Federal Reserve announces new trading and investment rules

Federal Reserve officials said Friday that a vote on the rules concluded Thursday. Fed officials said the steps reflected, in part, rules that are in place at other central banks.

Under the new rules, senior Fed officials are barred from purchasing individual stocks or holding investments in individual bonds, agency securities, cryptocurrencies or foreign currencies. Senior officials will also be required to provide 45 days of non-retractable notice for purchases and sales of securities, obtain prior approval for such transactions, and hold investments for at least one year.

Purchases and sales will also be prohibited during periods of heightened financial market stress.

The Fed’s 12 regional reserve bank presidents will be required to publicly disclosure securities transactions within 30 days, as is already required of Fed board members and senior board staff. Financial disclosures filed by Reserve Bank presidents will be posted online. Disclosures by board members are available on the website of the Office of Government Ethics.

The rules will take effect May 1. Requirements for advance notice and pre-clearance of transactions will take effect July 1.

In recent months, the Fed’s stock-trading scandals dealt a blow to public trust in the central bank at a time when the Fed is under immense pressure to control inflation and not disrupt the economic recovery.

“These tough new rules raise the bar high 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,” Powell said in October, when the rules were first outlined.

Scrutiny over Clarida’s disclosures began in October after initial reports showed that he bought shares in February 2020 of an investment fund that held stocks, just before the Fed announced it was prepared to help the economy as the pandemic began to take hold, bringing confidence to the markets. Attention on Clarida’s trades later intensified after the New York Times reported that Clarida initially did not disclose the full extent of his trading. He resigned last month.

In September, Rosengren and Kaplan both left their posts after reports revealed that they actively traded in stocks and other investments while in their roles setting monetary policy and assisting the central bank through the coronavirus crisis. At the time of those investments, Rosengren led the Boston Federal Reserve Bank and Kaplan led the Dallas Fed.