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§ 13. Violations generally; punishment; costs of prosecution

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Release point 114-9 · current through 04/07/2015

§ 13.

Violations generally; punishment; costs of prosecution

(a)

Felonies generally

It shall be a felony punishable by a fine of not more than $1,000,000 or imprisonment for not more than 10 years, or both, together with the costs of prosecution, for:

(1)

Any person registered or required to be registered under this chapter, or any employee or agent thereof, to embezzle, steal, purloin, or with criminal intent convert to such person’s use or to the use of another, any money, securities, or property having a value in excess of $100, which was received by such person or any employee or agent thereof to margin, guarantee, or secure the trades or contracts of any customer or accruing to such customer as a result of such trades or contracts or which otherwise was received from any customer, client, or pool participant in connection with the business of such person. The word “value” as used in this paragraph means face, par, or market value, or cost price, either wholesale or retail, whichever is greater.

(2)

Any person to manipulate or attempt to manipulate the price of any commodity in interstate commerce, or for future delivery on or subject to the rules of any registered entity, or of any swap, or to corner or attempt to corner any such commodity or knowingly to deliver or cause to be delivered for transmission through the mails or interstate commerce by telegraph, telephone, wireless, or other means of communication false or misleading or knowingly inaccurate reports concerning crop or market information or conditions that affect or tend to affect the price of any commodity in interstate commerce, or knowingly to violate the provisions of section 6, section 6b, subsections (a) through (e) of subsection 1

1 So in original. Probably should be “section”.
6c, section 6h, section 6o(1), or section 23 of this title.

(3)

Any person knowingly to make, or cause to be made, any statement in any application, report, or document required to be filed under this chapter or any rule or regulation thereunder or any undertaking contained in a registration statement required under this chapter, or by any registered entity or registered futures association in connection with an application for membership or participation therein or to become associated with a member thereof, which statement was false or misleading with respect to any material fact, or knowingly to omit any material fact required to be stated therein or necessary to make the statements therein not misleading.

(4)

Any person willfully to falsify, conceal, or cover up by any trick, scheme, or artifice a material fact, make any false, fictitious, or fraudulent statements or representations, or make or use any false writing or document knowing the same to contain any false, fictitious, or fraudulent statement or entry to a registered entity, board of trade, swap data repository, or futures association designated or registered under this chapter acting in furtherance of its official duties under this chapter.

(5)

Any person willfully to violate any other provision of this chapter, or any rule or regulation thereunder, the violation of which is made unlawful or the observance of which is required under the terms of this chapter, but no person shall be subject to imprisonment under this paragraph for the violation of any rule or regulation if such person proves that he had no knowledge of such rule or regulation.

(6)

Any person to abuse the end user clearing exemption under section 2(h)(4) of this title, as determined by the Commission.

(b)

Suspension of convicted felons

Any person convicted of a felony under this section shall be suspended from registration under this chapter and shall be denied registration or reregistration for five years or such longer period as the Commission may determine, and barred from using, or participating in any manner in, any market regulated by the Commission for five years or such longer period as the Commission shall determine, on such terms and conditions as the Commission may prescribe, unless the Commission determines that the imposition of such suspension, denial of registration or reregistration, or market bar is not required to protect the public interest. The Commission may upon petition later review such disqualification and market bar and for good cause shown reduce the period thereof.

(c)

Transactions by Commissioners and Commission employees prohibited

It shall be a felony punishable by a fine of not more than $500,000 or imprisonment for not more than five years, or both, together with the costs of prosecution, for any Commissioner of the Commission or any employee or agent thereof, to participate, directly or indirectly, in any transaction in commodity futures or any transaction of the character of or which is commonly known to the trade as an “option”, “privilege”, “indemnity”, “bid”, “offer”, “put”, “call”, “advance guaranty”, or “decline guaranty”, or any transaction for the delivery of any commodity under a standardized contract commonly known to the trade as a margin account, margin contract, leverage account, or leverage contract, or under any contract, account, arrangement, scheme, or device that the Commission determines serves the same function or functions as such a standardized contract, or is marketed or managed in substantially the same manner as such a standardized contract, or for any such person to participate, directly or indirectly, in any investment transaction in an actual commodity if nonpublic information is used in the investment transaction, if the investment transaction is prohibited by rule or regulation of the Commission, or if the investment transaction is effected by means of any instrument regulated by the Commission. The foregoing prohibitions shall not apply to any transaction or class of transactions that the Commission, by rule or regulation, has determined would not be contrary to the public interest or otherwise inconsistent with the purposes of this subsection.

