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

Former Fed Governor’s Stock Trades Violated Ethics Rules

A series of stock trades made by former Federal Reserve Governor Adriana Kugler violated the central bank’s ethics guidelines, according to financial disclosure documents released Saturday by the U.S. Office of Government Ethics.

Kugler, who unexpectedly resigned from her position on August 8, disclosed more than a dozen individual stock transactions in 2024, including several that occurred during restricted “blackout periods” surrounding Federal Reserve policy meetings. The ethics office reviewed Kugler’s financial disclosures after the Fed referred them to its inspector general earlier this year.

Among the problematic trades were transactions in major companies like Southwest Airlines, Apple, Caterpillar, and Fortinet. The largest was an Apple stock purchase in April 2024 valued between $100,000 and $250,000. Other notable transactions included a sale of Palo Alto Networks stock worth between $50,000 and $100,000 and a purchase of Cava Group shares valued between $1,000 and $15,000, both made in March 2024 within a week of that month’s Federal Open Market Committee meeting.

Kugler also disclosed another Cava Group stock purchase in April and the sale of Southwest Airlines stock worth between $15,000 and $50,000 during the blackout period before the April 30 Fed meeting.

The Federal Reserve’s ethics rules, significantly tightened in 2022, prohibit officials from investing in individual stocks, bonds, or cryptocurrencies. Officials may invest only through diversified vehicles such as mutual funds. Additionally, they must provide 45 days’ notice before trading, obtain approval for transactions, and disclose any trades made within the previous 30 days.

Particularly strict restrictions apply during the “blackout periods” that extend approximately 10 days before each of the Fed’s eight annual policy meetings until one day after they conclude. These rules exist because the central bank’s decisions on interest rates and financial regulations can significantly impact market prices, creating potential conflicts of interest for officials with knowledge of upcoming policy changes.

According to the ethics report, “certain trading activity was carried out by Dr. Kugler’s spouse, without Dr. Kugler’s knowledge and she affirms that her spouse did not intend to violate any rules or policies.” This explanation echoes similar situations with other Fed officials in recent years.

The Fed’s current ethics framework was implemented following controversy in 2022, when several top Fed officials faced scrutiny over questionable trading activities. Most notably, Raphael Bostic, president of the Federal Reserve Bank of Atlanta, acknowledged that many of his financial investments and trades had violated Fed ethics rules, requiring him to revise financial statements dating back to 2017. Bostic claimed the trades were executed by investment managers without his direct oversight or knowledge.

Kugler, who was appointed to the Fed’s seven-member Board of Governors by President Joe Biden in September 2023, was the first Hispanic person to serve in that role. Before joining the central bank, she worked as a professor at Georgetown University and served as the U.S. representative to the World Bank. Her resignation letter did not specify reasons for her departure, and she returned to Georgetown’s faculty this fall.

The vacant seat left by Kugler’s resignation has since been filled by Stephen Miran, one of President Donald Trump’s top economic advisers, who received Senate confirmation in September.

The disclosure of these ethics violations comes at a sensitive time for the Federal Reserve, which has been working to restore public trust in its governance practices while navigating complex economic challenges including inflation pressures, employment concerns, and financial market stability.