New restrictions on investments and active trading by Federal Reserve Bank and Fed Board policymakers and senior staff, along with new requirements for public disclosure, were announced Thursday by the Federal Reserve Board.
The Fed said the rules will (among other things) prohibit the purchase of individual securities, restrict active trading, and increase the timeliness of reporting and public disclosure by Federal Reserve policymakers and senior staff.
“These tough new rules raise the bar high in order to assure the public we serve that all of our senior officials maintain a single-minded focus on the public mission of the Federal Reserve,” said Federal Reserve Board Chair Jerome H. (“Jay”) Powell.
Thursday’s action follows recent reports of trades made by two Federal Reserve Bank officials last year, when the Fed was taking aggressive actions to mitigate the financial and economic impacts of the COVID-19 pandemic. The two Fed bank presidents – Robert Kaplan of the Dallas Fed and Eric Rosengren of the Boston Fed – have since stepped down.
The Fed said Thursday that under its new policies, senior Federal Reserve officials will be limited to purchasing diversified investment vehicles, like mutual funds. The new restrictions will apply to both Reserve Bank and Fed Board policymakers and senior staff, it said, and prohibit them from purchasing individual stocks, holding investments in individual bonds, holding investments in agency securities (directly or indirectly), or entering into derivatives.
The new rules are “expansive” and “designed to place the Federal Reserve’s investment and trading rules at the forefront among major federal agencies,” the central bank said.
The central bank also said that:
- To help guard against even the appearance of any conflict of interest in the timing of investment decisions, policymakers and senior staff generally will be required to provide 45 days’ advance notice for purchases and sales of securities, obtain prior approval for purchases and sales of securities, and hold investments for at least one year. Further, no purchases or sales will be allowed during periods of heightened financial market stress.
- Reserve Bank presidents now will be required to publicly disclose financial transactions within 30 days, as Board Members and senior staff currently do.
The Fed said these rules, which followed a “comprehensive review,” will be incorporated into appropriate Federal Reserve rules and policies over the coming months.