FAQs

The following FAQs provide clarification and guidance on the Investment and Trading Policies for Covered Individuals ("the Policy for Covered Individuals"), which is section (V) of the FOMC Policy on Investment and Trading for Committee Participants and Federal Reserve System Staff. Section (V) revises and renames the Investment and Trading Policy for FOMC Officials and sets forth the rules that govern investment and trading activities, as well as disclosure, for covered individuals. Please contact Board or Reserve Bank ethics staff with questions about the Policy for Covered Individuals or these FAQs.

  1. Implementation of the Policy for Covered Individuals
    1. When is the effective date of the revised policy?
    2. Why was the prior policy ("Investment and Trading Policy for FOMC Officials") revised?
    3. What are the key changes to the Policy for Covered Individuals?
    4. When will new covered individuals be designated? How long will they have to divest assets that are prohibited under the policy?
    5. If I will be designated as a new covered individual on June 30, 2024, can I make trades before June 30, 2024?
    6. On the date an employee becomes a covered individual, are all of their investments as of that date deemed to have been held for a year?
    7. When will Board Ethics begin collecting brokerage statements?
  2. Divestitures
    1. How does the Policy for Covered Individuals apply to a new covered individual's existing assets?
    2. How long do I have to divest impermissible assets under the Policy for Covered Individuals?
    3. Do the divestiture periods under the Policy for Covered Individuals affect divestiture requirements and time periods under other applicable ethics policies?
    4. How does the Policy for Covered Individuals treat inheritances?
    5. When is an asset considered "acquired" in the context of inheritance or other situations where a covered individual does not have specific intent to acquire an asset?
  3. Interaction with other ethics requirements
    1. How does the Policy for Covered Individuals interact with other ethics requirements?
  4. Spouses and children
    1. How does the Policy for Covered Individuals define "minor child"?
    2. How does the Policy for Covered Individuals define "spouse"?
    3. What happens if I anticipate changes in my marital status?
    4. If a covered individual marries, what divestiture period applies?
  5. Agency securities, real estate investment trusts ("REITs"), and real estate
    1. What are "agency securities"?
    2. What types of REITs are prohibited under the Policy for Covered Individuals?
    3. Are broad real estate mutual funds permissible investments under the Policy for Covered Individuals?
    4. Are real estate investments, such as rental properties, permissible investments under the Policy for Covered Individuals?
  6. Commodity
    1. Does the definition of "commodity" include commodity derivatives?
    2. Does the Policy for Covered Individuals prohibit ownership of a small amount of gold or silver held in an investment portfolio?
  7. Control
    1. How does the Policy for Covered Individuals treat situations where a covered individual or their spouse is named as an executor for an estate?
    2. How does the Policy for Covered Individuals treat situations where a covered individual or their spouse has a financial power of attorney?
  8. Covered trust
    1. Does the definition of "covered trust" include revocable trusts?
    2. Does "covered trust" include trusts in which a covered individual (or their spouse or minor child) is only a beneficiary and has no control over the trust investment decisions?
    3. Would it be feasible for covered individuals to place their investments in qualified blind trusts or qualified diversified trusts ("qualified trusts") to comply with the Policy for Covered Individuals?
  9. Cryptocurrency
    1. Does the definition of "cryptocurrency" include stock in businesses engaged in crypto activities or stock in crypto exchanges?
    2. How are crypto investment funds treated under the Policy for Covered Individuals?
  10. Debt security
    1. Is a foreign government bond a "debt security" under the Policy for Covered Individuals?
    2. Are hybrid securities, such as convertible bonds, included in the definition of "debt security"?
  11. Defined contribution plans, defined benefit plans, and individual retirement accounts
    1. What are examples of a defined contribution retirement plan established by the federal government?
    2. Does the Policy for Covered Individuals apply to defined contribution and defined benefit plans sponsored by a covered individual’s prior employers, such as private companies, state and local governments, and non-profit entities?
    3. Does the Policy for Covered Individuals apply to defined contribution or defined benefit plans sponsored by employers in foreign countries?
    4. Do the investment and trading rules apply to individual retirement accounts ("IRAs")?
    5. My non-federal government defined contribution plan allows me to purchase assets that are impermissible under section 1 of the Policy for Covered Individuals. The plan also does not require one-year holding periods as required in section 2 of the policy. Am I required to follow the policy’s requirements for assets and transactions in that defined contribution plan?
  12. Derivative transactions
    1. Are diversified mutual funds and ETFs that hold some underlying derivatives prohibited under the Policy for Covered Individuals?
    2. Are mutual funds and ETFs that have a stated policy of concentrating in derivatives prohibited under the Policy for Covered Individuals?
    3. How are commodity derivatives treated under the Policy for Covered Individuals?
  13. Financial market stress blackout period
    1. How will I be notified about the start or end of a financial market stress blackout period?
    2. May I submit an advance notice of a new trade after a financial market stress period is declared?
    3. Must I still execute a trade that received pre-clearance before the announcement of a financial market stress period, even if the proposed trade window inadvertently falls during the stress period?
  14. Foreign currencies
    1. Does the Policy for Covered Individuals prohibit holding shares of an international equity or bond fund or other diversified equity or bond funds with investments denominated in foreign currencies?
    2. Is it permissible for me or my spouse to own a bank account in a foreign country or to own foreign currency?
  15. Holding period
    1. How will the one-year holding period be calculated?
  16. Margin securities
    1. Is it permissible under the Policy for Covered Individuals to obtain a loan that is collateralized by securities?
  17. Noninvestment purpose
    1. What does "noninvestment purpose" mean? What are some examples?
  18. Qualifying automatic trades
    1. What is a "qualifying automatic trade"?
    2. Does starting a new qualifying automatic trade program (i.e., a new series of qualifying automatic trades) require advance notice and pre-clearance?
    3. Do changes to a qualifying automatic trade program require advance notice and pre-clearance?
    4. Does stopping a qualifying automatic trade program require advance notice and pre-clearance?
    5. Do I need to provide 45-days’ advance notice for ongoing qualifying automatic trade programs that were already in existence at the time I became a covered individual?
    6. Are qualifying automatic trades exempt from the one-year holding period, advance notice and pre-clearance process, and financial market stress trading blackout in sections 2(b) through (d) of the Policy for Covered Individuals?
    7. How are qualifying automatic trades treated during financial market stress periods?
    8. How does the one-year holding period apply to assets purchased or sold through qualifying automatic trades?
    9. Can you use a qualifying automatic trade to purchase additional shares in a diversified mutual fund?
    10. Can you use a qualifying automatic trade to purchase individual equity securities or sector funds?
    11. Are trades executed by an automated investment account ("robo-account") that only purchases diversified funds permissible under the Policy for Covered Individuals?
    12. Does the definition of "qualifying automatic trade" include contributions to defined contribution plans sponsored by a private company or a state or local government?
    13. Is an automatic dividend reinvestment plan for a diversified mutual fund or diversified ETF a permissible qualifying automatic trade program?
    14. Are limit orders considered to be qualifying automatic trades? Are they permissible under the Policy for Covered Individuals?
  19. Sector fund
    1. What is an example of a "sector fund"?
    2. Is a fund that focuses on two related sectors a sector fund?
  20. Security
    1. Are shares in mutual funds and ETFs "securities" under the Policy for Covered Individuals?
    2. Does the definition of "security" cover shares in small businesses, such as a family farm?
    3. Does the definition of "security" include securities of both privately held and publicly traded entities?
    4. Does the prohibition on purchases of individual equity securities in section 2(a) apply to private and publicly traded securities?
    5. Which individual securities holdings may covered individuals (and their spouses and minor children) retain under the Policy for Covered Individuals?
  21. Spousal equity and options
    1. Do the exemptions in section 1 and section 2 of the Policy for Covered Individuals cover (i) stock options from a spouse’s current or prior employer, or (ii) stock options that the spouse may only exercise after their employment ends?
    2. Does the spousal equity exemption cover any benefits that a spouse receives in connection with their employment, such as retirement plans?
    3. As part of their employment, my spouse acquired equity securities of their former employer. Can my spouse purchase more stock in that company through automatic dividend reinvestments?
  22. Treasury bonds and notes
    1. Are U.S. savings bonds included in the definition of "Treasury bonds and notes"?
    2. Are U.S. Treasury bills included in the definition of "Treasury bonds and notes"?
    3. Which bond funds that invest in Treasury securities are prohibited under the Policy for Covered Individuals?
  23. 529 plans, health savings accounts ("HSAs"), and other similar accounts
    1. What does "other similar accounts" mean in section 2(h)(2)(iii) of the Policy for Covered Individuals?
    2. What does the reference to "untaxed distributions" mean?
  24. Waivers
    1. To whom should a waiver request be sent?
  25. Reporting and disclosure
    1. Will covered individuals still be required to continue to comply with existing applicable annual financial disclosure reporting requirements under the Policy for Covered Individuals?
    2. What does "promptly posted" mean in section 3(b) regarding the requirement to post any Periodic Transaction Reports and annual financial disclosure reports filed by a Reserve Bank president?
  26. Miscellaneous
    1. Are separately managed accounts permissible under the Policy for Covered Individuals?
    2. Is a gift of securities by a covered individual considered a "sale" under the Policy for Covered Individuals?
    3. Are donor-advised funds permissible?
    4. May a covered individual use a corporate entity, such as a special purpose LLC, to engage in permissible investments?
    5. Are covered individuals eligible to obtain certificates of divestiture ("CDs")?
    6. What will happen if covered individuals violate the Policy for Covered Individuals, such as by failing to execute a pre-cleared trade?
    7. How does the Policy for Covered Individuals apply to automatic stock buybacks that occur as the result of a corporate acquisition?

