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Fed announces new curbs on trading by central bank officials following criticism of ethics rules.

The Federal Reserve unveiled a sweeping set of changes to its ethics practices on Thursday, outlining new rules governing the types of financial securities that policymakers can own and how they can trade them in response to an ethics scandal that has embroiled the central bank.

Senior Fed officials will not be allowed to hold individual stocks. They will be limited to purchasing diversified investment vehicles like mutual funds, the Fed said in an announcement. Their trading activity will be limited in general, and during periods of heightened financial market stress the Fed will declare official trading blackouts.

The announcement amounted to rough guidelines and principles, ones that will be fleshed out and incorporated into official Fed rules in the weeks and months to come. It came as the Fed continued to grapple with fallout from trades made by regional reserve bank officials during 2020, a year in which the central bank took extraordinary steps to rescue financial markets amid the pandemic. Two Fed presidents resigned after disclosures showed that they had traded individual stocks and real-estate securities last year, drawing scrutiny.

Jerome H. Powell, the Fed chair, had ordered a revamp of the Fed’s ethics rules and had asked for an investigation by an independent watchdog following the revelations. But scrutiny has persisted, with a lawmaker asking for more details earlier on Thursday after The New York Times reported that ethics officers had warned against active trading early last year, when markets were in turmoil and the central bank was active in rescuing them.

The Fed’s new rules will apply to presidents at the 12 reserve banks, governors on the Fed’s seven-seat board in Washington, and senior staff, the Fed said. The rules would prohibit officials from buying individual stocks, holding investments in individual bonds, holding investments in agency securities either directly or indirectly, or investing in derivatives.

“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,” Mr. Powell said in a statement.

The new rules will also limit policymakers’ ability to move money around. Policymakers and senior staff “generally” will be required to provide 45 days of advance notice for security purchases and sales, will need to obtain prior approval for purchases and sales of securities, and will be asked to hold investments for at least one year, the Fed said.

Reserve Bank presidents now will be required to publicly disclose financial transactions within 30 days, which Washington-based policymakers already do.

The Fed will “incorporate these new restrictions into the appropriate Federal Reserve rules and policies over the coming months,” according to the release.

This is a developing story. Check back for updates.

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