Atlanta Fed’s Bostic Violated Trading Rules, Says US Central Bank Watchdog

By Michael S. Derby

The trading and investment practices of Raphael Bostic, President of the Federal Reserve Bank of Atlanta, have been found to violate central bank rules, according to a report from the Fed’s internal watchdog.

The report from the Office of Inspector General indicated that Bostic created the appearance of acting on confidential information and had a conflict of interest, which goes against the Atlanta Fed’s code of conduct. However, investigators did not uncover any evidence suggesting that Bostic actually used insider information regarding Federal Reserve discussions or had financial conflicts of interest.

According to the report, Bostic relied on investment managers and did not directly oversee specific trades. Nonetheless, he was responsible for ensuring that all trades and investments made on his behalf complied with the relevant regulations, especially those regarding appearance standards.

Investigators found that Bostic’s trades occurred during prohibited "blackout" periods surrounding meetings of the Federal Open Market Committee, totaling 154 instances from March 2018 to March 2023. Additionally, Bostic submitted inaccurate disclosure forms, exceeded the limit on Treasury securities he could hold, and executed trades that differed from those he sought approval for.

In response to the report’s findings, the Atlanta Fed’s board stated they take these matters seriously and will discuss the report in detail during an upcoming meeting. Meanwhile, the U.S. central bank’s Board of Governors is also reviewing the report.

Bostic informed investigators that he was unaware of the prohibited periods due to his reliance on money managers, and the Inspector General noted that he did not review monthly investment statements, which could have helped him prevent the violations.

This report concerning Bostic’s financial activities is the third—likely final—report on trading and investing by current and former Federal Reserve officials. Prior findings made public in September 2021 revealed that the previous presidents of the Fed’s regional banks in Dallas and Boston engaged in active trading during their tenure in policy-making roles. Robert Kaplan and Eric Rosengren, who led those banks, both retired shortly after those revelations surfaced.

Questions were also raised about the investing activities of Fed Chair Jerome Powell and then-Fed Vice Chair Richard Clarida, though both were eventually cleared of any wrongdoing. The Inspector General previously stated that while Kaplan and Rosengren did not break any rules, their actions created an appearance of conflict of interest.

Given Bostic’s prior acknowledgment of errors in his financial disclosures, the report on his practices was anticipated. The ongoing trading controversy has raised concerns about the Fed’s reputation and the potential financial benefits policymakers might derive from their interest rate decisions. As a result, the central bank implemented stricter investment rules for policymakers and senior staff in 2021.