I. Implementation of the Policy for Covered Individuals

Q1: When is the effective date of the revised policy?
Updated: 2/5/2024
A1: The effective date of the revised policy is January 30, 2024, with the exception that the new covered individual category (8) of section (I) of the FOMC Policy on Investment and Trading for Committee Participants and Federal Reserve System Staff will be effective June 30, 2024.

Q2: Why was the prior policy ("Investment and Trading Policy for FOMC Officials") revised?
Updated: 2/5/2024
A2: In April 2023, the Board’s Office of Inspector General (OIG) published recommendations stemming from its evaluation of the FOMC’s investment and trading rules and the System’s approach to monitoring employees’ investment and trading activities. In response, the FOMC implemented revisions to the relevant policies in a new "FOMC Policy on Investment and Trading for Committee Participants and Federal Reserve System Staff," with conforming changes to the Program for Security of FOMC Information. The revised Policy, "Investment and Trading Policies for Covered Individuals" ("Policy for Covered Individuals") is section (V) of the "FOMC Policy on Investment and Trading for Committee Participants and Federal Reserve System Staff."

Q3: What are the key changes to the Policy for Covered Individuals?
Updated: 2/5/2024
A3: First, the definition of "covered individual" is being expanded to include "System staff who regularly and materially advise FOMC participants on the conduct of monetary policy." The new category will include many, though not all, special advisers to the FOMC participants as well as a very small number of other senior staff.

Second, the Policy for Covered Individuals now clarifies that, if necessary, employees may make untaxed distributions from 529 plans (or their foreign equivalents) or health savings accounts in order to satisfy educational or medical bills that must be paid during a trading blackout period. Further, it expands the definition of "529 plan" to include tuition programs that are similar to 529 plans, but that are offered by foreign countries.

Finally, to help monitor compliance with the trading and investment restrictions, Board Ethics is now required to direct covered individuals or employees with knowledge of Class I information to submit copies of brokerage statements or other securities transaction statements. Ethics officials will be required to collect these statements from all covered individuals and from a random sample of other employees with knowledge of Class I information.

Q4: When will new covered individuals be designated? How long will they have to divest assets that are prohibited under the policy?
Updated: 2/5/2024
A4: The designation of new covered individuals will not occur until June 30, 2024. Consistent with section 1(d)(1)(ii) of the policy, new covered individuals will have until the end of 2024 to divest assets prohibited under the policy.

Q5: If I will be designated as a new covered individual on June 30, 2024, can I make trades before June 30, 2024?
Updated: 2/5/2024
A5: There is no prohibition against making trades before June 30, 2024, provided (i) you are not yet a covered individual, (ii) the trades are not made on the basis of nonpublic information, (iii) they do not occur during FOMC trading blackout periods, and (iv) they comply with all other applicable ethics rules (e.g., prohibition on holding equity positions in banks or primary dealers, or shares of financial services sector funds that have underlying investments in banks or other depository institutions).

Q6: On the date an employee becomes a covered individual, are all of their investments as of that date deemed to have been held for a year?
Updated: 2/5/2024
A6: No. The length of time a covered individual (or their spouse or minor child) has held an asset is based on the asset’s original purchase date.

Q7: When will Board Ethics begin collecting brokerage statements?
Updated: 2/5/2024
A7: Board Ethics will not collect brokerage statements or other securities transaction statements from covered individuals and a sample of staff with ongoing knowledge of Class I information before December 31, 2024, to give Board Ethics time to explore the feasibility of electronic collection. Thus, no one will be required to submit any statements before December 31, 2024. After that date you will only be asked for information recorded in statements starting after December 31, 2024.

II. Divestitures

Q8: How does the Policy for Covered Individuals apply to a new covered individual's existing assets?
Updated: 2/5/2024
A8: Whether a covered individual (or their spouse or minor child) may keep an asset depends on whether the asset is permissible under the policy. Covered individuals must divest impermissible assets under section 1 of the policy. Retention of existing holdings of individual equity securities and sector funds is permitted under section 2(a) of the policy, but new purchases of individual equity securities and sector funds are not permitted.

Q9: How long do I have to divest impermissible assets under the Policy for Covered Individuals?
Updated: 2/5/2024
A9: If you become a covered individual, you have six months after the date on which you become a covered individual to dispose of impermissible assets.

If a covered individual (or their spouse or minor child) acquires an impermissible investment through gift, inheritance, merger, acquisition, or other change in corporate structure, or otherwise without specific intent to acquire the investment, the covered individual has six months from the date of acquisition to dispose of the investment.

