Federal Reserve implements tough trade restrictions after scandal

The Federal Reserve has finalized a new set of ethics rules designed to prevent questionable trading activities in financial markets by ...

The Federal Reserve has finalized a new set of ethics rules designed to prevent questionable trading activities in financial markets by senior officials, a sweeping response to a scandal that has rocked the central bank since late last year.

Fed officials traded individual stocks, real estate securities and equity funds in 2020, a year in which the central bank rolled out a series of pandemic response programs that placed officials’ day-to-day decisions at the heart of what had happened in the financial sector. markets. Three high-ranking policy makers resigned early than they had anticipated following the trading announcement last year and into early 2022.

Jerome H. Powell, the chairman of the Fed, admitted following the revelations that he and his colleagues were not “happy” with what had happened and that they would revamp the ethics rules of the central bank to prevent a similar situation from happening again in the future.

The new rules, which have been preview in october, aim to deliver on that promise. They prevent senior officials from buying individual stocks or funds tracing industry sectors, the Fed said, and they prohibit investments in individual bonds, cryptocurrencies, commodities or foreign currencies, among other titles.

Senior Fed officials must now announce they are buying or selling a security 45 days in advance, and this notice will not be retractable. Investments must be held for at least one year under the new guidelines.

The Fed’s 12 regional bank presidents will be required to publicly disclose securities transactions within 30 days, as its seven board members already do in Washington. They have to post financial information on their banks’ websites, which they now only do sporadically.

The new set of rules will apply to a wide range of staff with access to sensitive information, from reserve bank senior vice presidents and chief research officers to senior staff and presidential appointees. .

The Fed will also extend its financial trading blackout period — which typically applies the day before Fed meetings — by one day after each meeting. This will bring it in line with the period during which Fed officials are not allowed to give speeches.

Most of the restrictions will come into effect on May 1, 2022, although new rules on advance notice and pre-clearance of transactions will come into effect on July 1.

Financial disclosures released in late 2021 showed that Robert S. Kaplan, the former president of the Federal Reserve Bank of Dallas, made large single stock trades, while Eric S. Rosengren, the president of the Boston Fed, had traded in real estate securities. Mr Kaplan resigned in September, citing the scandal; Mr Rosengren resigned simultaneously, citing health concerns.

Richard H. Clarida, then Vice Chairman of the Fed, sold and then quickly repurchased an equity fund on the eve of a major Fed decision, corrected financial information show. Mr. Clarida has also resigned earlier than expected, although he did not cite a reason.

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Newsrust - US Top News: Federal Reserve implements tough trade restrictions after scandal
Federal Reserve implements tough trade restrictions after scandal
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