Atlanta Fed president violated trading rules, inspector general finds

Atlanta Federal Reserve President Raphael Bostic violated the central bank’s rules around financial disclosures and trading activity, marking the latest revelation in a series of ethics issues to rock the institution, the Fed’s internal watchdog said Wednesday.

The findings, released by the Fed’s independent inspector general, said there was no evidence that Bostic made trades based on confidential information or acted on financial conflicts of interest. The trades were handled by third parties, and neither Bostic nor his personal advisers directed specific trades.

But Bostic’s actions did run afoul of broader regulations meant to distance Fed officials from even the faintest appearance of unlawful behavior, given that they have access to some of the most consequential information about the economy and financial system.

For example, officials are barred from certain activities - including public speaking and some forms of trading - around Fed policy meetings. But investigators found that from March 2018 to March 2023, 154 trades were executed on Bostic’s behalf during those “blackout” periods. The report said Bostic “knowingly engaged” in a trading strategy that didn’t block trades from happening on his behalf during those periods.

The report sealed the inspector general’s investigation, which began in October 2022 after Bostic himself said he broke the rules. Any further action now rests with the Fed Board and the Atlanta Fed. The Fed Board confirmed it is reviewing the findings.

In a statement, Claire Lewis Arnold, board chair of the Atlanta Fed, said that she appreciated the “thorough review,” noting that “we take these issues seriously and the full board will meet to carefully discuss the report’s details further.”

Fed officials have come under closer ethical scrutiny in recent years. In 2017, Richmond Fed President Jeffrey Lacker resigned after he admitted he played a role in a leak of sensitive information to a financial analyst. Then, in 2021 and 2022, several news outlets revealed consequential trades made by two regional bank presidents and the Fed’s vice chair, all of whom eventually resigned.

Responding to the scrutiny - and in a fight to regain public trust - Fed Chair Jerome H. Powell led an overhaul of the Fed’s investment and trading rules. Those regulations, for example, now prohibit the purchase of individual securities, restrict active trading, and ramp up the timeliness of reporting and public financial disclosures by Fed policymakers as well as by senior staff.