Q10: Do the divestiture periods under the Policy for Covered Individuals affect divestiture requirements and time periods under other applicable ethics policies?
Updated: 2/5/2024
A10: No. For example, Board members’ ethics agreements, the Board’s supplemental rules of ethical conduct, and the Reserve Banks’ Code of Conduct may require divestiture of certain assets—like bank stocks—upon entering a covered position, or within 90 days. This policy does not alter any of those divestiture requirements and time periods.

Q11: How does the Policy for Covered Individuals treat inheritances?
Updated: 2/5/2024
A11: Whether a covered individual (or their spouse or minor child) may keep inherited assets depends on whether the underlying assets are permissible under the policy.

Section 1(d)(1)(i) requires a covered individual (or their spouse or minor child) to divest inherited assets that are impermissible under section 1 of the policy—such as debt securities or Treasury bonds—within six months of acquisition. Section 1(d)(1)(i) does not apply, however, to inherited individual equity securities or sector funds. If a covered individual (or their spouse or minor child) inherits an individual equity security or sector fund that they are not otherwise prohibited from owning under other ethics requirements, the covered individual (or their spouse or minor child) is not required to divest the asset because section 2(a) of the policy only prohibits purchases of individual equity securities or sector funds. Inheriting an asset is not a purchase of an asset.

Example: A person becomes a covered individual on May 6, 2025. On June 1, 2025, following the death of the covered individual’s father, the covered individual inherits a portfolio of equity securities and debt securities issued by Company A. The covered individual has six months (until December 1, 2025) to divest the debt securities of Company A. The covered individual is not required to divest the equity securities of Company A, as they are not impermissible holdings under section 1 of the policy. The covered individual may keep the inherited equity securities of Company A but is prohibited from purchasing additional shares in Company A under section 2(a) of the policy.

Q12: When is an asset considered "acquired" in the context of inheritance or other situations where a covered individual does not have specific intent to acquire an asset?
Updated: 2/5/2024
A12: A covered individual has "acquired" an asset under section 1(d)(1)(i) once the individual has control over the asset.

III. Interaction with other ethics requirements

Q13: How does the Policy for Covered Individuals interact with other ethics requirements?
Updated: 2/5/2024
A13: The Policy for Covered Individuals provides that covered individuals must continue to comply with other applicable ethics laws, rules, or policies. Assets that are otherwise permissible under the policy nevertheless may be prohibited under other ethics rules (e.g., existing holdings of equity in banks or primary dealers, or shares of financial services sector funds that have underlying investments in banks or other depository institutions) or require recusals. Covered individuals are responsible for understanding their obligations under other ethics requirements.

IV. Spouses and children

Q14: How does the Policy for Covered Individuals define "minor child"?
Updated: 2/5/2024
A14: "Minor child" means a child of a covered individual who is defined as a minor under state law (generally under 18 years old).

Q15: How does the Policy for Covered Individuals define "spouse"?
Updated: 2/5/2024
A15: Consistent with Office of Government Ethics financial disclosure guidance, "spouse" means an individual to whom a covered individual is legally married. It does not include an individual with whom a covered individual is in a civil union, domestic partnership, or any other relationship other than marriage.

Q16: What happens if I anticipate changes in my marital status?
Updated: 2/5/2024
A16: If you are planning to get married, please review the FOMC Policy on Investment and Trading for Committee Participants and Federal Reserve System Staff, these FAQs, and your future spouse’s financial interests to ensure that you are able to comply with the requirements of the policy.

If you are living apart from your spouse with the intention of ending the marriage or permanently separating, you should promptly notify, in writing (e.g., via email) the Board’s Designated Agency Ethics Official, and if applicable, the Reserve Bank ethics official, of these circumstances. Individuals living apart from a spouse with the intention of ending the marriage or permanently separating, or those that are already permanently separated, are not required to report any financial interests solely owned by the spouse, or transactions that are solely initiated by the spouse. If you jointly own assets with your spouse—or anyone else—and you plan to initiate securities transactions involving those assets, the policy’s advance notice and pre-clearance requirements apply to those transactions.

Q17: If a covered individual marries, what divestiture period applies?
Updated: 2/5/2024
A17: A covered individual who is newly married has six months after the date of marriage to conform their spouse’s assets to the FOMC Policy on Investment and Trading for Committee Participants and Federal Reserve System Staff.

V. Agency securities, real estate investment trusts ("REITs"), and real estate

Q18: What are "agency securities"?
Updated: 2/5/2024
A18: The FOMC Policy on Investment and Trading for Committee Participants and Federal Reserve System Staff defines an agency security as an obligation that is a direct obligation of, or is fully guaranteed as to principal and interest by, any agency of the United States, including the Federal National Mortgage Association (Fannie Mae), Government National Mortgage Association (Ginnie Mae), and Federal Home Loan Mortgage Corporation (Freddie Mac). Agency securities include agency debt as well as agency mortgage-backed securities.

Q19: What types of REITs are prohibited under the Policy for Covered Individuals?
Updated: 2/5/2024
A19: Mortgage REITs that have a stated policy of concentrating in agency securities, such as agency debt and agency mortgage-backed securities, are impermissible investments under section 1(a)(1)(ii) of the policy.

Conversely, equity REITs that concentrate in the ownership of real estate and pay out dividends based on the REIT’s rental income are permissible investments under the policy. If you have questions about REITs, please reach out to a Board or Reserve Bank ethics official.

Q20: Are broad real estate mutual funds permissible investments under the Policy for Covered Individuals?
Updated: 2/5/2024
A20: Yes. Real estate mutual funds generally invest in securities issued by public real estate companies. Following guidance from the Office of Government Ethics, real estate mutual funds that, for example, have a stated policy of tracking the MSCI US REIT Index, of principally investing in the broader real estate industry, or of making investments in commercial real estate, without focusing on a specific industry or single country other than the United States, are considered diversified funds and are permissible investments under the policy. However, funds that have a specific focus on a certain type of real estate (e.g., resorts or hotels) or on real estate in a specific foreign country would be considered sector funds.

Q21: Are real estate investments, such as rental properties, permissible investments under the Policy for Covered Individuals?
Updated: 2/5/2024
A21: Yes.

VI. Commodity

Q22: Does the definition of "commodity" include commodity derivatives?
Updated: 2/5/2024
A22: The definition of "commodity" does not include commodity derivatives, but commodity derivatives are still prohibited under the Policy for Covered Individuals. Commodity derivatives fall under the definition of "derivative transaction." Section 1(a)(3) of the policy prohibits a covered individual (and their spouse and minor child) from being a counterparty to a derivative transaction.

Q23: Does the Policy for Covered Individuals prohibit ownership of a small amount of gold or silver held in an investment portfolio?
Updated: 2/5/2024
A23: Yes. Section 1(a)(1)(iv) prohibits a covered individual (and their spouse and minor child) from owning or controlling commodities, unless the exemption in section 1(c)(4) applies and the commodities are owned for a noninvestment purpose (e.g., gold wedding bands). There is no de minimis exemption under the policy for commodities held for investment purposes (e.g., gold funds, gold bars, or gold bullion).

