Federal Reserve policymakers and senior staff will be prohibited from purchasing individual stocks and their trading activity will be limited under new rules announced Thursday.
The new restrictions will also prohibit senior Fed officials from holding investments in individual bonds, holding investments in agency securities (directly or indirectly), or entering into derivatives. Instead, senior Fed officials will be limited to purchasing diversified investment vehicles, like mutual funds.
Also, "to help guard against even the appearance of any conflict of interest in the timing of investment decisions," policymakers and senior staff generally will be required to provide 45 days' advance notice for purchases and sales of securities, obtain prior approval for purchases and sales of securities and hold investments for at least one year, the Fed said in a statement. Moreover, no purchases or sales will be allowed during periods of "heightened financial market stress," it added.
Fed bank presidents will be required to publicly disclose financial transactions within 30 days, as board members and senior staff currently do.
"These tough new rules raise the bar high in order to assure the public we serve that all of our senior officials maintain a single-minded focus on the public mission of the Federal Reserve," said Fed Chairman Jerome H. Powell.
The announcement Thursday comes after two now-former Fed officials were criticized after their 2020 financial disclosures showed they held and traded financial assets while the Fed was actively supporting markets through the pandemic, Bloomberg reported. The disclosures brought widespread criticism of potential conflicts of interest.
The two officials — Eric S. Rosengren, former Boston Fed president and CEO, and Robert Kaplan, former Dallas Fed president and CEO — announced last month they would retire Sept. 30 and Oct. 8, respectively.
The Fed said it will incorporate its new restrictions over the coming months.