(Bloomberg) — Federal Reserve Bank of Atlanta President Raphael Bostic made multiple trades leading up to the central bank’s meeting last May, revealing additional transgressions of the central bank’s trading rules that have since been disclosed and are under investigation.
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A money manager acting on Bostic’s behalf bought and sold shares of 19 exchange-traded funds on May 2, 2022, according to financial disclosure forms released Thursday. The Federal Open Market Committee, the Fed’s policy-setting group, convened the following two days, ultimately raising interest rates by half a percentage point. Bostic was not a voter.
In the almost two-week period leading up to each FOMC meeting, Fed officials are in a so-called blackout in which they’re prohibited from making trades and don’t speak publicly. Bostic ran afoul of this rule in March and April 2020, which he said was carried out by third-party financial advisers with investment discretion within managed account.
Bostic cited the same explanation in Thursday’s disclosure, adding that he and his spouse “held assets in managed accounts over which we had no discretion,” according to the documents. They moved all of their assets out of the managed accounts last year.
The trades occurred before he was aware they were subject to blackout restrictions. The transactions have already been reported to the Atlanta Fed, the Board of Governors’ ethics officers, as well as the Federal Reserve Inspector General, he said. The IG is investigating the issues.
The transactions were all relatively small, ranging from $1,001 to $50,000, the documents showed. He sold shares of ETFs run by Invesco Ltd. and Vanguard Group Inc. and bought others such as the iShares broad investment-grade bond ETF and the SPDR Bloomberg International Treasury Bond ETF.
The central bank released the annual financial disclosures for the Fed reserve bank presidents Thursday, a process intended to show compliance with ethics rules that have been stiffened in the wake of past missteps. No other disclosures appeared to reveal any violations.
The Kansas City Fed disclosed holdings and transactions by Esther George, who retired in January. Chicago provided details on actions by Austan Goolsbee, who took up his position in the same month.
The Fed in 2021 beefed up its rules governing the investment and trading of senior officials in the aftermath of an ethics scandal following unusual trading activity by two regional Fed presidents.
Under the policy, senior Fed officials — including regional bank presidents, Washington governors and senior staff — will be limited to purchasing diversified investment vehicles such as mutual funds. The rules restrict active trading, prohibit the purchase of individual securities and boost disclosure requirements among policymakers and senior staff members.
Dallas Fed President Robert Kaplan and Boston’s Eric Rosengren both stepped down following revelations of unusual trading during 2020. Rosengren cited a chronic illness in announcing his early retirement.
–With assistance from Catarina Saraiva and Jonnelle Marte.
(Updates with Kansas City disclosure)
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