After watching several Federal Reserve officials stuck with their hands in the cookie jar, including the Fed chairman himself, the Fed unveiled a new “tougher” set of rules about what, when and who can implement their policy decisions.
The new rules will Ban senior officials from buying individual securities And Restrict investment activities to large-scale products Like mutual funds.
The rules will require Federal Reserve officials and senior staff to do so Provide 45 days advance notice For any purchases or sales of various investment vehicles, such as mutual funds.
It will also ask the officials Obtain pre-approval for any investment purchases or salesAnd they will be asked Hold the investments for a minimum of one year.
Transactions will not be permitted during periods of “increased financial market stress,” The Federal Reserve said in a statement.
The new rules Applies to the 12 heads of the system’s reserve bank and the seven governors On the Board of Directors of the Central Bank in Washington.
The rules go beyond what other government agencies require of senior leaders.
“These tough new rules raise expectations in order to reassure the public we serve that all of our senior officials maintain a single-minded focus on the overall mission of the Federal Reserve.” Federal Reserve Chairman Jerome H. Powell.
While this move does not prohibit trading, we would suggest Senator Warren win the first round…
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The full Federal Reserve statement:
After a comprehensive review, the Federal Reserve on Thursday announced a broad set of new rules that will ban the purchase of individual securities, restrict active trading, and increase the timing of reporting and public disclosure by federal policy makers and senior staff. As a result of the new policies, senior Federal Reserve officials will be limited to purchasing various investment vehicles, such as mutual funds.
The new restrictions will apply to both the Reserve Bank and policy makers on the board and senior staff and will prohibit them from buying individual stocks, holding investments in individual bonds, holding investments in agency securities (directly or indirectly), or entering into derivatives. The new rules are broad in scope and designed to put the Federal Reserve’s investment and trading rules ahead of the larger federal agencies.
“These tough new rules raise the bar in order to assure the public we serve that all of our senior officials maintain a single-minded focus on the Fed’s overall mission,” Federal Reserve Chairman Jerome H. Powell.
To help protect against the emergence of any conflict of interest in the timing of investment decisions, policy makers and senior officials will generally be required to give 45 days prior notice to purchase and sell securities, obtain prior approval to buy and sell securities, and hold investments for at least one year. Furthermore, no purchases or sales will be permitted during periods of increased financial market stress.
Reserve bank heads will now be required to publicly disclose financial transactions within 30 days, as board members and senior staff currently do.
The Board of Directors and the Reserve Banks will incorporate these new restrictions into appropriate Federal Reserve rules and policies over the coming months.
Reminder, Powell’s term as central bank chief expires in February, President Biden did not say whether he would reappoint him to the position. But the White House said Thursday that Biden still had confidence in Powell.