Federal Reserve Cracks Down on Trading by Policy Makers

Issue 94

The Federal Reserve has decided to adopt new rules and regulations for its policymakers and senior staff that will prohibit the purchasing of individual shares as well as various other investments as the central bank attempts to limit trading by high-ranking officials.

In a statement on Thursday, the Federal announced that its senior officials will only be able to purchase “diversified investment vehicles, like mutual funds”. The cause for concern comes after questionable trades last year that has only been recently disclosed. These questionable trades resulted in the resignation of Eric Rosengren, the president of the Federal Reserve Bank of Boston, and Robert Kaplan, the president of Dallas Federal Reserve.

The recent disclosures forced Jay Powell, the central bank’s chair, to implement “tough new rules” in order to maintain the Federal Reserve's mission of maintaining focus on public interests.

The Biden administration had little to comment on the matter except that the Biden administration respects the Federal Reserve's independence and that independent government agencies should be held to the highest ethical standards.

The new rules for senior staff will not take effect for some time however, the rules will only be implemented once they are fully written and adopted by the central bank. In addition, the central bank and Federal Reserve’s electronic systems will have to be updated to account for mandatory disclosures and transaction notifications.

Source: Bloomberg