Atlanta Federal Reserve Chief Investigated for Breaking Trading Rules

President and Chief Executive Officer of the Federal Reserve Bank of Atlanta Raphael W. Bostic speaks at a European Financial Forum event in Dublin, Ireland, on Feb. 13, 2019. Clodagh Kilcoyne/Reuters

Raphael Bostic, president of the Atlanta Federal Reserve Bank, is currently under investigation after admitting to not disclosing certain trading activities that he engaged in during restricted periods.

Since assuming office in 2017, Bostic claims he has ensured his assets are only held in managed accounts which neither he nor his personal investment advisor has the ability to direct, the Fed president said in an Oct. 14 statement (pdf). However, Bostic claims that he only learned later on that transactions done by third parties on such accounts must also be listed in the annual disclosure forms.

“Due to my reliance on a third-party manager, I was unaware of any specific trades or their timing, including a limited number that took place during Federal Open Market Committee (FOMC) blackout periods or financial stress periods,” Bostic said in the statement.

“Similarly, I was unaware of when my holdings of U.S. Treasury funds in 2021 exceeded the limits set forth by the FOMC’s trading and investing rules.”

The Atlanta Fed president said that he worked with the agency’s general counsel’s office, Federal Reserve Board’s general counsel’s office, and the board of directors to provide corrected information about such trades “as soon as” he became aware that his financial reporting did not meet required compliance.

Bostic has now publicly posted “corrected annual disclosure forms” for every year he has been the president of the Atlanta Fed.

He has changed the way his investment accounts are managed to ensure that no automatic trading can be done without his approval. Bostic has also divested assets that are prohibited according to trading rules which went into effect on May 1 this year.

Trading by Officials

Fed Chair Jerome Powell has asked the agency’s Office of Inspector General to initiate an “independent review” of Bostic’s financial disclosures, a Fed spokesperson said in a statement, according to Reuters.

“We look forward to the results of their work and will accept and take appropriate actions based on their findings,” he added.

Fed officials are prohibited from owning stocks in banks that are overseen by the Federal Reserve. They are also banned from investing in funds that have holdings concentrated in the financial sector overseen by the central bank. In addition, officials are not allowed to trade during certain Fed meetings.

Bostic is not the first Fed official who has faced heat for trading activities. Powell himself is said to have made trades during the blackout periods in 2020, according to CNBC.

A year ago, Robert Kaplan, the then-leader of the Dallas Fed, resigned after it came to light that he had traded millions of dollars worth of stock and made other investments while also helping set monetary policy. Similarly, Eric Rosengren, who headed the Boston Fed, also resigned due to such trades.

Early this year, Richard Clarida, the second in command at the Federal Reserve, resigned after questions surfaced about some of his trades from 2020.

A recent investigation by WSJ found that more than 25 percent of Federal Reserve officials made investments in stocks of companies between 2016 and 2021 that took place at a time when the firms were lobbying the agency for favorable policies.