VII. Control

Q24: How does the Policy for Covered Individuals treat situations where a covered individual or their spouse is named as an executor for an estate?
Updated: 2/5/2024
A24: Section 1(a)(1) of the policy states that "[a] covered individual, a covered individual's spouse, and a covered individual's minor children must not own or control" impermissible assets under the policy.

If a covered individual or their spouse serves as an executor for an estate, the key question is whether the executor "controls" the estate’s assets. An executor who merely administers the terms of a will is carrying out a ministerial role and would not be viewed as "controlling" the estate’s assets; as a result, the estate would not be subject to the policy’s investment restrictions. In addition, the distribution of estate assets to designated beneficiaries in compliance with the provisions of a will would not be subject to the policy’s trading restrictions.

Q25: How does the Policy for Covered Individuals treat situations where a covered individual or their spouse has a financial power of attorney?
Updated: 2/5/2024
A25: As with executors, the key principle is whether the covered individual or their spouse uses their power of attorney to control investment and trading decisions. These scenarios will be considered on a case-by-case basis.

Example: A covered individual has a financial power of attorney over the assets of their elderly father. Ethics staff will consider the scope and authority of the covered individual’s financial power of attorney in determining whether the covered individual "controls" the father's assets and, therefore, if the requirements in sections 1 and 2 of the policy apply to the assets.

VIII. Covered trust

Q26: Does the definition of "covered trust" include revocable trusts?
Updated: 4/15/2022
A26: Yes, in some cases. A covered trust is any trust—revocable or irrevocable—in which a covered individual or their spouse is the trustee or fiduciary of the trust, or otherwise exercises discretionary authority or control over the trust's assets.

Q27: Does "covered trust" include trusts in which a covered individual (or their spouse or minor child) is only a beneficiary and has no control over the trust investment decisions?
Updated: 2/5/2024
A27: No. The definition of covered trust does not include a trust in which a covered individual (or their spouse or minor child) is only a beneficiary, and the covered individual or their spouse does not exercise any control over the trust.

Q28: Would it be feasible for covered individuals to place their investments in qualified blind trusts or qualified diversified trusts ("qualified trusts") to comply with the Policy for Covered Individuals?
Updated: 2/5/2024
A28: No. Federal law strictly controls which trusts are considered qualified trusts within the government. While qualified trusts would not be covered trusts under the policy, qualified trusts are extremely rare, and the Office of Government Ethics ("OGE") would need to approve the terms of any qualified trust created for a Board employee. To date, OGE has not approved a qualified trust for any current Board employee. Moreover, under the law, it is our understanding that OGE could not approve qualified trusts for Reserve Bank employees, because they are not executive branch employees. Therefore, blind trusts would not be a feasible option to comply with the policy.

IX. Cryptocurrency

Q29: Does the definition of "cryptocurrency" include stock in businesses engaged in crypto activities or stock in crypto exchanges?
Updated: 2/5/2024
A29: No. The definition of "cryptocurrency" does not cover stock in crypto exchanges or companies engaged in crypto activities. However, section 1(a)(2) of the Policy for Covered Individuals separately prohibits holding bonds issued by individual cryptocurrency companies (or other companies), and section 2(a) prohibits purchasing stocks issued by individual cryptocurrency companies (or other companies). The policy also prohibits holding funds that concentrate in derivatives, including cryptocurrency futures exchange-traded funds ("ETFs").

Q30: How are crypto investment funds treated under the Policy for Covered Individuals?
Updated: 2/5/2024
A30: Section 1(a)(1)(iii) prohibits a covered individual (and their spouse and minor child) from holding assets in an investment fund that has a stated policy of concentrating in cryptocurrencies. A crypto investment fund that concentrates in cryptocurrencies would be an impermissible asset. Some examples of crypto investment funds are Grayscale Bitcoin Trust, Grayscale Ethereum Trust, and the Bitwise 10 Crypto Index Fund. Crypto futures funds, such as the VanEck Bitcoin Strategy ETF and the ProShares Bitcoin Strategy ETF, are also prohibited investments.

X. Debt security

Q31: Is a foreign government bond a "debt security" under the Policy for Covered Individuals?
Updated: 2/5/2024
A31: Yes. Individual foreign government bonds fall under the definition of debt security and thus are impermissible assets. Note that a bond fund that concentrates in the bonds of a single foreign country is a "sector fund" under the policy, but a mutual fund that concentrates in bonds of multiple foreign countries (such as a European government bond fund) would be a diversified mutual fund.

Q32: Are hybrid securities, such as convertible bonds, included in the definition of "debt security"?
Updated: 4/15/2022
A32: Yes. Hybrid securities, such as convertible bonds, fall under the definition of debt security and thus are impermissible assets.

XI. Defined contribution plans, defined benefit plans, and individual retirement accounts

Q33: What are examples of a defined contribution retirement plan established by the federal government?
Updated: 2/5/2024
A33: Defined contribution plans established by the federal government include the federal government’s Thrift Savings Plan and the Federal Reserve’s Thrift Plan. These plans are exempt from the prohibitions and requirements in section 1(a) and sections 2(a) through 2(d) of the Policy for Covered Individuals. This is consistent with the Office of Government Ethics’ approach to federal government retirement plans, which are exempt from financial conflicts of interest and financial disclosure requirements.

Q34: Does the Policy for Covered Individuals apply to defined contribution and defined benefit plans sponsored by a covered individual’s prior employers, such as private companies, state and local governments, and non-profit entities?
Updated: 2/5/2024
A34: Sections 1(c)(3) and section 2(g) of the Policy for Covered Individuals exempt from the investment and trading rules (i) any defined benefit retirement plan; and (ii) a defined contribution retirement plan established by the federal government. All defined benefit plans are exempt from the policy. Defined contribution plans sponsored by private sector, state and local government, and non-profit employers are not exempt from the policy. As such, the investment rules in section 1 and the trading rules in section 2 apply to those defined contribution plans.

Q35: Does the Policy for Covered Individuals apply to defined contribution or defined benefit plans sponsored by employers in foreign countries?
Updated: 2/5/2024
A35: All defined benefit plans are exempt from the Policy for Covered Individuals. However, the investment and trading restrictions in sections 1 and 2 apply to defined contribution plans established by any employer other than the federal government. This would include employers located outside the United States.

Q36: Do the investment and trading rules apply to individual retirement accounts ("IRAs")?
Updated: 2/5/2024
A36: Yes. The Policy for Covered Individuals applies to IRAs owned or controlled by covered individuals (and their spouses and minor children).

Q37: My non-federal government defined contribution plan allows me to purchase assets that are impermissible under section 1 of the Policy for Covered Individuals. The plan also does not require one-year holding periods as required in section 2 of the policy. Am I required to follow the policy’s requirements for assets and transactions in that defined contribution plan?
Updated: 2/5/2024
A37: Yes. The investment rules in section 1 and trading rules in section 2 of the policy apply to defined contribution retirement plans that are not sponsored by the federal government. Covered individuals (and their spouses and minor children) are responsible for ensuring their compliance with the policy and for reporting transactions on applicable disclosure forms.

XII. Derivative transactions

Q38: Are diversified mutual funds and ETFs that hold some underlying derivatives prohibited under the Policy for Covered Individuals?
Updated: 2/5/2024
A38: Generally, no. Diversified mutual funds and ETFs that do not have a stated policy of concentrating in derivative investments are permissible investments.

