The U.S. Federal Reserve (Fed) has banned top officials from buying and selling individual stocks and bonds as well as limit active trading after a scandal that led two officials to resign.
"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," Chairman Jerome Powell said in a written statement.
The American central bank’s ban is the most significant response yet to revelations of stock trading last year by top policymakers as the Fed fought to protect the U.S. economy during the pandemic.
Under the new policies, senior Fed officials, including regional bank presidents, Washington governors and senior staff, will be limited to purchasing diversified investment vehicles such as mutual funds.
New appointees will have to divest certain assets before joining the Fed, like a portfolio of individual corporate bonds, for example.
Other new rules include providing 45 days’ advance notice for buying and selling securities, obtaining prior approval for such transactions, and holding investments for at least one year. Additionally, "no purchases or sales will be allowed during periods of heightened financial market stress," the Fed said.
Critics seized on the disclosures that senior Fed officials were trading stocks as ammunition to call for the blocking of Powell’s potential renomination by U.S. President Joe Biden.
Critics also seized on Powell’s own 2020 financial disclosure that showed he himself sold $5 million U.S. in a broad-based stock index fund last October, questioning keeping him at the helm of the central bank.
Powell’s current term ends in February 2022. Fed watchers say that if the ethics scandal was hurting Powell’s chances for another four years, his prompt action to tighten the securities trading rules could tip the balance back in his favor.