(d)

Use of information by Commissioners and Commission employees prohibited

It shall be a felony punishable by a fine of not more than $500,000 or imprisonment for not more than five years, or both, together with the costs of prosecution—(1) for any Commissioner of the Commission or any employee or agent thereof who, by virtue of his employment or position, acquires information which may affect or tend to affect the price of any commodity futures or commodity and which information has not been made public to impart such information with intent to assist another person, directly or indirectly, to participate in any transaction in commodity futures, any transaction in an actual commodity, or in any transaction of the character of or which is commonly known to the trade as an “option”, “privilege”, “indemnity”, “bid”, “offer”, “put”, “call”, “advance guaranty”, or “decline guaranty”, or in any transaction for the delivery of any commodity under a standardized contract commonly known to the trade as a margin account, margin contract, leverage account, or leverage contract, or under any contract, account, arrangement, scheme, or device that the Commission determines serves the same function or functions as such a standardized contract, or is marketed or managed in substantially the same manner as such a standardized contract; and (2) for any person to acquire such information from any Commissioner of the Commission or any employee or agent thereof and to use such information in any transaction in commodity futures, any transaction in an actual commodity, or in any transaction of the character of or which is commonly known to the trade as an “option”, “privilege”, “indemnity”, “bid”, “offer”, “put”, “call”, “advance guaranty”, or “decline guaranty”, or in any transaction for the delivery of any commodity under a standardized contract commonly known to the trade as a margin account, margin contract, leverage account, or leverage contract, or under any contract, account, arrangement, scheme, or device that the Commission determines serves the same function or functions as such a standardized contract, or is marketed or managed in substantially the same manner as such a standardized contract.

(e)

Insider trading prohibited

It shall be a felony for any person—

(1)

who is an employee, member of the governing board, or member of any committee of a board of trade, registered entity, swap data repository, or registered futures association, in violation of a regulation issued by the Commission, willfully and knowingly to trade for such person’s own account, or for or on behalf of any other account, in contracts for future delivery or options thereon, or swaps, on the basis of, or willfully and knowingly to disclose for any purpose inconsistent with the performance of such person’s official duties as an employee or member, any material nonpublic information obtained through special access related to the performance of such duties; or

(2)

willfully and knowingly to trade for such person’s own account, or for or on behalf of any other account, in contracts for future delivery or options thereon on the basis of any material nonpublic information that such person knows was obtained in violation of paragraph (1) from an employee, member of the governing board, or member of any committee of a board of trade, registered entity, or registered futures association.

Such felony shall be punishable by a fine of not more than $500,000, plus the amount of any profits realized from such trading or disclosure made in violation of this subsection, or imprisonment for not more than five years, or both, together with the costs of prosecution.

Source(Sept. 21, 1922, ch. 369, § 9, 42 Stat. 1003; June 15, 1936, ch. 545, §§ 2, 11, 49 Stat. 1491, 1501; Pub. L. 90–258, § 25,
Feb. 19, 1968
, 82 Stat. 33; Pub. L. 93–463, title II, § 212(d), title IV, §§ 401, 409,
Oct. 23, 1974
, 88 Stat. 1404, 1412, 1414; Pub. L. 95–405, § 19,
Sept. 30, 1978
, 92 Stat. 875; Pub. L. 97–444, title II, § 227,
Jan. 11, 1983
, 96 Stat. 2316; Pub. L. 99–641, title I, §§ 105, 110(3), (4),
Nov. 10, 1986
, 100 Stat. 3558, 3561; Pub. L. 102–546, title II, §§ 212(a), 214(a),
Oct. 28, 1992
, 106 Stat. 3608, 3610; Pub. L. 106–554, § 1(a)(5) [title I, § 123(a)(22)],
Dec. 21, 2000
, 114 Stat. 2763, 2763A–410; Pub. L. 110–234, title XIII, §§ 13103(d), 13105(h),
May 22, 2008
, 122 Stat. 1434, 1435; Pub. L. 110–246, § 4(a), title XIII, §§ 13103(d), 13105(h),
June 18, 2008
, 122 Stat. 1664, 2196, 2197; Pub. L. 111–203, title VII, § 741(b)(6), (7),
July 21, 2010
, 124 Stat. 1731.)
Notes