Q39: Are mutual funds and ETFs that have a stated policy of concentrating in derivatives prohibited under the Policy for Covered Individuals?
Updated: 2/5/2024
A39: Yes. Investment funds that have a stated policy of concentrating in derivative instruments are prohibited under the policy.

Q40: How are commodity derivatives treated under the Policy for Covered Individuals?
Updated: 2/5/2024
A40: Commodity derivatives are prohibited under the policy. Commodity derivatives fall under the definition of "derivative transaction." Section 1(a)(3) of the policy prohibits a covered individual (and their spouse and minor child) from being a counterparty to a derivative transaction. Additionally, funds that concentrate in commodity derivatives cannot be held.

XIII. Financial market stress blackout period

Q41: How will I be notified about the start or end of a financial market stress blackout period?
Updated: 4/15/2022
A41: The Board's General Counsel will promptly notify covered individuals and Reserve Bank ethics officers about the beginning and end of a financial market stress period.

Q42: May I submit an advance notice of a new trade after a financial market stress period is declared?
Updated: 2/5/2024
A42: No. Section 2(c)(1)(iii)(B) prohibits covered individuals from submitting advance notices during a financial market stress period.

Q43: Must I still execute a trade that received pre-clearance before the announcement of a financial market stress period, even if the proposed trade window inadvertently falls during the stress period?
Updated: 2/5/2024
A43: Yes. Section 2(d)(1) of the Policy for Covered Individuals requires trades that received pre-clearance before the beginning of a financial market stress period to still be executed during the trade window that falls during the stress period.

XIV. Foreign currencies

Q44: Does the Policy for Covered Individuals prohibit holding shares of an international equity or bond fund or other diversified equity or bond funds with investments denominated in foreign currencies?
Updated: 2/5/2024
A44: No.

Q45: Is it permissible for me or my spouse to own a bank account in a foreign country or to own foreign currency?
Updated: 4/15/2022
A45: Yes. Covered individuals and their spouses may own or control foreign bank accounts and own foreign currency for noninvestment purposes. There is no fixed, quantitative limit on the amount of foreign currency that a covered individual (or their spouse or minor child) may hold, but foreign currency must be held only for noninvestment purposes.

Examples: Permitted noninvestment holdings of foreign currency include:

  • Owning foreign currency to pay mortgage, rent, or taxes on a personal residence in a foreign country.
  • Owning foreign currency to facilitate travel in a foreign country.

XV. Holding period

Q46: How will the one-year holding period be calculated?
Updated: 2/5/2024
A46: The holding period in section 2(b) is calculated based on the date that the covered individual (or their spouse or minor child) purchased the asset. If shares in an asset are purchased periodically over time, all of the shares to be sold must have been held for at least one year.

Example: A covered individual purchased $200 worth of shares (which equaled 40 shares) in diversified mutual fund Z ("Fund Z") on October 24, 2024, and then purchased an additional $300 worth of shares (which equaled 50 shares) in Fund Z on May 4, 2025. The covered individual later wants to sell all their shares in Fund Z in November 2025. In November 2025, the covered individual could sell the initial 40 shares of Fund Z—even if the shares have increased in value to be worth more than $200—as the one-year holding period for those shares expired on October 24, 2025. In November 2025, however, the covered individual could not yet sell the 50 shares purchased in May 2025. The covered individual must wait until May 4, 2026, to sell those remaining 50 shares.

XVI. Margin securities

Q47: Is it permissible under the Policy for Covered Individuals to obtain a loan that is collateralized by securities?
Updated: 2/5/2024
A47: A covered individual (or their spouse or minor child) may obtain a loan that is collateralized by securities, provided that the borrower does not use the loan proceeds for the purpose of purchasing or carrying securities—which would violate the prohibition on purchasing or carrying securities on margin in section 1(a)(4) of the policy—or any other impermissible asset under the policy. However, covered individuals should be mindful of the risk that the securities could be automatically sold by the lender under the loan agreement without prior direction from the borrower, which would violate the policy's requirement of advance notice and pre-clearance for securities transactions.

XVII. Noninvestment purpose

Q48: What does "noninvestment purpose" mean? What are some examples?
Updated: 2/5/2024
A48: Section 1(c) of the Policy for Covered Individuals provides exemptions for holdings of commodities and foreign currencies that have a "noninvestment purpose." "Noninvestment purpose" refers to an expenditure for consumption or use without the expectation or purpose of achieving a profit on resale.

Examples:

  • Owning gold or silver jewelry.
  • Owning foreign currency to pay personal expenses in a foreign country, such as a mortgage, rent, or taxes on a personal residence; tuition and education- related expenses of a child or other family member; or to travel abroad.
  • Owning commonly purchased goods for personal consumption like groceries, gasoline, and construction materials.

XVIII. Qualifying automatic trades

Q49: What is a "qualifying automatic trade"?
Updated: 2/5/2024
A49: A qualifying automatic trade is a trade that happens on a periodic, pre-determined basis in connection with a transaction that is permissible under the Policy for Covered Individuals.

Examples of qualifying automatic trades are:

  • Periodic automatic contributions to a 529 plan; 401(k) plan, 403(b) plan, or other defined contribution retirement plan; or mutual fund.
  • Periodic automatic rebalancing within a 529 plan; 401(k) plan, 403(b) plan, or other defined contribution retirement plan; or mutual fund.
  • An automatic dividend reinvestment plan for a diversified mutual fund.

Q50: Does starting a new qualifying automatic trade program (i.e., a new series of qualifying automatic trades) require advance notice and pre-clearance?
Updated: 10/17/2023
A50: Yes, with two exceptions. Although qualifying automatic trades are exempt from the advance notice and pre-clearance requirements, beginning a new qualifying automatic trade program requires advance notice and pre-clearance, except for (1) new qualifying automatic trade programs entered by covered individuals’ spouses or minor children in connection with their first becoming a participant in a benefit plan offered by their employer, provided that the covered individual confirms with their ethics officer that the planned investments are not prohibited by statute, regulation, or System policy; and (2) automatic dividend or capital gains reinvestment plans for diversified investment funds. Covered individuals should provide the relevant ethics officials with 45-days’ advance notice before beginning any other new qualifying automatic trade program. Once a new qualifying automatic trade program has been approved, the qualifying automatic trades made pursuant to the program’s specifications will be exempt from the advance notice and pre-clearance requirements.

Example: A covered individual that is employed at the Board wishes to set up a new investment program through which the covered individual will purchase shares in diversified mutual funds. The covered individual plans to make monthly contributions of $1000 to the mutual funds. The covered individual must give the Board’s Designated Agency Ethics Official 45-days’ advance notice of the qualifying automatic trade program before their first contribution to the mutual funds under the program. In their advance notice, the covered individual should describe the qualifying automated trade program, including the periodicity and amount of contributions to each mutual fund. Once the covered individual receives pre-clearance for the qualifying automatic trade program, the covered individual’s qualifying automatic trades according to the program need no further advance notice or pre-clearance.

