The Federal Reserve has adopted new rules banning its policymakers and senior staff from buying individual shares and a string of other investments, as the US central bank tries to stamp out a growing furore over trading by top officials.
In a statement on Thursday, the Fed said that as a result of the new policies, its senior officials would be limited to “purchasing diversified investment vehicles, like mutual funds”.
As well as banning the acquisition of individual stocks, they would not be allowed to hold “investments in individual bonds, holding investments in agency securities (directly or indirectly), or entering into derivatives”, the Fed said.
The new rules are being introduced after questionable financial trades during last year led to the resignations in September of Eric Rosengren, the president of the Federal Reserve Bank of Boston, and Robert Kaplan, the president of Dallas Fed.
The furore over those trades caused Powell to call for a review of the rules around investments by the Fed’s top officials, which led to the tightening of the restrictions and disclosures announced on Thursday.
“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 Jay Powell, the central bank’s chair.
The Fed said policymakers and senior staff would have to provide 45 days notice for any purchases or sales of securities, obtain approval for those transactions, and hold any investments for at least a year.
“Further, no purchases or sales will be allowed during periods of heightened financial market stress,” it said.
The trading scandal has come as an especially challenging time for the Fed, as it moves to shift monetary policy to slow its support for the recovery, and uncertainty over its leadership.
Powell’s term as chair of the central bank ends in February, and President Joe Biden has not said whether he would reappoint him to the post. The White House said on Thursday that the Biden continued to have “confidence” in Powell, however.