Codification

Pub. L. 110–234 and Pub. L. 110–246 made identical amendments to this section. The amendments by Pub. L. 110–234 were repealed by section 4(a) of Pub. L. 110–246.

Amendments

2010—Subsec. (a)(2). Pub. L. 111–203, § 741(b)(6)(A)(i), inserted “or of any swap,” before “or to corner”.
Subsec. (a)(4). Pub. L. 111–203, § 741(b)(6)(A)(ii), inserted “swap data repository,” before “or futures association”.
Subsec. (a)(6). Pub. L. 111–203, § 741(b)(7), added par. (6).
Subsec. (e)(1). Pub. L. 111–203, § 741(b)(6)(B), inserted “swap data repository,” before “or registered futures association” and “, or swaps,” before “on the basis”.
2008—Subsec. (a). Pub. L. 110–246, § 13103(d), in introductory provisions, struck out “(or $500,000 in the case of a person who is an individual)” after “$1,000,000” and substituted “10 years” for “five years”.
Subsecs. (e), (f). Pub. L. 110–246, § 13105(h), redesignated subsec. (f) as (e) and, in par. (1), substituted “; or” for period at end.
2000—Subsecs. (a)(2) to (4), (f)(1), (2). Pub. L. 106–554 substituted “registered entity” for “contract market”.
1992—Subsec. (a). Pub. L. 102–546, § 212(a)(1)(A), (C), added subsec. (a) and struck out former subsec. (a) which related to penalty for embezzlement and larcenous actions.
Subsec. (b). Pub. L. 102–546, § 212(a)(1)(A), (C), added subsec. (b) and struck out former subsec. (b) which related to penalty for price manipulation, cornering, and fraudulent information.
Subsec. (c). Pub. L. 102–546, § 212(a)(1)(A), (B), (2), redesignated subsec. (d) as (c), substituted “$500,000” for “$100,000”, and struck out former subsec. (c) which related to penalty for misdemeanors.
Subsecs. (d) to (f). Pub. L. 102–546, §§ 212(a)(1)(B), (3), 214(a), redesignated subsec. (e) as (d), substituted “$500,000” for “$100,000”, and added subsec. (f).
1986—Subsec. (c). Pub. L. 99–641, § 110(3), substituted “6k,” for “6k.”
Subsec. (d). Pub. L. 99–641, § 110(4), substituted “advance guaranty” for “advance guarantee”.
Pub. L. 99–641, § 105, inserted “if nonpublic information is used in the investment transaction, if the investment transaction is prohibited by rule or regulation of the Commission, or if the investment transaction is effected by means of any instrument regulated by the Commission” after “actual commodity”, and substituted provisions which related to foregoing prohibitions not being applicable to transactions determined by Commission not contrary to public interest or inconsistent with this subsection for provisions which read as follows: “Such prohibition against any investment transaction in an actual commodity shall not apply to (1) a transaction in which such person buys an agricultural commodity or livestock for use in such person’s own farming or ranching operations or sells an agricultural commodity which such person has produced in connection with such person’s own farming or ranching operations nor to any transaction in which such person sells livestock owned by such person for at least three months, (2) a transaction entered into by the trustee of a trust established by such person over which such person exercises no control if such transaction is entered into solely to hedge against adverse price changes in connection with such farming or ranching operations or is a transaction for the lease of oil or gas or other mineral rights or interests owned by such person, or (3) a transaction in which such person buys or sells, directly or indirectly (except by means of an instrument regulated by the Commission), a United States Government security, a certificate of deposit, or a similar financial instrument if no nonpublic information is used by such person in such transaction. With respect to such excepted transactions, the Commission shall require any Commissioner of the Commission or any employee or agent thereof who participates in any such transaction to notify the Commission thereof in accordance with such regulations as the Commission shall prescribe and the Commission shall make such information available to the public.”
1983—Subsec. (a). Pub. L. 97–444, § 227(1), expanded applicability to any person registered or required to be registered under this chapter and inserted provision suspending persons convicted under this subsec. from registration and denying reregistration for five years or longer as determined by the Commission, unless such suspension or denial is not required to protect the public interest.
Subsec. (b). Pub. L. 97–444, § 227(2), inserted “A person convicted of a felony under this subsection shall be suspended from any registration under this chapter, denied registration or reregistration for five years or such longer period as the Commission shall determine, and barred from using or participating in any manner in any market regulated by the Commission for five years or such longer period as the Commission shall determine on such terms and conditions as the Commission may prescribe, unless the Commission determines that the imposition of such suspension, denial of registration or reregistration, or market bar is not required to protect the public interest. The Commission may upon petition later review such disqualification and market bar and for good cause shown reduce the period thereof.”