Q51: Do changes to a qualifying automatic trade program require advance notice and pre-clearance?
Updated: 4/15/2022
A51: Some changes to an existing qualifying automatic trade program require 45-days’ advance notice and pre-clearance. Specifically, changes to the periodicity of trades and asset allocation (both fund type and allocation percentages) require 45-days’ advance notice and pre-clearance.

However, changes to the dollar amount of contributions do not require 45-days’ advance notice and pre-clearance.

Example: A spouse of a covered individual previously received approval to make monthly $1000 contributions to a 403(b) plan offered by his employer through which the spouse invests equally in two diversified mutual funds (Fund A and Fund B), with biannual rebalancing to preserve the 50/50 allocation between the two funds.

The following changes to the qualifying automatic trade program would require advance notice and pre-clearance:

  • Changing the periodicity of contributions (e.g., from monthly to quarterly)
  • Changing the types of funds in which the spouse invests (e.g., ceasing purchases of Fund A and purchasing Fund C instead)
  • Changing allocation percentages (e.g., moving from 50/50 between Funds A and B to 75/25)
  • Changing the frequency of rebalancing (e.g., from biannual to quarterly)
  • Making a one-time rebalancing of the portfolio (this would not be a qualifying automatic trade because it is not periodic)
  • Making a one-time transfer of cash from Fund A to Fund B (this would not be a qualifying automatic trade because it is not periodic)

The following changes to the qualifying automatic trade program would not require advance notice and pre-clearance:

  • Increasing the periodic contribution amount (e.g., from $1000 to $2000)
  • Decreasing the periodic contribution amount (e.g., from $1000 to $500)
  • Changing the date on which a qualifying automatic trade is made, provided the periodicity does not change (e.g., changing a monthly contribution from the 1st to the 15th of a month)
  • Stopping periodic $1000 contributions (that is, terminating the program)

Q52: Does stopping a qualifying automatic trade program require advance notice and pre-clearance?
Updated: 4/15/2022
A52: No. Terminating a qualifying automatic trade program does not require advance notice and pre-clearance.

Q53: Do I need to provide 45-days’ advance notice for ongoing qualifying automatic trade programs that were already in existence at the time I became a covered individual?
Updated: 2/5/2024
A53: No. Qualifying automatic trade programs in existence when you became a covered individual do not require advance notice and pre-clearance; these programs will be grandfathered into the Policy for Covered Individuals. However, covered individuals should notify their ethics officials about any ongoing qualifying automatic trade programs, and certain changes to these programs would require advance notice and pre-clearance.

Q54: Are qualifying automatic trades exempt from the one-year holding period, advance notice and pre-clearance process, and financial market stress trading blackout in sections 2(b) through (d) of the Policy for Covered Individuals?
Updated: 2/5/2024
A54: Yes, although changes to qualifying automatic trade programs may require advance notice and pre-clearance. Additionally, if a covered individual wishes to sell securities in a trade that is not a qualifying automatic trade, sections 2(b) through (d) will apply, regardless of whether the securities were originally purchased through qualifying automatic trades.

Q55: How are qualifying automatic trades treated during financial market stress periods?
Updated: 4/15/2022
A55: During a financial market stress period, a covered individual may (i) terminate a qualifying automatic trade program, such as stopping contributions to a 401(k) account; or (ii) decrease their contribution amount. However, a covered individual cannot initiate a new qualifying automatic trade program or make any other change to a qualifying automatic trade program during such a time.

Q56: How does the one-year holding period apply to assets purchased or sold through qualifying automatic trades?
Updated: 2/5/2024
A56: The FOMC Policy on Investment and Trading for Committee Participants and Federal Reserve System Staff defines a "qualifying automatic trade" as a trade that happens on a periodic, pre-determined basis in connection with a transaction that is permissible under the Policy for Covered Individuals. Under section 2(h)(2) of the Policy for Covered Individuals, qualifying automatic trades are exempt from the requirements in section 2(b) through (d) of the Policy for Covered Individuals, which includes the one-year holding period requirement described in section 2(b).

The purchase of an asset through a qualifying automatic trade does not mean that the asset is categorically exempt from the minimum holding period in the future. Rather, assets are exempt from the minimum holding period in section 2(b) so long as any trades in the asset (either purchases or sales) are effectuated through a qualifying automatic trade. If a covered individual wishes to sell shares in an asset through a trade that is not a qualifying automatic trade, the covered individual may only do so if the asset has been held for a year after purchase (and meets other relevant requirements, such as advance notice and pre-clearance as described in section 2(c) of the Policy for Covered Individuals).

Example: A covered individual schedules an automatic contribution of $250 into a 401(k) retirement account every month and uses the 401(k) contributions to purchase shares in two diversified mutual funds, Fund A and Fund B. These transactions are qualifying automatic trades because they are periodic (every month), pre-determined, and automatic; the entire investment approach is a qualifying automatic trade program. After the covered individual requests 45-days’ advance notice for the entire qualifying automatic trade program and obtains preapproval for the program, the $250 contributions and related share purchases do not need to meet the advance notice and pre-clearance requirements.

So long as the covered individual’s future trades involving these assets are qualifying automatic trades, the assets are not subject to the minimum holding period. For example, if the covered individual sets up an automatic rebalancing of the 401(k) portfolio every six months as part of the qualifying automatic trade program, any purchases or sales of shares of Fund A and Fund B that result from the automatic rebalancing will be permissible, even though the shares of Fund A and Fund B may not have been held for one year.

Conversely, any future trades involving the 401(k) account’s mutual fund holdings will be subject to the minimum holding period if the future trade is not a qualifying automatic trade. If, for example, six months after the covered individual begins the recurring $250 contributions, the covered individual wants to sell all their holdings in Fund A and use the proceeds to buy more shares in Fund B in a one-time transaction, the minimum holding period will apply to the Fund A shares. The covered individual may only engage in that trade after the covered individual has owned all the shares in Fund A for one year. The one-time sale of Fund A shares and purchase of Fund B shares will also be subject to the advance notice and pre-clearance requirements.

Q57: Can you use a qualifying automatic trade to purchase additional shares in a diversified mutual fund?
Updated: 4/15/2022
A57: Yes. Purchasing a fixed dollar amount of shares in a diversified mutual fund on a pre-determined schedule, such as the first of every month, would constitute a qualifying automatic trade.

Q58: Can you use a qualifying automatic trade to purchase individual equity securities or sector funds?
Updated: 2/5/2024
A58: No. The definition of qualifying automatic trade is "a trade that happens on a periodic, pre-determined basis in connection with a transaction that is permissible under this policy." A purchase that is impermissible under the Policy for Covered Individuals is not a qualifying automatic trade.

Example: On the date they became covered under the policy, a covered individual owns $500 of shares in company Z, which equals 50 shares. The covered individual has an automatic dividend reinvestment plan through which the covered individual’s dividends from company Z are automatically used to purchase more stock in company Z. On the date they became covered, the covered individual may continue to hold the 50 shares in company Z but cannot use an automatic dividend reinvestment plan to purchase more stock of company Z. The covered individual must receive dividends from the shares in cash.

Q59: Are trades executed by an automated investment account ("robo-account") that only purchases diversified funds permissible under the Policy for Covered Individuals?
Updated: 2/5/2024
A59: Yes. A trade executed by a robo-account is a "qualifying automatic trade," provided that the robo-account automatically purchases (via a pre-set algorithm) permissible assets under the policy.

