Attention FAE Customers:
Please be aware that NASBA credits are awarded based on whether the events are webcast or in-person, as well as on the number of CPE credits.
Please check the event registration page to see if NASBA credits are being awarded for the programs you select.

Want to save this page for later?

News

Two Fed Officials Criticized by Inspector General for 2020 Stock Trading Activity

By:
S.J. Steinhardt
Published Date:
Jan 23, 2024

GettyImages-939248364-Federal-Reserve

Two former regional presidents of the Federal Reserve System were found not to have done anything illegal regarding their 2020 trading activities, but were still criticized for them, by the Fed’s Office of Inspector General (OIG).

The OIG initiated an investigation into the trading activities of Federal Reserve Bank of Dallas President Robert Kaplan and Federal Reserve Bank of Boston President Eric Rosengren in October 2021. While the investigation did not find that Kaplan’s trading activities violated laws, rules, regulations or policies related to trading activities as investigated by the OIG, it did find that his 2020 Form A Federal Reserve Bank Confidential Financial Disclosure Report did not publicly disclose specific dates of his trading activities and did not specify transactions that involved the selling of stock option contracts.

“This lack of information, in our opinion, did not support public confidence in the impartiality and integrity of the policymakers and senior staff carrying out the public mission of the FOMC's [Federal Open Market Committee] work, especially during this critical time period when the Federal Reserve was taking monetary policy actions to address the effects of the COVID-19 pandemic on the U.S. economy,” the report stated. "These collective facts, in our opinion, create an 'appearance of acting on confidential FOMC information' under the FOMC blackout rule and an 'appearance of a conflict of interest' that could cause a reasonable person to question Mr. Kaplan’s impartiality under FRB Dallas’s code of conduct."

The OIG found that Rosengren did not report multiple trades on his 2020 Form A. It also found multiple discrepancies between the transactions reflected in his brokerage statements and trading data. "Moreover, in our opinion, Mr. Rosengren’s trading activities in real estate investment trusts (REITs) in 2020—during a time of financial market volatility that prompted the Federal Reserve to authorize the purchase of agency create an 'appearance of a conflict of interest' that could cause a reasonable person to question Mr. Rosengren’s impartiality under FRB Boston’s code of conduct.," the report stated.

Both men left the Fed in September 2021; Kaplan took early retirement and Rosengren resigned  due to medical reasons, CNBC reported.

The Fed subsequently adopted new rules that prohibit Federal Reserve officials from "purchasing individual stocks or sector funds; holding investments in individual bonds, agency securities, cryptocurrencies, commodities, or foreign currencies; entering into derivatives contracts; and engaging in short sales or purchasing securities on margin."