On Thursday, the Federal Reserve announced that it is banning officials owning individual stocks and bonds and limits on other activities as well. The ban includes top policymakers such as those on the Federal Open market committee and senior staff. Future investment will have to be confined to diversified assets such as mutual funds. Fed officials can no longer have holdings in shares of particular companies, nor will they be able to invest in individual bonds, hold agency securities or derivative contacts. Although the new rule replaces existing regulations while still somewhat restrictive, it still allows regional presidents to buy and sell stocks.
Fed Chairman Jerome Powell said in a statement, “these tough 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.” The new rules now require officials to provide 45 days’ notice before buying or selling any securities that are still allowed. Officials will also be required to hold the securities for a minimum of one year, and they cannot buy or sell funds during “heightened financial market stress”, a news release announcing the moves said. The rules come on the heels of disclosures that many Fed officials had been buying and selling stocks when the central bank’s policies were designed to improve market functioning, majorly during the covid-19 crisis.