The Federal Reserve on Thursday banned individual stock purchases by its top officials and unveiled a broad set of other restrictions on their investing activities, taking action roughly six weeks after reports of active trading by some U.S. central bank policymakers triggered an ethics uproar.
The new rules will limit the types of financial securities the Fed's top officials can own, including a ban on purchasing individual stocks or holding individual bonds and agency-backed securities. It also requires a 45-day advance notice and approval of any transaction and stipulates investments be held for at least a year.
Active trading by top Fed officials will now be expressly prohibited, with purchases limited to investments like mutual funds, and all transactions vetted in advance by the central bank's ethics officer. Atlanta Fed President Raphael Bostic, speaking on CNBC, said he hoped the steps announced on Thursday would let the Fed put the ethics controversy to rest and refocus on coming policy debates.To the Fed's sharpest critics on the issue, however, the new rules were a start, but with more still needed in particular to understand whether trading through the pandemic year by different officials violated any laws.
Beyond the resignations of Rosengren and Kaplan, Powell and Fed Vice Chair Richard Clarida had been criticized for what, in other times, would have been treated as innocuous transactions involving, for example, stock index funds. The 12 regional Fed banks are quasi-private institutions, not subject for example to the federal Freedom of Information Act, and the selection and oversight of their presidents a subject of frequent calls for reform.
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