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The US Federal Reserve is taking measures to protect the institution from an ethics scandal. The institution has adopted a restrictive policy on its officials on matters of investing and trading.

In 2020, the Federal Reserve was engulfed in a scandal where three top officials were engaged in unusual trading activity. The officials have since resigned.

The Federal Reserve has approved new rules that,

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.

The rules have already been approved by the Federal Open Market Committee. If any of the officials violate the rule, the matter will be addressed depending on the extent of the breach. The sanctions that will be applied in case of a breach have not been disclosed.

The Federal Reserve is currently under scrutiny and its chair, Jerome Powell, seems to be working hard to implement changes. Senator Elizabeth Warren pointed out a “culture of corruption” at the institution. The Fed’s inspector general is investigating the institution’s trading activities.

Under the new rules, senior Federal Reserve official will limit their investment options to diversified products such as exchange-traded funds (ETFs) and mutual funds. Officials are barred from holding stocks, securities, bonds, commodities, cryptocurrencies, foreign currencies, derivatives contracts, margin trading and sector funds.

The rules will be effected on May 1, and the affected officials will be given 12 months to close their existing trades. New officials will be given six months.

Last year, Eric Rosengren and Robert Kaplan, two top officials at the Federal Reserve, resigned after their trading activities aroused suspicion. According to the Vice-Chair, Richard Clarida, in February 2020, Rosengren sold over $1 million worth of shares in a US stock fund and used the same amount to invest in the same fund a day before a major Fed announcement.

On the other hand, Kaplan made over 41 million worth of financial transactions in 2020, coinciding with a plan by the Fed to bugger the economy and the real estate sector.

The post Top US Federal Reserve officials barred from stock, bonds and crypto trading appeared first on Invezz.

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