Blackout Period Stock Trades Expose Fed Ethics Enforcement Gaps

Former Federal Reserve Governor Adriana Kugler violated the central bank's ethics rules by trading stocks during prohibited blackout periods, according to a report released by the U.S. Office of Government Ethics (OGE) on Saturday. The findings, which emerged after the Fed referred Kugler's financial disclosures to its inspector general earlier this year, detail over a dozen individual stock transactions-including purchases of Apple, Southwest Airlines, Caterpillar, and Cava Group-made in 2024. These trades occurred around the time of Federal Open Market Committee (FOMC) meetings, when Fed officials are barred from trading due to potential conflicts of interest according to the report.

Kugler's largest transaction, a purchase of Apple stock valued between $100,000 and $250,000 in April 2024, fell within the blackout period preceding the Fed's April 30–May 1 policy meeting. Other trades, including sales of Southwest Airlines and Caterpillar shares, also occurred during restricted windows. The Fed's 2022 ethics rules explicitly prohibit officials from holding or trading individual stocks, bonds, or cryptocurrencies, requiring instead diversified investments like mutual funds. Kugler also disclosed that her spouse executed several trades without her knowledge, though she affirmed these actions were unintentional according to the report.

The OGE report highlights a pattern of violations. For example, Kugler's spouse purchased Cava Group stock on March 13, 2024-just days before the Fed's March 19–20 meeting-and later sold it in April. Similarly, Southwest Airlines shares were bought in March and sold ahead of the April meeting. These trades align with the Fed's policy of restricting transactions during blackout periods, which span roughly 10 days before and one day after FOMC meetings.

Kugler's resignation in August 2024, which followed months of undisclosed compliance issues, appears tied to these violations. She had sought a waiver from Fed Chair Jerome Powell to adjust her portfolio during blackout periods but was denied. Her departure left a vacancy on the Fed's seven-member board, which was subsequently filled by Stephen Miran, a top economic adviser to President Donald Trump according to the report.

The Fed's inspector general is now reviewing Kugler's disclosures, following similar probes into past misconduct by senior officials. In 2021, Raphael Bostic, then-president of the Federal Reserve Bank of Atlanta, admitted to violating ethics rules through trades managed by investment advisors. The 2022 policy overhaul aimed to prevent such conflicts, but Kugler's case underscores lingering challenges in enforcement according to the report.

Kugler's financial filings also revealed she received nearly $41,000 in pro bono legal services from Arnold & Porter, a Washington law firm, and returned to her teaching role at Georgetown University shortly after resigning according to the report. The OGE's refusal to certify her disclosure forms-a standard requirement for federal officials-further complicates her case, as ethics officers deemed the transactions non-compliant with Fed regulations according to the report.

With the inspector general's investigation ongoing, the incident raises questions about oversight of Fed officials' personal finances. Kugler, the first Hispanic appointee to the Fed's board, had joined in September 2023 under Joe Biden. Her resignation and the subsequent political appointment of Miran highlight the intersection of regulatory compliance and partisan dynamics in central bank governance according to the report.