Fed’s Bostic acknowledges trades broke rules, corrects records

WASHINGTON — Federal Reserve Bank of Atlanta President Raphael Bostic said Friday that many of his financial transactions and investments over the past five years have inadvertently violated central bank ethics rules, and he has reviewed all of its financial information since becoming president in 2017.

Bostic said the trades were made by investment managers he did not directly supervise and he had no knowledge of the trades. He said he has since changed his approach to investing to stay within the rules.

Bostic’s disclosure comes just a year after a trade controversy engulfed the Federal Reserve. Last fall, two bank presidents resigned after their frequent stock trading at the start of the pandemic drew criticism because it happened just as the Fed was taking steps to stabilize financial markets and the economy.

Since then, investments by Fed officials have come under scrutiny, as policymakers like Bostic participate in Fed interest rate decisions that can cause wild swings in financial markets.

Bostic said managers made financial transactions during times surrounding Fed meetings, when members of the Federal Reserve’s policy-making committee aren’t expected to trade. Advisors also bought investments for amounts above the limits set by Fed ethics rules.

The Atlanta Fed board said it accepted Bostic’s explanation for the oversights and announced no further action.

“My board colleagues and I have confidence in Chairman Bostic’s explanation that he did not seek to profit from (Fed)-related knowledge,” said Elizabeth Smith, board chair. administration of the Fed Bank of Atlanta.

Still, Federal Reserve Chairman Jerome Powell asked the Fed’s Office of Inspector General to review Bostic’s financial information.

“We look forward to the results of their work and will accept and take appropriate action based on their findings,” a Fed spokesperson said.

The Fed revised its ethics rules last fall to impose stricter limits on investments by Fed officials and senior executives. These rules came into effect on May 1. Managers are now largely restricted to holding only diversified mutual funds and must provide 45 days’ notice before making any trades.

Bostic said it has changed its current investments to comply with updated ethical guidelines.

“I acknowledge that it is my responsibility to understand and comply with all obligations of this office,” Bostic said in a statement. “I want to be clear: at no time did I knowingly authorize or conduct a financial transaction based on nonpublic information or with the intention of concealing or circumventing my transparent and responsible reporting obligations.”

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