Federal Reserve to Ban Top Officials From Buying Individual Stocks, Restricting Trading

Federal Reserve Chairman Jerome Powell testifies during a Senate Banking, Housing and Urban Affairs Committee hearing on the CARES Act, at the Hart Senate Office Building in Washington on Sept. 28, 2021. Kevin Dietsch/Pool via Reuters

The Federal Reserve on Thursday banned individual stock purchases by top officials who work at the central bank and placed limits on other activities.

The new rules come several weeks after reports of active trading by high-level Fed policymakers triggered calls for an ethics investigation.

Now, the fed will implement rules limiting the types of financial securities that top Fed officials can own, including the aforementioned ban on individual stock purchases or holding individual bonds. Any transactions require advance notice from the official, and it stipulates that investments have to be held for at least one year.

Officials will have to give 5 days’ notice in advance of buying or selling any securities that are allowed, according to a news release announcing the rules. They also can’t purchase funds during periods of “heightened financial market stress,” the release said.

“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,” Fed Chair Jerome Powell said in a statement.

In the release, the Fed said the rules are designed to “help guard against even the appearance of any conflict of interest in the timing of investment decisions.”

Several weeks ago, 2 of the 12 Federal Reserve officials resigned after reports surfaced of their active trading last year amid the COVID-19 pandemic and efforts taken by the Fed to fight associated economic impacts. The Fed has reportedly purchased more than $4 trillion in bonds to bolster the U.S. economy, and it also purchased bonds from some of the largest companies on Wall Street to ensure that the market functions.

Dallas Federal Reserve Bank President Robert Kaplan speaks during an interview in his office at the bank's headquarters in Dallas, Texas, on Jan. 9, 2020. Ann Saphir/File Photo/Reuters

Federal Reserve Chair Jerome Powell and then-Boston Fed President Eric Rosengren in a file photo. Brendan McDermid/Reuters

Regional presidents Robert Kaplan of Dallas and Eric Rosengren of Boston stepped down after disclosures of their trading surfaced, although Rosengren cited health concerns. Fed officials obtain private reports about the U.S. economy on a daily basis.

After those revelations became public, the Federal Reserve announced last month its inspector general would conduct an independent review over their behavior to determine whether they complied with the law and ethics rules.

“The core rules that guide personal financial practices for Federal Reserve officials are the same as those for other government agencies. We also have a set of supplemental rules that are stricter than those that apply to Congress and other agencies that are specific to the work we do at the Federal Reserve,” a spokesperson for the Fed told The Epoch Times.

Sen. Elizabeth Warren (D-Mass.) has called for the Securities and Exchange Commission (SEC) to investigate the trading activity. Earlier on Thursday, the senator called for the Federal Reserve to release a March 2020 ethics warning that was allegedly provided to Fed officials.

“I am writing to ask that you release this information immediately, so that Congress and the public can evaluate the extent to which Fed officials may have known of the risks from their trading, and if they ignored calls by ethics officials to avoid this scandalous behavior,” Warren wrote in a letter to Powell.

It also comes as Powell’s term as chairman is slated to expire in February 2022. The White House has not signaled whether it will renominate him.