Senate Democrats unveiled legislation that would impose penalties on senior officials at the Federal Reserve who trade individual stocks as the central bank faces immense scrutiny over a recent scandal involving stock trades made by senior staff.
Sen. Sherrod Brown (D-OH), chair of the Senate Banking, Housing, and Urban Affairs Committees, joined Sens. Kirsten Gillibrand (D-NY), Jeff Merkley (D-OR), and Raphael Warnock (D-GA) in introducing the bill on Wednesday.
Under the proposed legislation, the government would put into law ethics rules recently announced by the central bank that bar top Federal Reserve officials from trading individual stocks. Officials would still be able to invest in diversified mutual funds, investment trusts, and U.S. treasuries, however.
The legislation also seeks to require presidents, vice presidents, and directors at the regional Fed banks to make the same public annual and periodic financial disclosures as Fed governors, a summary of the bill released the senators said.
The bill states that those who violate those requirements would be subject to civil penalties of at least 10 percent of the value of the investment that was purchased or sold.
The legislation comes after the central bank has weathered a wave of criticism in recent weeks after reports emerged of stock trades made by leaders at the Fed’s banks in Dallas and Boston last year.
At the time, a report from The Wall Street Journal found that Dallas President Robert Kaplan had traded stocks in a number of companies, including Apple Inc., Alibaba Group Holding Ltd. and Amazon.com Inc. Some of his trades reportedly reached well into the seven-figure range.
The report also detailed multiple real estate investments made by Boston President Eric Rosengren.
Though both said then that their actions complied with ethics rules, they later announced retirement last month after vowing to divest their assets to avoid the appearance of any conflict of interest.