The CFTC amended the rule governing the maximum amount of civil monetary penalties ("CMPs") that can be assessed for violations of CEA and CFTC rules. The amendment adjusts the maximum amount for inflation. The amendment was published in the Federal Register in the form of an interim final rule.
The Federal Civil Penalties Inflation Adjustment Act of 1990 requires each federal agency to adjust the minimum and maximum amount of CMPs periodically so that "CMPs do not lose their deterrence value because of inflation." The penalties for the most common violations, which currently are assessed at $140,000 per violation, now will be raised to $152,243. Penalties for manipulation will be raised from $1 million to $1.098 million.
The interim final rule will become effective on August 1, 2016.
Commentary
Under the CEA, the calculation of penalties involves more art than science. If the statute limits the CFTC to X dollars for each violation, but it wants to impose X + Y dollars on a respondent, then the CFTC usually (though not always) can assess the higher amount simply by finding more violations;e.g., by saying that each day represents a new violation and then multiplying the prescribed maximum amount by the number of newly discovered violations. Alternatively, even if a respondent commits only a small number of violations, but those violations generate enormous amounts of illegal monetary gains, then the CFTC can choose to base the penalty on the gains under the statute and treble that amount in order to calculate a larger penalty.
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