Former Federal Reserve Governor’s Stock Trades Violated Central Bank Ethical Rules

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

The transactions are described in a report released Saturday by the U.S. Office of Government Ethics, which reviewed Adriana Kugler’s financial statements after the Federal Reserve referred them to its inspector general earlier this year.

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

Southwest Airlines, Apple, Caterpillar and Fortinet are among the companies Kugler lists as individual stock transactions in 2024. The largest was a purchase of Apple stock in April 2024 worth between $100,000 and $250,000.

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

As such, Federal Reserve 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 give 45 days’ notice of any operation and obtain approval for such operations. And they must give public notice of any operation carried out in the previous 30 days.

Federal Reserve officials are also prohibited from conducting financial transactions during the blackout period, around the eight times a year when the Federal Reserve’s policymaking committee meets. That blackout period is about 10 days before a Federal Reserve meeting and one day after the meeting ends.

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

Kugler also revealed another purchase of Cava Group shares in April of between $1,000 and $15,000 and the sale of between $15,000 and $50,000 in Southwest Airlines shares during the lockup period before the Federal Reserve meeting that began on April 30, 2024.

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

In 2022, the Federal Reserve formally adopted sweeping new rules aimed at limiting the ability of its top officials to invest in financial markets, a change intended to avoid conflicts of interest involving investments affected by the Fed’s policies. The move came after an outcry over questionable trading by several top Fed officials.

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

Kugler, who did not provide a reason for resigning in her resignation letter, was appointed to the seven-member board of governors of the Federal Reserve by former President Joe Biden in September 2023. She was the first Hispanic female governor of the Federal Reserve. Before joining the Federal Reserve, she was a professor at Georgetown University and the United States representative to the World Bank. Kugler returned to the Georgetown faculty in the fall.

In September, Stephen Miran, one of President Donald Trump’s top economic advisers, was confirmed by the Senate to fill the Federal Reserve board seat vacated by Kugler.