Warren urges SEC to open insider trading probe into Fed Vice Chair Clarida, others

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  • Sen. Elizabeth Warren on Monday urged the Securities and Exchange Commission to investigate whether three Federal Reserve leaders violated insider trading rules.
  • Warren called on SEC Chairman Gary Gensler to look into “ethically questionable transactions” conducted by Fed Vice Chairman Richard Clarida and regional presidents Kaplan and Rosengren.
  • A Fed spokesperson noted that Clarida’s 2020 trades were made public in May and pursuant to a “pre-planned rebalancing” of their accounts.

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Sen. Elizabeth Warren on Monday urged the Securities and Exchange Commission to investigate whether three Federal Reserve leaders violated insider trading rules in 2020 after they criticized the central bank’s efforts to shield the US economy from economic turmoil. Bought and sold property while speeding up.

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Warren, who sits on the Congressional committee that oversees the Fed, pressured SEC Chairman Gary Gensler to look into “ethically questionable transactions” conducted by Fed Vice Chairman Richard Clarida and regional presidents Robert Kaplan and Eric Rosengren. .

Massachusetts Democrats’ comments on Clarida and their trades mark their latest and highest-profile attacks against Fed officials for trades made in 2020. Clarida is Fed Chair Jerome Powell’s top deputy.

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She has repeatedly criticized Fed officials for the million-dollar trades she made last year, while the central bank worked on potentially unique insights and other economic data.

“I am writing to ask that the SEC investigate trading in securities by high-level Federal Reserve officials and determine whether any of these ethically questionable transactions violated insider trading regulations. ” he wrote in a letter.

“There is no justifiable ethical or financial rationale for [Clarida] or for any other government official engaging in these questionable market conspiracies while having access to non-public information and authority over decisions that would have an extraordinary impact on markets and the economy,” Warren wrote.

A Fed spokesman noted that Clarida’s trades were made public in May and pursuant to a “pre-planned rebalancing” of their accounts. One such transaction involved moving between $1 million and $5 million from a broad-based bond fund to a broad-based equity fund in February 2020.

A Fed spokesman said in an emailed statement, Clarida’s transactions were “executed prior to engaging in discussions on the Federal Reserve’s actions to respond to the emergence of the coronavirus, and not during the blackout period.” ” “The selected funds were selected with the prior approval of the Board’s Ethics Officer.”

Insider trading is difficult to prove if financial transactions are part of a set schedule for buying and selling securities and are not time-bound, outright trades for market events.

The Fed declined to comment further on when Clarida submitted its 2020 transactions for review or when the Fed’s ethics officer approved the plan. A Fed spokesperson also declined to comment on whether the central bank was working with the SEC, which also declined to comment.

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Similar disclosure forms issued in recent weeks showed that Dallas Fed Chairman Kaplan traded millions of dollars in individual stocks last year, and Boston Fed Chairman Rosengren traded in real estate while He and other Fed members had worked to buy mortgage-backed securities.

The two resigned last week amid a public uproar, though Rosengren cited health issues as the reason for her early exit from the Boston Fed.

While Clarida’s typical portfolio holdings are not considered unusual, their February 2020 timing – just before a major market sell-off in the US in response to the COVID-19 pandemic in March 2020 – has raised renewed concerns that central The business rules of the bank may be out of date. And whether he may have acted on non-public information.

At the conclusion of the central bank’s final policy-making meeting, Fed Chair Powell said its current trading rules are inadequate and ordered a review and overhaul of its protocol.

“We understand full well that the trust of the American people is essential to effectively fulfilling our mission. And so I directed the Fed to begin a comprehensive review of the ethics rules around permissible financial holdings and activity by Fed officials. ” He said September 22.

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