act ("FCPIAA")-[2]- to require that the Commission adopt regulations no later than 180 days after the enactment of the statute and at least once every four years thereafter adjusting for inflation the maximum amount of the civil monetary penalties under the statutes administered by the Commission. ---------FOOTNOTES---------- -[1]- P.L. 104-134, section 31001(s) (April 26, 1996) -[2]- 28 U.S.C.  2461 (1990). ==========================================START OF PAGE 2====== A civil monetary penalty 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 federal court pursuant to federal law.-[3]- This definition covers the monetary penalty provisions contained in the statutes administered by the Commission. The DCIA requires that the penalties be adjusted by the cost-of-living adjustment set forth in section 5 of the FCPIAA.-[4]- The cost-of-living adjustment is defined as the percentage by which the U.S. Department of Labor's Consumer Price Index ("CPI") for the month of June of the year preceding the adjustment exceeds the CPI for the month of June for the year in which the amount of the penalty was last set or adjusted pursuant to law. The adjusted amounts are then rounded in accordance with the rounding formula set forth in section 5 of the FCPIAA. However, the DCIA imposes a 10% maximum increase for each penalty for the first adjustment pursuant thereto. The Commission administers four statutes which 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. The last years in which the penalties administered by the Commission were adjusted ---------FOOTNOTES---------- -[3]- Id. at  3(2). -[4]- P.L. 104-134. ==========================================START OF PAGE 3====== or set were 1936,-[5]- 1988,-[6]- and 1990.-[7]- For each of these years, the required CPI adjustment exceeds 10%. Therefore, for this first increase pursuant to the DCIA, the Commission is directed by the statute to increase the maximum amount of each penalty by 10%. Accordingly, the Commission is adopting an amendment to 17 CFR 201 to add a new Subpart E increasing by 10% the amount of each civil monetary penalty authorized by Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Company Act of 1940 and the Investment Advisers Act of 1940. The adjustments set forth in the amendment apply to violations occurring after the effective date of the amendment. Because the Commission is required by statute to adjust the civil monetary penalties within its jurisdiction by 10%, the Commission finds that good cause exists to dispense with public notice and comment pursuant to the notice and comment provisions of the Administrative Procedure Act ("APA").-[8]- ---------FOOTNOTES---------- -[5]- See 15 U.S.C. 78ff(b)). The CPI for June 1936 was 41.4. The CPI for June 1995 was 456.7. Therefore, the cost- of-living adjustment factor for penalties set or last amended in 1936 is 11.031. -[6]- See 15 U.S.C.  78ff(c)(1)(B), 78ffc(2)(C), 78u- 1(a)(3). The CPI for June 1988 was 353.5. The CPI for June 1995 was 456.7. Therefore, the cost-of-living adjustment factor for penalties set or last amended in 1988 is 1.29. -[7]- See 15 U.S.C.  77t(d); 15 U.S.C.  78u-2, 78u(d)(3); 15 USC  80a-9(d), 80a-41(e), 80b-3(i), 80b-9(e). The CPI for June 1990 was 389.1. The CPI for June 1995 was 456.7. Therefore, the cost-of-living adjustment factor for penalties set or last amended in 1990 is 1.17. -[8]- 5 U.S.C.  553(b)(3)(B). ==========================================START OF PAGE 4====== 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. Therefore, the provisions of the Regulatory Flexibility Act, which apply only when notice and comments are required by the APA or other laws, are also not applicable.-[9]- This rule does not contain any collection of information requirements as defined by the Paperwork Reduction Act of 1995 as amended.-[10]- Therefore, Office of Management and Budget review is not required. List of Subjects in 17 CFR Part 201 Administrative practice and procedure; Claims; Confidential business information; Equal access to justice; Lawyers; Securities. For the reasons set forth in the preamble, Title 17, Chapter II of the Code of Federal Regulations is to be amended by adding Subpart E. PART 201 -- RULES OF PRACTICE Part 201 is amended by adding Subpart E to read as follows: Subpart E -- Adjustment of Civil Monetary Penalties Sec. 201.1001 Adjustment of Civil Monetary Penalties ---------FOOTNOTES---------- -[9]- See 5 U.S.C.  601-612. -[10]- 44 U.S.C.  3501 et. seq. ==========================================START OF PAGE 5====== Table I to Subpart E -- Civil Monetary Penalty Inflation Adjustments Authority: P.L. 104-134 (April 26, 1996). 201.1001 Adjustment of Civil Monetary Penalties 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, and the Investment Advisers Act of 1940 are adjusted for inflation in accordance with Table I to this Subpart. The adjustments set forth in Table I apply to violations occurring after [30 days after publication in Federal Register]. By the Commission. November 1, 1996 Jonathan G. Katz Secretary