Today, U.S. Senator Kirsten Gillibrand (D-NY) was joined by Senators Sherrod Brown (D-OH), Jeff Merkley (D-OR), and Raphael Warnock (D-GA) to introduce the Ban Conflicted Trading at the Fed Act, legislation to prohibit Federal Reserve officials from trading individual stocks and ensure Americans can trust that the Federal Reserve is acting in the best interest of all Americans.
“It’s common sense—Federal Reserve officials should not be trading stocks while setting U.S. economic policy. The Ban Conflicted Trading at the Fed Act would extend STOCK Act financial disclosure requirements and penalties to Federal Reserve Bank officials, bars Federal Reserve leadership from trading individual stocks, penalizes them if they do so and, most importantly, will give the American people confidence that the Federal Reserve is acting solely for the national interest. Sunlight is the best disinfectant and I am proud to work alongside my colleagues to strengthen transparency and accountability in the federal government,” said Senator Gillibrand.
The Ban Conflicted Trading at the Fed Act would strengthen and clarify the ethics requirements at the highest levels of the Federal Reserve System. It would make sure that Fed officials never have a leg up on investing over hard-working Americans. A summary of the legislation is available here.
The bill would also:
- Prohibit Federal Reserve Board governors and Reserve Bank presidents and vice presidents from trading individual stocks. Officials could invest in diversified mutual funds, investment trusts, and U.S. treasuries.
- Federal Reserve officials would have six months to divest individual holdings after enactment of the bill, or if received by gift or inheritance. They could also hold existing investments while in office, or transfer them to a blind trust.
- Federal Reserve officials would be subject to substantial fines if they fail to comply with the ban or other requirements.
- Reserve Bank presidents, vice presidents, and directors would be required to make the same public annual and periodic financial disclosures as Federal Reserve Governors, and would also be subject to the same penalties for violation of these requirements.
- The Board of Governors would administer the bill’s requirements, including with respect to the Reserve Banks. In addition, the bill would ensure that the Federal Reserve quickly implements the rules for Federal Reserve policymakers and senior staff, announced on October 21, 2021, to help guard against conflicts of interest. These include advance notice and prior approval of investment transactions and a one-year holding period.
Senator Gillibrand is a leading advocate for increasing transparency and accountability in Congress. Last year, Gillibrand, lead sponsor and author of the original STOCK Act, announced the STOCK Act 2.0 with Representative Katie Porter (D-CA). This bicameral legislation would expand the STOCK Act by strengthening disclosure rules and preventing individuals in trusted positions of public service — including members of Congress, their families, and their staffs — from using their access for self-enrichment. The original STOCK Act bars a member of Congress, the president, vice president and high level staff from engaging in insider trading or otherwise using nonpublic information for their own benefit. It also included important updates to financial transparency, by requiring these high ranking government officials to expeditiously disclose financial transactions to the public.