Adriana Kugler provides testimony at a Senate Banking Committee hearing regarding her nomination to the Federal Reserve Board of Governors, on Capitol Hill in Washington, U.S., June 21, 2023.
The revelation follows Kugler’s abrupt departure from the Fed’s Board of Governors three months prior without an explanation. She joined the Fed in September 2023, having been appointed by then-President Joe Biden.
Kugler’s resignation occurred after her request for a waiver from Chair Jerome Powell regarding a disclosure form that indicated she had unauthorized holdings was declined, according to sources familiar with the situation who spoke to CNBC.com.
It was noted that concerns about trading activity involving Kugler or her spouse date back to at least September 2024, when she began consulting with ethics officials to rectify trading policy violations.
A financial disclosure document submitted by Kugler to the OGE on September 11 this year, detailing securities transactions by her or her husband, mentions that an Ethics Office official refused to certify the report.
A note accompanying Friday’s disclosure states, “Issues concerning this disclosure were earlier referred this year” by the office to the independent Office of Inspector General for the Board of Governors of the Federal Reserve System. An inspector general is a watchdog within federal departments and agencies for ethics compliance.
Another note in the report indicates, “In alignment with her September 15, 2024, disclosure, certain trading activities were executed by Dr. Kugler’s spouse, without her knowledge, and she asserts that her spouse had no intention of breaching any rules or policies.”
Issues with trading
Kugler is married to Ignacio Donoso, an immigration attorney.
Her disclosure reveals two types of breaches of Federal Reserve regulations pertaining to financial transactions by senior officials at the central bank: purchasing stock shares of individual firms instead of mutual funds; and acquiring securities during “blackout periods” surrounding the blackout periods before and after meetings of the Federal Open Market Committee.
The FOMC meetings determine key interest rates. Speculation regarding these meetings and their actual results can significantly influence stock and bond prices.
Kugler’s infractions pertained to stock purchases in companies such as Apple, Southwest Airlines, Caterpillar, and Cava Group, as indicated in the report.
Kugler attended FOMC meetings throughout her time at the Fed. However, she did not attend the FOMC meeting this past July, which the Fed publicly attributed to a personal issue.
Shortly before the July meeting, Kugler sought a waiver from the Ethics disclosure filing deadline to alleviate concerns regarding her prohibited holdings within her investment portfolio, according to Fed officials in discussions with CNBC.
Two months earlier, she had requested and was granted a standard extension for her annual ethics disclosures, officials noted.
Powell, considering the ongoing attempts to resolve Kugler’s situations, turned down her request for another waiver, which resulted in her absence from the July FOMC meeting.
Shortly thereafter, on August 1, Kugler expressed her intention to resign on August 8.
In another disclosure filed in October 2024, Kugler similarly pointed to her husband Donoso for four stock acquisitions — three of Apple shares in July of that year, and one of Cava shares the following September — which contravened Fed trading regulations.
“These four purchases were executed by my spouse, without my awareness, and I assert that my spouse had no intention of contravening any rules,” Kugler stated at that time.
“Upon discovering the acquisitions, I promptly informed ethics officials, and as per their direction, I commenced divestiture of these assets as soon as possible in accordance with FOMC ethics guidelines.”
CNBC has reached out to Kugler for insights on the latest Ethics disclosure report, which also reveals that Kugler benefited from over $41,000 worth of “pro bono legal services” provided by the law firm Arnold & Porter.
Pro bono signifies that the services were offered at no cost.
CNBC has also sought comments from Donoso.
Amendments to regulations
Following her resignation from the Fed, Kugler returned to Georgetown University in Washington, D.C., where she is a faculty member at the McCourt School of Public Policy and Economics.
In early 2022, the Fed implemented new regulations that prohibited officials from engaging in trading individual stocks and bonds, as well as cryptocurrencies.
This action emerged following revelations regarding then-regional Fed presidents Eric Rosengren of Boston and Robert Kaplan of Dallas trading stocks and stock funds just before the central bank introduced extensive measures to support the U.S. economy amid the initial stages of the Covid-19 pandemic.
Rosengren and Kaplan faced no legal repercussions, but both departed their roles amid uncertainties regarding the appropriateness of Fed officials potentially exploiting privileged information for profit. Other transactions by Fed officials, including Powell, also came under scrutiny and received considerable public and congressional backlash.
Kugler’s unexpected resignation enabled President Donald Trump to appoint Stephen Miran to fill her remaining term on the Fed Board of Governors.
Miran, whose current term concludes on January 31, took an unpaid leave of absence as the chair of the White House Council of Economic Advisors.
In 2024, the Fed’s inspector general determined that Atlanta Fed President Raphael Bostic, who is set to retire in February, violated trading regulations.
