The United States Federal Reserve (Fed) has published its new ethical regulations with the aim of maintaining the confidence of citizens in the impartiality of the institution, months after it became known that several of its senior officials had carried out million-dollar operations in the markets during the pandemic.
The agency reported in October that it was tightening the rules for operating in the markets for its top officials, but this Friday it has revealed new details that largely prohibit individual activity in the stock markets, including cryptocurrencies.
Under the Fed’s new code of ethics, top officials are prohibited from buying stocks or shares of sectoral funds. They are also prohibited from holding investments in Treasury bonds and notes, Agency securities, Cryptocurrencies, Commodities, or Foreign currencies.
Likewise, central bankers will also not be able to enter into derivative contracts, make short sales or buy any type of security on margin (leverage).
In any case, any purchase or sale of the securities in which they are allowed to invest will be communicated to the ethics committee 45 days in advance and approval will be obtained for said transaction. Any investment will have to be kept in the portfolio for at least one year, although any transaction will be prohibited during “stress” events in the markets.
In addition, the presidents of the 12 regional central banks of the Fed will have to communicate their transactions to the public 30 days after carrying them out. Likewise, the financial breakdowns of the presidents will be posted on the websites of their regional central banks. Until now, they were only accessible through a transparency request.
The review was requested by Fed President Jerome Powell after it was revealed that the presidents of the Dallas and Boston Federal Reserve Banks, Robert Kaplan and Eric Rosengren, respectively, had engaged in multi-million dollar stock exchange transactions.
Kaplan and Rosengren, who resigned in September, are two of the 12 presidents of the regional central banks in which the Fed in the United States is divided. Those 12 presidents take turns attending the Federal Open Market Committee (FOMC) along with the chairman of the Fed and the rest of the governors of the Board, who are permanent members. The FOMC is the body in charge of deciding monetary policy, including asset purchases and interest rates.
During the year 2020, Kaplan made multiple million-dollar stock trades in companies like Apple, Amazon, and Tesla. Despite publicly warning about the risks of the real estate market in the previous year, Rosengren acquired holdings in four REITs totaling more than a million dollars.