Jerome Powell says the Fed will tighten trading rules after an ethics scandal.

Jerome H. Powell, the chair of the Federal Reserve, told lawmakers on Tuesday at his nomination hearing that the central bank was making changes to rules surrounding financial trades to prevent the kind of eyebrow-raising transactions surrounding three top Fed officials.

The Fed has come under fire for allowing central bank officials to trade securities for their own portfolios in 2020, a year in which the Fed was actively saving many asset classes and markets. That included notable trades by two of the 12 regional reserve bank presidents and the Fed’s vice chair, who is a member of the Fed’s Board of Governors in Washington.

The mere possibility that officials could have financially benefited from the privileged knowledge they had access to as policymakers has prompted outrage and lawmaker questions. All three of the officials in question have resigned early, one citing health concerns, one giving no reason and one explicitly referencing the trading issues.

Mr. Powell has repeatedly acknowledged that the trading scandal created an appearance problem for the Fed, and he and his colleagues moved quickly to establish a new set of ethics rules. On Tuesday, he suggested that those changes should preclude the types of trades that have come into question.

“We’ve really made a complete change in the way we govern purchases and sales of securities,” Mr. Powell said while testifying before members of the Senate Banking Committee on Tuesday as he sought confirmation for a second term as chair.

He noted that buying individual stocks would now be disallowed and sales must come with a 45-day notice.

“You’ve got to clear that trade — that sale — with a central body,” he said. “We don’t have a group in the center that applies these rules consistently and clearly across the whole system. We will have that now, at the Board of Governors.”

That means that “there will be no ability to time the market,” Mr. Powell added.

The New York Times reported last week that Richard H. Clarida, the Fed’s vice chair, had engaged in more extensive trades than he initially disclosed and corrected his 2020 financial disclosures in late December. Ethics experts said one of his updated trades raised questions given he sold a stock fund on Feb. 24 before repurchasing it on Feb. 27, a day before Mr. Powell announced that the central bank stood ready to help markets and the economy.

His initial disclosures had noted only the purchase of the stock fund, which the Fed had described on his behalf as a planned portfolio rebalancing. But the rapid move out of and back into stocks called that explanation into question, some experts said, and the repurchase could have put Mr. Clarida in a position to benefit as the Fed reassured markets.

Mr. Clarida announced on Monday that he planned to step down two weeks ahead of his planned departure at the end of the month, without giving a reason.

The Fed’s new notice period would probably prevent future trades like the rapid-fire one Mr. Clarida made.

Mr. Powell noted that the Fed’s old approach to policing trading activity among its personnel had been in place for a long time, noting that weaknesses had only recently surfaced — and are being rectified.

“The old system was in place for decades on end, and then suddenly it was revealed as insufficient,” he said, calling the new system “easily the toughest in government.”

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