Fed issues tough new trade rules for senior officials

The Federal Reserve on Friday finalized tough new investment rules for top policymakers months after three senior bank officials resigned amid financial exchange fire.

Members and senior officials of the Federal Open Market Committee (FOMC), a panel of Fed officials tasked with setting monetary policy, will be prohibited from buying and holding a wide range of investment products beginning on June 1. may. Relevant officers will also be prohibited from conducting financial transactions without prior approval from ethics officers and in the run-up to political meetings.

The new rules apply to members of the Board of Governors of the Fed, presidents and first vice presidents of regional reserve banks, senior officials of the FOMC, the director and deputy director of the System Open Market Account, their spouses and minor children and to any other person designated by the chairman of the board of directors of the Fed.

The Fed first introduced its new investment rules in October after financial records revealed large deals by three of the top officials responsible for setting interest rates and overseeing the Fed’s lending programs. bank emergency during pandemic.

Former Fed Vice Chairman Richard Clarida, former Dallas Fed Chairman Robert Kaplan and former Boston Fed Chairman Eric Rosengren made millions in financial transactions in 2020, documents show. ethics uncovered by journalists as the bank scrambled to prevent a financial crisis. All three resigned from their posts before their terms expired amid intense political backlash and an investigation by the Fed’s internal watchdog.

Clarida moved between $1 million and $5 million in and out of two funds — one invested in stocks, the other invested in bonds — in February as the emerging COVID-19 pandemic rocked financial markets. Kaplan had bought and sold millions of individual stocks throughout 2020, with the Fed offering trillions to support financial markets and midsize businesses. Rosengren has invested heavily in real estate investment trusts.

The new rules prohibit Fed officials and their immediate families from buying individual stocks or stocks of equity funds tied to specific sectors, treasury bills, mortgage-backed securities backed by federal agencies, crypto -currencies, commodity contracts and other derivatives with some exceptions. The rules also apply to trusts managed or supervised by these officials

Money market mutual funds that hold mostly US government bonds, securities owned by a spouse through employment, and most retirement and college savings funds aren’t covered by the new rules.