Q60: Does the definition of "qualifying automatic trade" include contributions to defined contribution plans sponsored by a private company or a state or local government?
Updated: 2/5/2024
A60: Yes. A pre-scheduled, periodic, contribution to a private company or state or local government defined contribution plan (such as an automated salary deferral) is a qualifying automatic trade, provided that any purchases made with the contributions involve permissible assets under the Policy for Covered Individuals.

Q61: Is an automatic dividend reinvestment plan for a diversified mutual fund or diversified ETF a permissible qualifying automatic trade program?
Updated: 4/15/2022
A61: Yes. Mutual funds and ETFs generally distribute dividends on a quarterly basis, although some may issue dividends more infrequently (such as annually). Covered individuals may choose to automatically reinvest dividends issued by a diversified mutual fund or diversified ETF, and these will be considered permissible qualifying automatic trade programs.

Q62: Are limit orders considered to be qualifying automatic trades? Are they permissible under the Policy for Covered Individuals?
Updated: 2/5/2024
A62: No. A limit order is an order to buy or sell a security at a specific price or better and if the price is not met, the trade is not executed. This type of transaction does not comply with the requirement that a trade be non-retractable and executed during an identified trade window as required under sections 2(c)(1)(i) and (c)(2)(iii) of the policy. Thus, limit orders and other transactions that will only occur based on the satisfaction of a contingency do not comply with the policy.

XIX. Sector fund

Q63: What is an example of a "sector fund"?
Updated: 2/5/2024
A63: The FOMC Policy on Investment and Trading for Committee Participants and Federal Reserve System Staff defines sector fund as "a fund that has a stated policy of concentrating its investments in an industry, business, single country other than the United States, or bonds of a single State within the United States." Individuals may rely on the fund’s prospectus in determining whether a fund has a stated policy of concentrating investments in a particular industry, business, foreign country, or bonds of a single U.S. state. For purposes of the Policy for Covered Individuals, Ethics staff generally plan to follow guidance from the Office of Government Ethics on the definition of a sector fund.

Examples:

  • Fidelity Energy Select Portfolio, iShares U.S. Healthcare ETF, and BlackRock Pennsylvania Municipal Bond Fund are sector funds with stated policies of concentrating their investments in energy, healthcare, and Pennsylvania bonds, respectively. Section 2(a) of the Policy for Covered Individuals prohibits covered individuals from purchasing shares of these funds.
  • Similarly, Matthews China Fund, Eaton Vance Greater India Fund, and iShares MSCI Ireland ETF are examples of sector funds concentrating their investments in a single foreign country; covered individuals also cannot purchase shares of these funds under section 2(a).

Q64: Is a fund that focuses on two related sectors a sector fund?
Updated: 4/15/2022
A64: Yes. Consistent with Office of Government Ethics policy, "dual industry" funds that are expressly marketed as being concentrated in two related industry or business sectors, such as "defense and aerospace," "telecommunications and utilities," or "media and telecommunications," are non-diversified sector funds. Covered individuals are encouraged to consult with ethics officials regarding dual industry funds.

XX. Security

Q65: Are shares in mutual funds and ETFs "securities" under the Policy for Covered Individuals?
Updated: 2/5/2024
A65: Yes. Mutual funds and ETFs, however, are not considered "individual equity securities" under section 2(a) of the policy. Accordingly, covered individuals may purchase shares of mutual funds or ETFs unless the funds are sector funds or otherwise prohibited under the policy (e.g., funds concentrating in Treasuries).

Q66: Does the definition of "security" cover shares in small businesses, such as a family farm?
Updated: 2/5/2024
A66: The definition of "security" includes shares in small businesses, such as a family farm. Section 2(h)(1)(ii) of the Policy for Covered Individuals, however, exempts equity securities issued by small businesses, including small family farms, from the prohibition on purchases of individual equity securities in section 2(a) of the policy. Purchases and sales of securities in small businesses are subject to the other trading requirements in section 2 of the policy, such as the one-year holding period and advance notice and pre-clearance process.

Q67: Does the definition of "security" include securities of both privately held and publicly traded entities?
Updated: 4/15/2022
A67: Yes.

Q68: Does the prohibition on purchases of individual equity securities in section 2(a) apply to private and publicly traded securities?
Updated: 2/5/2024
A68: Yes.

Q69: Which individual securities holdings may covered individuals (and their spouses and minor children) retain under the Policy for Covered Individuals?
Updated: 2/5/2024
A69: Section 2(a) of the policy states that a covered individual, a covered individual’s spouse, and a covered individual’s minor children must not purchase individual equity securities or interests in a sector fund. Covered individuals (and their spouses and minor children) may retain ownership in any non-prohibited individual equity securities or sector funds that are owned or controlled when they become subject to the policy, but they are prohibited under section 2(a) of the policy from purchasing any additional individual equity securities or shares of sector funds on and after that date.

Covered individuals (and their spouses and minor children) must divest any holdings in individual debt securities or other impermissible securities as described in section 1 of the policy.

XXI. Spousal equity and options

Q70: Do the exemptions in section 1 and section 2 of the Policy for Covered Individuals cover (i) stock options from a spouse’s current or prior employer, or (ii) stock options that the spouse may only exercise after their employment ends?
Updated: 2/5/2024
A70: Yes. Equity securities and equity options of a covered individual’s spouse that are acquired or held in connection with the spouse’s current or former employment are exempt from both (i) the investment rules, pursuant to section 1(c)(2) of the Policy for Covered Individuals, and (ii) the purchase prohibition in section 2(a), pursuant to section 2(h)(1)(i) of the policy.

So long as the stock or stock options are "acquired or held in connection with the spouse’s employment," the exemptions will apply, even after the spouse's employment ends.

Q71: Does the spousal equity exemption cover any benefits that a spouse receives in connection with their employment, such as retirement plans?
Updated: 2/5/2024
A71: This exemption covers benefit plans that would not be covered under the exemptions in sections 1(c)(3) and 2(g) but that involve equity securities and equity options of a covered individual’s spouse that are acquired or held in connection with the spouse’s employment. For example, this exemption would cover shares acquired via an Employee Stock Ownership Plan for a covered individual’s spouse, including shares of company stock offered at a discounted price to employees. However, this exemption is limited to stock and options in the spouse’s employing company. The exemption does not apply to other assets (like investment funds) held within a defined contribution plan sponsored by the employer.

Q72: As part of their employment, my spouse acquired equity securities of their former employer. Can my spouse purchase more stock in that company through automatic dividend reinvestments?
Updated: 2/5/2024
A72: Yes. Equity securities and equity options of a covered individual’s spouse that are acquired or held in connection with the spouse’s employment are exempt from the prohibition on new purchases of individual equity securities in section 2(a). This exemption includes purchases of additional shares through an automatic dividend reinvestment plan, which could be approved as a qualifying automatic trade program under the Policy for Covered Individuals. However, covered individuals should keep in mind that they will need to provide advance notice of and seek pre-clearance for the qualifying automatic trade program itself, unless the program was already in existence at the time the individual became covered by the policy.

