Following an ethics crisis that resulted in the removal of two regional Presidents and shattered faith in the central bank, the Federal Reserve will prohibit policymakers and other senior employees from purchasing individual stocks and bonds and restrict active trading. In addition, senior Fed officials, including regional bank Presidents, Washington governors, and senior staff, would be limited to acquiring diversified investment vehicles such as mutual funds under the new restrictions, according to a statement released by the central bank on Thursday.
Other restrictions include giving 45 days’ notice for purchasing and selling shares, obtaining prior clearance for such transactions, and holding investments for at least one year to help guard against even the perception of any conflict of interest in the timing of investment decisions.
After ordering a system-wide examination of ethics guidelines, Powell made the statement and asked the Federal Reserve’s inspector general to look into the trading of some senior employees. There are not enough purchases that would be allowed during the financial crisis. “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,” Fed Chair Jerome Powell said in the statement.