Federal Reserve Officials Prohibited From Trading Bonds, Stocks, and Cryptocurrencies

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A few months after intro­duc­ing the first draft aim­ing to pro­hib­it Fed offi­cials from own­ing cer­tain assets, the pol­i­cy­mak­ing Fed­er­al Open Mar­ket Com­mit­tee has updat­ed the doc­u­ment to include cryptocurrencies.

  • Reports emerged last year claim­ing that numer­ous Fed­er­al Reserve top employ­ees trad­ed stocks, bonds, and real estate secu­ri­ties in 2020, short­ly before the cen­tral bank employed spe­cif­ic COVID-19-prompt­ed poli­cies that impact­ed the market.
  • Some pol­i­cy­mak­ers resigned after the rev­e­la­tions, but Fed Chair Jerome Pow­ell insist­ed that the mon­e­tary body must enforce new rules on the mat­ter. As such, the Fed­er­al Open Mar­ket Com­mit­tee pro­posed rules in Octo­ber that would pro­hib­it senior bank offi­cials from engag­ing with the afore­men­tioned assets.
  • The Fed took it a step fur­ther in the lat­est amend­ment that came out on Fri­day, which has already become for­mal. The major­i­ty of the rules below will take effect as of May 1st.
  • It reads that senior offi­cials will be pro­hib­it­ed from pur­chas­ing indi­vid­ual stocks or funds trac­ing busi­ness sec­tors. They also won’t be able to invest in indi­vid­ual bonds, com­modi­ties, for­eign cur­ren­cies, oth­er secu­ri­ties, and cryp­tocur­ren­cies. It’s worth not­ing that dig­i­tal assets were not men­tioned in the first draft.
  • The new reg­u­la­tions also mean that offi­cials hold­ing mar­ket posi­tions have one year to dis­pose of the pro­hib­it­ed ones.
  • As of July 1st, top offi­cials cov­ered by the new rules must give 45 days’ notice before mak­ing any per­mis­si­ble pur­chas­es and will have to hold to those assets for at least a year.
  • The new rules “aim to sup­port pub­lic con­fi­dence in the impar­tial­i­ty and integri­ty of the Committee’s work by guard­ing against even the appear­ance of any con­flict of inter­est,” – reads the statement.
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