Fed announces new rules to restrict trade by senior officials – .

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Fed announces new rules to restrict trade by senior officials – .


The Federal Reserve on Thursday announced what it called a “large package” of new rules that will restrict the trading and investing activities of senior officials and executives.

Due to the new rules, senior Fed officials will not be allowed to buy and sell securities of individual companies. Instead, they will be limited to purchasing diversified investment vehicles like mutual funds.

Investments in individual bonds and agency mortgage securities are also prohibited.

Officials will need to give 45 days’ notice for purchases and sales and they will need to obtain pre-approval before executing transactions.

There will be a one-year detention requirement. Trading will also be prohibited during times of heightened market stress.

A Federal Reserve official said Fed governors and regional bank presidents strongly support the rules. Officials said a rule that would have mandated key Fed policymakers to place their investments in blind trusts was considered but rejected.

Some divestments will be necessary because of the new rules.

Presidents of reserve banks will have to publicly disclose transactions within 30 days, which was previously only required for the board of governors.

“These tough new rules set the bar very high to assure the public we serve that all of our senior officials remain focused on the Federal Reserve’s public mission,” Fed Chairman Jerome Powell said in a statement. .

The Fed has been on the defensive since The Wall Street Journal and Bloomberg discovered that two Fed officials, Dallas Fed Chairman Rob Kaplan and Boston Fed Chairman Eric Rosengren, were active traders in 2020 at same time when the central bank was providing massive economic support in the wake of the coronavirus pandemic. Kaplan resigned following the disclosure while Rosengren stepped down for health reasons.

Senator Elizabeth Warren, Democrat of Massachusetts, has asked the Securities and Exchange Commission to review trading activity. Fed officials receive daily private reports on the health of the US economy.

Supporters of Fed reform have also cited the investment decisions of Fed Vice President Richard Clarida and Powell in 2020 as examples of trading that should be scaled back.

Some experts have defended Powell’s trading activity – which was to sell the assets of a stock index in October 2020.

Former Obama economist Jason Furman said Powell’s business was essentially taking money out of a bank. Peter Conti-Brown, a professor at the University of Pennsylvania, said it would be “a scandal” if Powell’s deals were used against him over whether President Joe Biden would give him a second term.

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