Ban Conflicted Trading at the Fed Act
Bill: S.3076 | Sponsor: Sen. Brown, Sherrod (D-OH)
Policy area: Finance and Financial Sector

Summary:
Ban Conflicted Trading at the Fed Act
This bill imposes investment restrictions on certain Federal Reserve employees.
Specifically, members of the Board of Governors of the Federal Reserve System and presidents or vice presidents of a Federal Reserve bank are prohibited from (1) purchasing or selling a specified investment, including an investment in a security, a commodity, virtual currency, or a future; or (2) entering into a transaction that creates a net short position in a security. (A short position is an investment strategy employed when an investor anticipates a short term decrease in the investment's price.) Investments held prior to taking office may not be bought or sold, except for approved placement in a blind trust or divestiture during a specified time period.
Further, Federal Reserve bank presidents, vice presidents, and directors must make annual and periodic financial and transaction disclosures.
Finally, the Board of Governors of the Federal Reserve System must issue rules within 90 days of enactment requiring Federal Reserve board members, presidents, vice presidents, and senior staff (1) to provide 45 days advance notice of investment transactions, and (2) to hold investments for at least 1 year from the date of transaction.

To amend the Federal Reserve Act to prohibit officers of the Federal 
    Reserve from trading certain securities, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Ban Conflicted Trading at the Fed 
Act''.

SEC. 2. STOCK ACT.

    Section 4 of the Federal Reserve Act (12 U.S.C. 341 et seq.) is 
amended by adding at the end the following:
    ``Title I of the Ethics in Government Act of 1978 (5 U.S.C. App.), 
sections 9, 11, 13, and 14 of the STOCK Act (Public Law 112-105), and 
section 21A(i) of the Securities Exchange Act of 1934 (15 U.S.C. 78u-
1(i)) shall apply to Federal Reserve bank presidents, vice presidents, 
and directors.''.

SEC. 3. BAN CONFLICTED TRADES.

    The Federal Reserve Act (12 U.S.C. et seq.) is amended by inserting 
after section 25C (12 U.S.C. 633) the following:

``SEC. 25D. BAN CONFLICTED TRADES.

    ``(a) Definitions.--In this section--
            ``(1) the term `commodity' has the meaning given the term 
        in section 1a of the Commodity Exchange Act (7 U.S.C. 1a);
            ``(2) the term `covered investment'--
                    ``(A) means investment in a security, a commodity, 
                virtual currency, or a future, or any comparable 
                financial interest acquired through synthetic means 
                such as the use of a derivative; and
                    ``(B) does not include--
                            ``(i) a diversified mutual fund or 
                        investment trust subject to an exemption under 
                        section 208(b)(2) of title 18, United States 
                        Code, and section 2640.201 of title 5, Code of 
                        Federal Regulations; or
                            ``(ii) a United States Treasury bill, note, 
                        or bond;
            ``(3) the term `covered person' means--
                    ``(A) a member of the Board of Governors of the 
                Federal Reserve System; and
                    ``(B) a president or vice president of a Federal 
                Reserve bank;
            ``(4) the term `future' means a financial contract 
        obligating the buyer to purchase an asset or the seller to sell 
        an asset, such as a physical commodity or a financial 
        instrument, at a predetermined future date and price;
            ``(5) the term `security' has the meaning given the term in 
        section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 
        78c(a)); and
            ``(6) the term `virtual currency' means any cryptocurrency, 
        such as coins or tokens received in connection with initial 
        coin offerings or issued or distributed using distributed 
        ledger or blockchain technology.
    ``(b) Prohibitions.--Except as provided in subsections (c) and (d), 
no covered person may--
            ``(1) purchase or sell any covered investment; or
            ``(2) enter into a transaction that creates a net short 
        position in any security.
    ``(c) Exceptions.--
            ``(1) Investments held before taking office.--
                    ``(A) In general.--A covered person may have 
                control over or knowledge of the management of any 
                covered investment held by the covered person as of the 
                day before the date on which the covered person took 
                office.
                    ``(B) Prohibition on purchasing or selling.--A 
                covered person may not buy or sell any investment 
                described in subparagraph (A) except in the case of--
                            ``(i) placing the investment in a qualified 
                        blind trust described in subsection (d); or
                            ``(ii) divesting themselves of any 
                        investment under paragraph (2).
            ``(2) Divestiture.--A covered person may sell a covered 
        investment during the 6-month period beginning on--
                    ``(A) the date on which the covered person takes 
                office or begins employment, as applicable;
                    ``(B) the date of enactment of this section; or
                    ``(C) the date on which the covered person receives 
                a covered investment through gift or inheritance.
            ``(3) Approval.--Any transaction described in this 
        subsection shall be approved in accordance with the rules 
        issued under subsection (f).
    ``(d) Trusts.--
            ``(1) In general.--On a case-by-case basis, the designated 
        agency ethics official of the Board of Governors may authorize 
        a covered person to place their securities holdings in a 
        qualified blind trust approved by the Board under section 
        102(f) of the Ethics in Government Act of 1978 (5 U.S.C. App.).
            ``(2) Blind trust.--A blind trust permitted under this 
        subsection shall meet the criteria in section 102(f)(4)(B) of 
        the Ethics in Government Act of 1978 (5 U.S.C. App.), unless an 
        alternative arrangement is approved by the Board.
    ``(e) Administration and Enforcement.--
            ``(1) Administration.--The provisions of this section shall 
        be administered by the Board.
            ``(2) Enforcement.--Whoever knowingly fails to comply with 
        this section shall be subject to a civil penalty of not less 
        than 10 percent of the value of the covered investment that was 
        purchased or sold or the security in which a net short position 
        was created in violation of this section, as applicable.
    ``(f) Other Requirements.--Not later than 90 days after the date of 
enactment of this section, the Board shall issue rules that require 
covered persons and senior staff to--
            ``(1) provide 45 days advance notice and prior approval for 
        any investment transactions; and
            ``(2) hold investments for a minimum of 1 year from the 
        date of the transaction.''.
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