Fed publishes new rules limiting trading
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The Federal Reserve has published new rules that prohibit its senior leaders from trading securities that might be affected by the central bank's actions.
Driving the news: After a scandal involving Fed officials trading during the early days of the pandemic that led to three top leaders resigning, the central bank has codified new limits.
The details: Under the new rules, senior Fed officials are prohibited from investing in individual stocks or bonds, cryptocurrencies, commodities, foreign currencies, derivative contracts, and short sales or securities on margin.
- They also will be required to give 45-day notice before buying or selling securities that are allowed, such as index funds.
- The rules state that purchases and sales are prohibited during periods of "heightened financial market stress" and include more rapid disclosure of officials' investments.
The backstory: When financial markets were going haywire in February and March of 2020, Dallas Fed President Robert Kaplan, Boston Fed President Eric Rosengren, and Vice-Chair Richard Clarida made financial moves that would be prohibited under the new rules. All three eventually resigned.
The bottom line: The Fed is putting in place rules that prohibit activity that damaged its reputation and raised questions about whether officials were using their public position for financial advantage.
