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Federal Reserve Initiates Trading Restrictions on its Officials

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Responding to a series of scandals that have been swirling around the bank since 2021; The Federal Reserve Bank yesterday 18th February announced a new set of ethical guidelines to prohibit top officials from trading in the financial market.

These new ethical guidelines entail:

A 45 days announcement will be made by Senior Fed Officials on what assets or securities they’re buying or selling. Once made, this announcement cannot be pulled back; as orders made can’t be canceled. Under these new guidelines, they must hold investments for a minimum period of one year. 

The 12 regional presidents of the Federal Reserve will publicize their assets and securities transactions every month. This will be in line with what the bank’s board members in Washington do. These public disclosures will be on the bank’s websites regularly – every 30 days. 

Personnel with access to sensitive information like the Vice Presidents, Research Directors, and other top officials; will subjugate to these new ethical guidelines. 

The financial trading blackout period will gain extension. Meaning that Fed officials will not be able to trade securities for a while before and after their meetings.

However, these new set of ethical guidelines will not roll out until May 1. Also, the full functionality will begin on July 1, with the announcement of security sales and purchases – by top officials.

Scandals rock the Federal Reserve Bank

Reports that came out in 2021 reveal Fed officials were involved in trading personal stocks, real estate, and stock funds in 2020 – the year characterized by a global pandemic. The response of the Central bank to the pandemic was based on the decision of top bank officials. They traded in the financial market whose activities are dependent solely on their decisions.

As a result of this scandal, three top officials have resigned since 2021 till date. Robert Kaplan and Eric Rosengren, both Presidents of the reserve in Dallas and Boston respectively; carried out large transactions in 2020, investing in personal stock trading and real estate assets. Both being top officials of the bank are responsible for the fed’s financial decisions during the Covid-19 pandemic; and even after it.

 Mr. Kaplan resigned in September 2021, due to the scandal; as Mr. Rosengren did the same for health-related reasons. Their resignation comes after the initial announcement to drop their holdings.

Another top official involved in the scandal is the Vice Chairman of the Federal Reserve Bank. Financial disclosures show his activeness in the sales and purchase of a stock fund; just before a major financial decision by the bank. He resigned January 14, 2022; two weeks earlier to his initial January 31 deadline. He however doesn’t have a reason for his early resignation. 

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