Subsec. (c). Pub. L. 97–444, § 227(3), inserted “A person convicted under this subsection of knowingly violating the provisions of section 6a of this title shall be suspended from any registration under this chapter, denied registration or reregistration for a period of two years or such longer period as the Commission shall determine, and barred from using or participating in any manner in any market regulated by the Commission for two years or such longer period as the Commission shall determine on such terms and conditions as the Commission may prescribe, unless the Commission determines that the imposition of such suspension, denial of registration or reregistration, or market bar is not required to protect the public interest. The Commission may upon petition later review such disqualification and market bar and for good cause shown reduce the period thereof.”
Subsec. (d). Pub. L. 97–444, § 227(4), in amending subsec. (d) generally, added to range of felonious conduct, participation in any transaction for the delivery of any commodity under a standardized contract commonly known to the trade as a margin account, margin contract, leverage account, or leverage contract, or under any contract, account, arrangement, scheme, or device that the Commission determines serves the same function or functions as such a standardized contract, or is marketed or managed in substantially the same manner as such a standardized contract, and added to nonapplicability of prohibition against any investment transaction in an actual commodity, a transaction entered into by the trustee of a trust established by such person over which such person exercises no control if such transaction is entered into solely to hedge against adverse price changes in connection with such farming or ranching operations or is a transaction for the lease of oil or gas or other mineral rights or interests owned by such person, or a transaction in which such person buys or sells, directly or indirectly (except by means of an instrument regulated by the Commission), a United States Government security, a certificate of deposit, or a similar financial instrument if no nonpublic information is used by such person in such transaction.
Subsec. (e). Pub. L. 97–444, § 227(5), inserted after words “ ‘decline guaranty’ ” each place they appear the following: “, or in any transaction for the delivery of any commodity under a standardized contract commonly known to the trade as a margin account, margin contract, leverage account, or leverage contract, or under any contract, account, arrangement, scheme, or device that the Commission determines serves the same function or functions as such a standardized contract, or is marketed or managed in substantially the same manner as such a standardized contract”.
1978—Subsec. (a). Pub. L. 95–405, § 19(1), substituted “$500,000” for “$100,000” and inserted provision relating to a fine of not more than $100,000 plus costs of prosecution for a violation by a person who is an individual.
Subsec. (b). Pub. L. 95–405, § 19(2), substituted “$500,000” for “$100,000” and inserted provisions making felonies the violation of sections 6, 6b, 6c(b) to (e), 6h, 6o(1) and 23 of this title, knowingly making any false or misleading statement of material fact, or omitting such fact in any application or report, and setting the fine for such felonies at not more than $100,000 for a person who is an individual.
Subsec. (c). Pub. L. 95–405, § 19(3), inserted references to subsecs. (d) and (e) of this section and substituted “sections 6a, 6c(a), 6d, 6e, 6i, 6k, 6m, 6o(2), or 12b of this title” for “sections 6 to 6e, 6h, 6i, 6k, 6m, 6o or 12b of this title”.
Subsecs. (d), (e). Pub. L. 95–405, § 19(4), (5), substituted “$100,000” for “$10,000”.
1974—Subsecs. (a), (b). Pub. L. 93–463, § 212(d)(1), (2), substituted “$100,000” for “$10,000”.
Subsec. (c). Pub. L. 93–463, §§ 212(d)(3), 409, substituted “$100,000” for “$10,000” and inserted reference to sections 6k, 6m, and 6o of this title.
Subsecs. (d), (e). Pub. L. 93–463, § 401, added subsecs. (d) and (e).
1968—Subsec. (a). Pub. L. 90–258 added subsec. (a).
Subsec. (b). Pub. L. 90–258 incorporated existing offenses in provisions designated as subsec. (b), changed classification thereof from misdemeanors to felonies, and increased term of imprisonment from not more than one year to not more than five years.
Subsec. (c). Pub. L. 90–258 incorporated existing offenses in provisions designated as subsec. (c), and included penalty for violation of section 12b of this title.
1936—Act
June 15, 1936
, amended section generally and provided that price manipulations of commodities in interstate commerce was a violation.

