The Federal Reserve on Monday released a rare public statement revealing an independent review by the Office of Inspector General for the Federal Reserve Board, over whether trading activity by top Fed officials “was in compliance with both the relevant ethics rules and the law.”

Leaders had previously announced the Fed’s own internal ethics review of financial trading rules for top officials, and Fed Chair Jerome H. Powell said there would be changes to existing guidance. But the latest statement reflected a more concerted focus on the legality of the trades themselves.

“As part of our comprehensive review, we began discussions last week with the Office of Inspector General for the Federal Reserve Board to initiate an independent review of whether trading activity by certain senior officials was in compliance with both the relevant ethics rules and the law,” the Fed said in a statement Monday evening. “We welcome this review and will accept and take appropriate actions based on its findings.”

A spokesperson for the Office of Inspector General for the Federal Reserve Board said Powell “has requested that we conduct an independent review of these matters. We have agreed to do so and have no further comment at this time.”

During testimony on Capitol Hill last week, Powell said the trading activity of two regional bank presidents, Eric Rosengren and Robert Kaplan, appeared to comply with the current guidelines, even if “the appearance is just obviously unacceptable.”

Those remarks came before Bloomberg News reported on the financial activities of Fed Vice Chair Richard Clarida, who moved between $1 million and $5 million out of a broad-based bond fund to broad-based stock funds on Feb. 27, 2020, according to his disclosure forms. The Fed has said Clarida’s actions were part of a preplanned rebalancing of his portfolio and were similar to activity he disclosed in April 2019.

The revelations have raised questions about trading rules for Fed officials — and specifically what regulators at the Fed knew about the markets and financial system as the central bank turbocharged its pandemic-era policy response. Some Fed critics have alleged that such trades also erode public trust in the central bank and, at the very least, distract from its heady responsibility of navigating the economy through a slowing recovery.

Earlier on Monday, Sen. Elizabeth Warren called for an investigation of whether the financial trading activities of top Federal Reserve officials violated insider-trading rules, heightening scrutiny over ethics issues at the central bank.

During a Senate Banking Committee hearing on Sept. 28, Sen. Elizabeth Warren (D-Mass.) called Jerome H. Powell "a dangerous man to head up the Fed." (Reuters)

In a letter to the Securities and Exchange Commission on Monday, Warren (D-Mass.) highlighted transactions made by two regional Fed bank presidents, Kaplan and Rosengren, who left their posts last week after revelations of their financial behavior became public. On Friday, Bloomberg News also reported on February 2020 trades made by Clarida that came the day before the Fed issued a rare statement saying it would “act as appropriate to support the economy” as the pandemic tightened its grip on public health and the economy.

“The reports of this financial activity by Fed officials raise serious questions about possible conflicts of interest and a reveal a disregard for the public trust,” Warren wrote to SEC Chair Gary Gensler. “They also reflect atrocious judgment by these officials, and an attitude that personal profiteering is more important than the American people’s confidence in the Fed.”

Kaplan and Rosengren’s financial activities fixed attention on trading by some of the country’s top economic policymakers at a time when they were actively shaping the Fed’s response to the coronavirus crisis. Kaplan traded millions of dollars in individual stocks. And while Rosengren’s trades were on a smaller scale, they nevertheless drew scrutiny, with stakes in four separate real estate investment trusts. Last year, Rosengren’s public speeches and remarks highlighted his concerns for the commercial real estate sector as the economy weathered the coronavirus recession.

The events have also fueled debate over who should lead the Fed in the first place. In the coming months, the Biden White House can fill as many as four spots on the Fed board, and there are now two vacancies leading the reserve banks in Boston and Dallas.

During a Senate Banking Committee hearing last week, Warren did not bring up questions about Fed stock-trading policies but called Powell a “dangerous man” because of the Fed’s moves to ease regulation on Wall Street. She became the first senator to oppose him getting a second term. His current term expires early next year, and President Biden has not said whether he will renominate him.