Atlanta Fed president Bostic violated trading rules

The Federal Reserve's inspector general has been asked to investigate a series of transactions by Atlanta Fed President Raphael Bostic that violated the central bank's policies meant to keep top officials from benefiting from inside information.

Driving the news: The Atlanta Fed released updated versions of Bostic's financial disclosures dating to 2017 that included transactions that took place while the Fed was in "blackout," just before or after a policy meeting, contrary to rules.

• Bostic, in a letter accompanying the new disclosures, said that the transactions were carried out by a third-party asset manager without his knowledge, and that he has taken steps to ensure it does not happen in the future.
• A Fed spokesperson said that Chair Jerome Powell "has asked the Office of Inspector General for the Federal Reserve Board to initiate an independent review of President Bostic’s financial disclosures," adding "We look forward to the results of their work and will accept and take appropriate actions based on their findings."

In a statement, Atlanta Fed board chair Elizabeth A. Smith said: "After reviewing the documents and discussing these issues with President Bostic and the Atlanta Fed’s chief ethics officer, the board acknowledges the violations and accepts President Bostic’s explanation."

• "My board colleagues and I have confidence in President Bostic’s explanation that he did not seek to profit from any FOMC-related knowledge," she said.

Backstory: Former Dallas Fed President Robert Kaplan and Boston Fed President Eric Rosengren both resigned after reports that they actively traded securities whose value was influenced by the central bank's decisions.

• The Fed put in place tight new rules this year that limit the ability of Fed policymakers to buy, sell, and hold financial assets.

In a seven-page "explanatory statement" released by the Atlanta Fed, Bostic wrote that: "Since I assumed office, I have ensured that my assets were held in managed accounts that neither I nor my personal investment adviser had the ability to direct."

• "I have come to learn, however, that while I did not have the ability to direct trades in these accounts, the transactions directed by third parties, not just the assets themselves, should have been listed on my annual financial 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 added that "At no time did I knowingly authorize or complete a financial transaction based on nonpublic information or with any intent to conceal or sidestep my obligations of transparent and accountable reporting."