Key Takeaways:
- The new rules made by Fed centre around the trading and investing practices of the senior officials.
- The rule is made in the light of last year’s ethics scandal that swamped the US Central Bank.
- According to the new rules, the senior Federal Reserve officials “are prohibited from purchasing individual stocks or sector funds; holding investments in individual bonds, agency securities, cryptocurrencies, commodities, or foreign currencies; entering into derivatives contracts; and engaging in short sales or purchasing securities on margin”.
The Federal Reserve has come up with a set of tough rules which centre around the trading and investing practices of the senior officials, in the light of last year’s ethics scandal that swamped the US Central Bank.
According to the new guidelines, the senior Federal Reserve officials “are prohibited from purchasing individual stocks or sector funds; holding investments in individual bonds, agency securities, cryptocurrencies, commodities, or foreign currencies; entering into derivatives contracts; and engaging in short sales or purchasing securities on margin”, as per the Federal Reserve’s press release.
In the announcement made on Friday, the senior Federal Reserve officials who have been working for some time in the agency would have a year, starting from May 1 to “dispose of all impermissible holdings”. While for the new officials, a time period of 6 months would be allotted.
The Federal Open Market Committee (or FOMC) have further specified the term “senior federal officials” which constitute of the Reserve Bank first vice presidents and research directors, FOMC staff officers, the System Open Market Account Manager and Deputy Manager, Board Division Directors (who are the regular attendees of Committee meetings), individuals designated by the Fed chair as well as their spouses and children that are under the age of 18.
The rules which will be starting from July 1, would also require these officials as well as the policymakers to provide a 45 days advance notice and once they get approval, only then the transaction would take place. The rules were first devised last October which were introduced in order “to ensure public confidence in the impartiality and integrity of the Committee’s work,” according to the Fed statement.
Many lawmakers have been pushing to introduce legislation to monitor and prohibit members of Congress from owning as well as trading stocks and other cryptocurrencies.
