Responding to a growing controversy over investing practices, the Federal Reserve announced on Thursday a ban on officials owning individual stocks and limits on other activities as well.
The ban includes senior policymakers such as those who sit on the Federal Open Market Committee, along with top staff. Future investments will have to be confined to mutual funds such as diversified assets.
Fed officials can no longer hold shares in individual companies, nor can they invest in individual bonds, hold agency securities or derivative contracts. The new rules replace existing regulations that, while somewhat restrictive, still allowed members to buy and sell stocks.
These tough new rules raise the bar high in order to assure the public 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.
Under the new rules, the officials will have to provide 45 days notice in advance of buying or selling any securities that are still allowed. They also will be required to hold the securities for at least a year and cannot buy or sell funds during heightened financial market stress, a news release announcing the moves said.
The rules come on the heels of disclosures that multiple Fed officials had been buying and selling stocks at a time when the central bank s policies were designed to improve market functioning, particularly during the Covid crisis.
Regional presidents Eric Rosengren of Dallas and Robert Kaplan of Boston both resigned shortly after disclosures that they had engaged in trading individual securities last year. In Kaplan s case, the moves occurred in large-dollar allotments.
Vice Chairman Richard Clarida also had been featured in the reports. Powell also sold securities last year, though they were exchange traded funds that tracked market indexes.
The announcement stated that reserve bank presidents will have to disclose transactions within 30 days, a requirement already in place for FOMC members and senior staff. The new rules will be formally incorporated over the coming months, the release said.