By Michael S. Derby
NEW YORK (Reuters) -The Federal Reserve on Wednesday announced changes to its nearly two-year-old ethics system, expanding who is covered by it as well as enhancing how the Fed can ensure its top workers are in compliance.
In a press release issued by the Federal Open Market Committee at the close of the policy-setting panel's meeting on Wednesday, the Fed said it would subject more of its top central bank staff to tight limitations on how they can trade and invest for their personal accounts, and will include those "who regularly and materially advise FOMC participants on the conduct of monetary policy." Fed policy makers and top staff were already subject to those restrictions.
"The updated policy supports a new compliance regime where staff with access to the most sensitive FOMC information may be directed to submit brokerage statements or other securities transaction statements to verify the accuracy of their financial disclosures," the Fed said.
The new rules expand a system that was formally adopted in February 2022 that tightened how top policy makers can invest their money in the wake of news that some Fed regional bank leaders had been actively trading in markets while helping to set monetary policy. Fed Chair Jerome Powell, as well as his then-second-in-command, Richard Clarida, also faced questions about how they'd been investing their own money.
All the officials were cleared of formal wrongdoing by the Fed's in-house watchdog. But the inspector general found earlier this month that the then-leaders of the Dallas and Boston regional Fed banks, who both resigned after their activities became public, had created the appearance of a conflict of interest in how they traded and reported their investments.
Fed officials have flagged their new ethics system as one of the more thorough in government. But, even so, changes had been expected in light of recommendations last year from the inspector general that in part argued for a stronger system to ensure employees, as well as close family members, are complying with the rules. The Fed had said last spring it would implement some of what the watchdog had called for.