XXII. Treasury bonds and notes

Q73: Are U.S. savings bonds included in the definition of "Treasury bonds and notes"?
Updated: 2/5/2024
A73: No. U.S. savings bonds are not considered Treasury bonds or notes under the FOMC Policy on Investment and Trading for Committee Participants and Federal Reserve System Staff and are permissible assets for covered individuals.

Q74: Are U.S. Treasury bills included in the definition of "Treasury bonds and notes"?
Updated: 2/5/2024
A74: No. U.S. Treasury bills with maturities of one year or less are not considered Treasury bonds and notes under the FOMC Policy on Investment and Trading for Committee Participants and Federal Reserve System Staff and are permissible assets for covered individuals. However, covered individuals must hold Treasury bills to maturity.

Q75: Which bond funds that invest in Treasury securities are prohibited under the Policy for Covered Individuals?
Updated: 2/5/2024
A75: Investment funds with a stated policy of concentrating in Treasury bonds and notes are prohibited under the policy (e.g., Vanguard Inflation Protected Securities fund or iShares 1-3 Year Treasury Bond ETF). However, total or aggregate bond funds that have a broader investment focus on bonds in general are permissible assets even if they hold Treasury securities (e.g., Schwab U.S. Aggregate Bond Index Fund, BNY Mellon Bond Market Index Fund, and T. Rowe Price QM U.S. Bond Index Fund).

XXIII. 529 plans, health savings accounts ("HSAs"), and other similar accounts

Q76: What does "other similar accounts" mean in section 2(h)(2)(iii) of the Policy for Covered Individuals?
Updated: 2/5/2024
A76: Section 2(h)(2)(iii) of the policy exempts "[u]ntaxed distributions from 529 plans, health savings accounts, or other similar accounts" from the one-year holding period, advance notice and pre-clearance process, and financial market stress period prohibitions. "Other similar accounts" is intended to cover tax-advantaged accounts that operate in a similar manner, such as an Achieving a Better Life Experience ("ABLE") account, which is a tax-advantaged account for individuals with disabilities and their families.

Q77: What does the reference to "untaxed distributions" mean?
Updated: 2/5/2024
A77: Section 2(h)(2)(iii) of the Policy for Covered Individuals exempts "[u]ntaxed distributions from 529 plans, health savings accounts, or other similar accounts" from the one-year holding period, advance notice and pre-clearance process, and financial market stress period prohibitions. To qualify for this exemption, distributions or withdrawals from these accounts must meet the tax code requirements so that they are not considered federal taxable income.

XXIV. Waivers

Q78: To whom should a waiver request be sent?
Updated: 4/15/2022
A78: Covered individuals who are Board employees must submit waiver requests to the Board’s Designated Agency Ethics Official. Covered individuals who are Reserve Bank employees must submit waiver requests to the Board's Designated Agency Ethics Official and their Reserve Bank Ethics Official.

XXV. Reporting and disclosure

Q79: Will covered individuals still be required to continue to comply with existing applicable annual financial disclosure reporting requirements under the Policy for Covered Individuals?
Updated: 2/5/2024
A79: Yes.

Q80: What does "promptly posted" mean in section 3(b) regarding the requirement to post any Periodic Transaction Reports and annual financial disclosure reports filed by a Reserve Bank president?
Updated: 2/5/2024
A80: Consistent with the requirements for Board members’ financial disclosures, Reserve Bank presidents’ disclosures should be posted online within 30 days of submission of a signed report to the Reserve Bank ethics official.

XXVI. Miscellaneous

Q81: Are separately managed accounts permissible under the Policy for Covered Individuals?
Updated: 2/5/2024
A81: Separately managed accounts, while not prohibited, will generally be challenging to hold under the policy. With a managed account, an investor gives a financial advisor the discretion to buy, sell, and trade investments on the investor’s behalf, often through a predetermined portfolio selected by the investor. However, covered individuals ultimately retain control over their managed accounts and are responsible for all trades made within a managed account, even if the trading decision is delegated to an account manager. Because the policy requires a covered individual to provide a minimum of 45-days’ advance notice before a purchase or sale of a security, an account manager must notify the covered individual at least 45 days in advance of a proposed transaction—even a transaction in a predetermined portfolio—so that the covered individual can ensure compliance with the notice and pre-clearance requirements, as well as the investment restrictions imposed by the policy. Further, the advance notice and pre-clearance system will only be accessible to Federal Reserve System employees, thus, the account manager would not be able to submit advance notice on the covered individual's behalf. If a covered individual cannot ensure a managed account’s compliance with the notice, investment, or trading restrictions in the policy, then the covered individual (or their spouse or minor child) must exit – or not enter into – the managed account.

Q82: Is a gift of securities by a covered individual considered a "sale" under the Policy for Covered Individuals?
Updated: 2/5/2024
A82: A gift or transfer of securities by a covered individual with no consideration received in exchange is not a "sale" under the policy.

Q83: Are donor-advised funds permissible?
Updated: 2/5/2024
A83: Yes. A contribution to a donor-advised fund in which the covered individual no longer retains legal control over the investment is considered a gift under the Policy for Covered Individuals.

Q84: May a covered individual use a corporate entity, such as a special purpose LLC, to engage in permissible investments?
Updated: 2/5/2024
A84: Yes, however, the Policy for Covered Individuals applies to all investments owned or controlled by a covered individual or their spouse. Thus, Ethics officials generally will apply a look-through approach to investments made by corporate entities controlled by covered individuals or their spouses. Accordingly, if a covered individual or their spouse exercises control over a corporate entity, then they generally will be deemed to control the corporate entity’s investments, and those investments would be subject to the policy.

Q85: Are covered individuals eligible to obtain certificates of divestiture ("CDs")?
Updated: 4/15/2022
A85: Board employees are eligible to request a CD from OGE prior to selling investment assets that they must divest to comply with federal ethics requirements. If OGE grants the request and the Board employee receives a CD, they may defer capital gains taxes resulting from the sales if the proceeds are promptly reinvested in diversified mutual funds or diversified ETFs. However, under federal law, Reserve Bank employees are not eligible for CDs.

Q86: What will happen if covered individuals violate the Policy for Covered Individuals, such as by failing to execute a pre-cleared trade?
Updated: 2/5/2024
A86: The consequences of any particular instance of noncompliance with the policy will depend on a number of factors, such as the severity of the violation, whether the violation was intentional or inadvertent, and whether the violation was a first or repeat offense.

Q87: How does the Policy for Covered Individuals apply to automatic stock buybacks that occur as the result of a corporate acquisition?
Updated: 2/5/2024
A87: The policy’s advance notice, pre-clearance, and trading blackout requirements apply to securities transactions that are controlled by or subject to the control of a covered individual or their spouse or minor child. Unlike trades of securities that are held within a managed account or trust account that are controlled by a covered individual or their spouse or minor child, stock buybacks typically are not subject to such control, and occur automatically upon a corporate acquisition. Therefore, unless a covered individual or their spouse or minor child controls the corporate acquisition, an automatic stock buyback is not subject to the policy’s advance notice and pre-clearance requirements or the trading blackout restrictions.

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Last Update: February 05, 2024