Former Fed governor’s stock trades violated central bank ethics rules

A former Federal Reserve governor, who retired in August, listed several stock transactions in her 2024 financial disclosure filings that violated the central bank’s ethics rules.

The transactions are outlined in a report released Saturday by the U.S. Office of Government Ethics, which reviewed Adriana Kugler’s financial information after the Fed submitted it to its inspector general earlier this year.

Kugler, who unexpectedly resigned from the Fed board on Aug. 8, disclosed more than a dozen individual stock trades, including several made during financial trading “blackout periods,” when the Federal Reserve’s steering committee meets to set interest rates and other monetary policies.

Southwest Airlines, Apple, Caterpillar and Fortinet were among the companies listed as individual stock trades in 2024 by Kugler. The largest was a purchase of Apple stock in April 2024, between $100,000 and $250,000.

Central bank decisions regarding interest rates and banking regulations can cause significant fluctuations in the prices of stocks, bonds and other securities.

As such, Fed officials are prohibited from investing in individual stocks, bonds, or cryptocurrencies, although they are allowed to invest through diversified investments such as mutual funds. They must provide 45 days’ notice of any transactions and obtain approval for these transactions. And they must provide public notice of all transactions made in the previous 30 days.

Fed officials are also prohibited from engaging in financial transactions during the blackout period, which is eight times a year when the Fed’s steering committee meets. This blackout period lasts approximately 10 days before a Fed meeting and one day after the meeting ends.

Among the transactions disclosed by Kugler were a sale of Palo Alto Networks stock for about $50,000 to $100,000 and a purchase of Cava Group stock for about $1,000 to $15,000, both in March 2024, within a week of that month’s Fed policymakers’ meeting.

Kugler also disclosed another purchase of Cava Group stock in April between $1,000 and $15,000 and the sale of between $15,000 and $50,000 of Southwest Airlines stock during the pre-Fed meeting blackout period that began on April 30, 2024.

The report notes that “certain business activities were conducted by Dr. Kugler’s spouse, without Dr. Kugler’s knowledge and she asserts that her spouse did not intend to violate any rules or policies.” »

In 2022, the Fed officially adopted sweeping new rules aimed at limiting the ability of its top officials to invest in financial markets, a change intended to prevent conflicts of interest involving investments affected by Fed policies. The move follows an outcry over questionable trading by several senior Fed officials.

That year, Raphael Bostic, president of the Federal Reserve Bank of Atlanta, acknowledged that many of his financial investments and transactions in previous years had violated the Fed’s ethics rules and revised all of his financial statements dating back to 2017. At the time, he said the trades were made by investment managers he did not directly supervise and that he was not aware of the transactions.

Kugler, who did not provide a reason for resigning in her resignation letter, was appointed to the seven-member Fed Board of Governors by former President Joe Biden in September 2023. She was the Fed’s first Hispanic governor. Before joining the Fed, she was a professor at Georgetown University and a U.S. representative to the World Bank. Kugler returned to the Georgetown faculty in the fall.

In September, Stephen Miran, a top economic adviser to President Donald Trump, was confirmed by the Senate to fill the Federal Reserve board seat vacated by Kugler.