The Federal Reserve has finalized a new code of ethics aimed at preventing questionable financial market trading by top officials, a far-reaching response to a scandal that has rocked the country. central bank since the end of last year.
Fed officials trade individual stocks, real estate securities, and stock funds in 2020, a year in which the central bank rolled out a series of pandemic response programs that set decisions on a daily basis of officials to the core of what happened in the financial sector. market. Three senior policymakers resigned earlier against their plan after news of the deal broke last year and early 2022.
Jerome H. Powell, the Fed chair, admitted after the revelations that he and his colleagues unhappy” with what happened and they will amend the central bank’s codes of ethics to prevent a similar situation in the future.
New rules, already preview in October, to fulfill that promise. The Fed said it prevents senior officials from buying individual stocks or funds that track sectors of business, and it prohibits investing in individual bonds, cryptocurrencies, commodities or foreign currencies, among others. other securities.
Senior Fed officials must now announce that they are buying or selling a security 45 days in advance, and that notice cannot be withdrawn. Investments must be held for at least one year under the new guidelines.
The Fed’s 12 regional bank presidents will be required to make their securities transactions public within 30 days, the way seven Washington board members have done. They had to publicly post their finances on their banking websites, which they now do only sporadically.
The new rules will apply to a wide range of personnel with access to sensitive information, from the reserve bank’s first vice president and director of research to senior staff and those designated by the president. determined.
The Fed will also extend the financial shutdown period – which usually applies in the run-up to Fed meetings – by one day after each meeting. That would match the length of time that Fed officials are not allowed to speak.
Most of the restrictions will go into effect on May 1, 2022, although the new rules for advance notice and prepayment of transactions will go into effect on July 1.
Financial disclosures released in late 2021 show that Robert S. Kaplan, former president of the Federal Reserve Bank of Dallas, has large individual stock trading, while Eric S. Rosengren, president of the Boston Fed, was in the real estate securities business. Mr. Kaplan resigned in September, citing scandals; Mr. Rosengren resigned at the same time due to health reasons.
Richard H. Clarida, then vice president of the Fed, sold and then quickly bought back a stock fund before a big Fed decision, corrected financial disclosure showed. So is Mr. Clarida resign a little earlier than planned, although he did not state why.
https://www.nytimes.com/2022/02/18/business/economy/federal-reserve-trading-restrictions.html Federal Reserve introduces tough trading restrictions after scandal