The US Federal Reserve on Thursday banned its officials from purchasing individual securities, restricting them from active trading in light of a recent scandal.
The new set of rules will prohibit staff from purchasing individual stocks, holding investments in individual bonds and agency securities, and entering into derivatives, the central bank said in a statement.
The rules will increase the timeliness of reporting and public disclosure by Fed policymakers and senior officials who will be required to provide 45 days' advance notice for purchases and sales of securities, obtain prior approval for such transactions, and hold their investments for at least a year.
In addition, no purchases or sales will be allowed during periods of heightened financial market stress, said the rules.
Senior Fed officials will be limited to purchasing only diversified investment vehicles, such as mutual funds.
Also, presidents of the Fed are now required to publicly disclose their financial transactions within 30 days.
"These tough new 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," Fed Chair Jerome Powell said in the statement.
The move comes amid a scandal in which several Fed officials were reported in recent weeks to have bought and sold stocks at a time when the bank was adjusting policies to improve the pandemic-hit markets.
During the pandemic, the Fed lowered interest rates to near-zero, and bought more than $4 trillion worth of assets to support the American economy in order to provide liquidity for the markets.
Boston Fed President Eric Rosengren and Dallas Fed President Robert Kaplan announced on Sept. 27 their early retirement as they had bought corporate bonds and stocks from some of the largest US companies during the pandemic.
Powell also owned municipal bonds worth $1.25-$2.5 million purchased before 2019, but they were held by him during the pandemic.