Effective Date of 2010 Amendment

Amendment by Pub. L. 111–203 effective on the later of 360 days after
July 21, 2010
, or, to the extent a provision of subtitle A (§§ 711–754) of title VII of Pub. L. 111–203 requires a rulemaking, not less than 60 days after publication of the final rule or regulation implementing such provision of subtitle A, see section 754 of Pub. L. 111–203, set out as a note under section 1a of this title.

Effective Date of 2008 Amendment

Amendment of this section and repeal of Pub. L. 110–234 by Pub. L. 110–246 effective
May 22, 2008
, the date of enactment of Pub. L. 110–234, see section 4 of Pub. L. 110–246, set out as an Effective Date note under section 8701 of this title.

Effective Date of 1983 Amendment

Amendment by Pub. L. 97–444 effective
Jan. 11, 1983
, see section 239 of Pub. L. 97–444, set out as a note under section 2 of this title.

Effective Date of 1978 Amendment

Amendment by Pub. L. 95–405 effective
Oct. 1, 1978
, see section 28 of Pub. L. 95–405, set out as a note under section 2 of this title.

Effective Date of 1974 Amendment

For effective date of amendment by Pub. L. 93–463, see section 418 of Pub. L. 93–463, set out as a note under section 2 of this title.

Effective Date of 1968 Amendment

Amendment by Pub. L. 90–258 effective 120 days after
Feb. 19, 1968
, see section 28 of Pub. L. 90–258, set out as a note under section 2 of this title.

Effective Date of 1936 Amendment

Amendment by act
June 15, 1936
, effective 90 days after
June 15, 1936
, see section 13 of that act, set out as a note under section 1 of this title.

Regulations

Pub. L. 102–546, title II, § 214(b),
Oct. 28, 1992
, 106 Stat. 3611, provided that:
“The Commodity Futures Trading Commission shall issue regulations to implement the amendment made by subsection (a) [amending this section] not later than three hundred and sixty days after the date of enactment of this Act [
Oct. 28, 1992
].”

Penalties Study and Guidelines

Pub. L. 102–546, title II, § 225,
Oct. 28, 1992
, 106 Stat. 3618, provided that:
“(a)

Study.—

The Commodity Futures Trading Commission shall study the penalties the Commission imposes against persons found to have violated the Commodity Exchange Act (7 U.S.C. 1 et seq.) and the penalties imposed by contract markets and registered futures associations against persons found to have violated their respective rules established under such Act.

“(b)

Report.—

Not later than two years after the date of enactment of this Act [

Oct. 28, 1992
], the Commission shall submit to the Committee on Agriculture of the House of Representatives and the Committee on Agriculture, Nutrition, and Forestry of the Senate a report that describes the results of the study conducted under subsection (a). The report shall—

“(1)

include an analysis of whether systematic differences exist among penalties imposed by various contract markets and registered futures associations for similar offenses, and, if so, the causes of such differences;

“(2)

propose industry-wide guidelines or rules to make penalty levels among contract markets and registered futures associations consistent, including, if appropriate, minimum penalties or penalty ranges for various offenses; and

“(3)

propose guidelines or rules to make Commission penalty levels consistent, including, if appropriate, minimum penalties or penalty ranges for various offenses.”

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