Ex-Fed official to face ethics inquiry over stock trades

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A top former Federal Reserve official will be investigated by the central bank’s internal watchdog over discrepancies in her financial disclosures, a long-awaited ethics report said.

Adriana Kugler resigned from the Fed in August, months before her term was due to end. A public financial disclosures report she filed stated that ethics officials declined to certify that transactions made last year were compliant with the Fed’s rules.

The ethics disclosure, which was published on Saturday, showed that in 2024 Kugler or her husband bought and sold shares in individual stocks including Cava and Southwest Airlines, and sold shares in Apple, Palo Alto Networks, Fortinet and Caterpillar.

Certain officials, including Kugler, and their spouses are forbidden to buy individual stocks. The Fed’s rules also forbid the purchase and sale of stocks and other securities by senior officials during the 10-day blackout period around Federal Open Market Committee meetings. Officials must hold most securities, including equities, for a minimum of 45 days. Sales can only be made with 45 days of notice to the Fed’s ethics office.

The disclosure shows that the purchase and sale of shares in Cava and Southwest Airlines contravened the 45-day rule. Some of the activity took place within blackout periods.

The disclosure also indicated that Kugler owned an interest in Fidelity’s Select Semiconductor Fund, but had not complied with rules which require officials to turn off automatic dividend reinvestment.

Sean Croston, a deputy associate general counsel at the Federal Reserve, said in the report that Kugler had been referred to the central bank’s internal watchdog.

“Consistent with our standard practices and policies, matters related to this disclosure were referred earlier this year by the Board’s Ethics Office to the independent Office of Inspector General for the Board of Governors of the Federal Reserve System,” Croston said in the disclosure.

Kugler’s disclosure, which contains her own interpretation of her financial records and has not been certified by the Fed, stated 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”.

The Fed’s internal rules also cover senior officials’ spouses as well as children under the age of 18. Some of the discrepancies involving financial transactions by Kugler’s husband had previously come to light.

Kugler’s surprise resignation came at a precarious time for the US central bank, which has faced a barrage of attacks from the Trump administration over rate-setters’ refusal to back interest rate cuts. 

She had been expected to remain on the Fed board until her term ended in January. Her abrupt resignation paved the way for Donald Trump to nominate Stephen Miran to temporarily fill her seat on the board.

The first signs of discrepancies in Kugler’s financial transactions emerged late last year, and were flagged to the central bank’s internal watchdog. 

Kugler did not attend a policy vote immediately before her resignation in late July. Fed officials said that before the meeting she had requested a waiver of the FOMC trading policies in order to address earlier transactions that had breached the Fed’s rules.

The matter was discussed with Fed chair Jay Powell and the waiver was refused. Kugler did not attend the July meeting, reportedly for personal reasons. She resigned days later.

Kugler did not immediately respond to a request for comment.

The Fed tightened up its ethics rules after scandals involving then-vice chair Richard Clarida and Federal Reserve Bank presidents Eric Rosengren and Robert Kaplan which emerged in 2021.