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

A former Federal Reserve governor who retired in August listed several stock trades in her financial disclosure documents for 2024 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 disclosures after the Fed referred them to its inspector general earlier this year.

Kugler, who unexpectedly stepped down from the Fed board Aug. 8, disclosed more than a dozen individual stock trades, including several made during financial trading “blackout periods” around the time the Federal Reserve’s policymaking committee meets to set interest rates and other monetary policy.

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

The central bank’s decisions on interest rates and bank regulations can cause significant swings in the prices of stocks, bonds and other securities.

As such, Fed officials are barred from investing in individual stocks, bonds or cryptocurrencies, although they are allowed to invest via diversified investments such as mutual funds. They must provide 45 days’ notice of any trade and secure approval of such trades. And they must provide public notice of any trades made in the previous 30 days.

It’s also forbidden for Fed officials to engage in financial transactions during the blackout period around the eight times during the year when the Fed’s policymaking committee meets. That blackout period is roughly 10 days before a Fed meeting and one day after the meeting ends.

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

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

The report notes that “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.”

In 2022, the Fed formally 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 followed an outcry over questionable trades that were made by several top Fed policymakers.

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

Kugler, who did not provide a reason for stepping down in her resignation letter, was appointed to the Fed’s seven-member board of governors by former President Joe Biden in September 2023. She was the first Hispanic Fed governor. Prior to joining the Fed, she was a professor at Georgetown University and was the U.S. 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 take the seat on the Federal Reserve’s governing board vacated by Kugler.