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A top former Federal Reserve official will be investigated by the central bank’s internal watchdog over discrepancies in her financial disclosures, a long-awaited ethics report said.
Adriana Kugler resigned from the Fed in August, months before her term was due to end. A public financial disclosures report she filed stated that ethics officials declined to certify that transactions made last year were compliant with the Fed’s rules.
The ethics disclosure, which was published on Saturday, showed that in 2024 Kugler bought and sold shares in individual stocks including Cava and Southwest Airlines, and sold shares in Apple, Palo Alto Networks, Fortinet and Caterpillar.
The Fed’s rules forbid the purchase and sale of individual stocks and other securities by senior officials during the 10-day blackout period around Federal Open Market Committee meetings. Officials must hold most securities, including equities, for a minimum of 45 days.
The disclosure also indicated that Kugler owned an interest in Fidelity’s Select Semiconductor Fund, but had not complied with rules which require officials to turn off automatic dividend reinvestment.
Sean Croston, a deputy associate general counsel at the Federal Reserve, said in the report that Kugler had been referred to the central bank’s internal watchdog.
“Consistent with our standard practices and policies, matters related to this disclosure were referred earlier this year by the Board’s Ethics Office to the independent Office of Inspector General for the Board of Governors of the Federal Reserve System,” Croston said in the disclosure.
Kugler’s disclosure, which contains her own interpretation of her financial records and has not been certified by the Fed, stated that “certain trading activity was carried out by Dr Kugler’s spouse, without Dr Kugler’s knowledge, and she affirms that her spouse did not intend to violate any rules or policies”.
The Fed’s internal rules also cover senior officials’ spouses. Discrepancies involving financial transactions by Kugler’s husband had previously come to light.
Kugler’s surprise resignation came at a precarious time for the US central bank, which has faced a barrage of attacks from the Trump administration over rate-setters’ refusal to back interest rate cuts.
She had been expected to remain on the Fed board until her term ended in January. Her abrupt resignation paved the way for Donald Trump to nominate Stephen Miran to temporarily fill her seat on the board.
Kugler did not attend a policy vote immediately before her resignation in late July. Fed officials said that before the meeting she had requested a waiver of the FOMC trading policies in order to address earlier transactions that had breached the Fed’s rules.
The matter was discussed with Fed chair Jay Powell and the waiver was refused. Kugler did not attend the July meeting, reportedly for personal reasons. She resigned days later.
Kugler did not immediately respond to a request for comment.
The Fed tightened up its ethics rules after scandals involving then-vice chair Richard Clarida and Federal Reserve Bank presidents Eric Rosengren and Robert Kaplan which emerged in 2021.
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(Bloomberg) — As tech companies gear up to borrow hundreds of billions of dollars to fuel investments in artificial intelligence, lenders and investors are increasingly looking to protect themselves against it all going wrong.
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Banks and money managers are trading more derivatives that offer payouts if individual tech companies, known as hyperscalers, default on their debt. Demand for credit protection has more than doubled the cost of credit derivatives on Oracle Corp.’s bonds since September. Meanwhile, trading volume for credit default swaps tied to the company jumped to about $4.2 billion over the six weeks ended Nov. 7, according to Barclays Plc credit strategist Jigar Patel. That’s up from less than $200 million in the same period last year.
“We’re seeing renewed interest from clients in single-name CDS discussions, which had waned in recent years,” said John Servidea, global co-head of investment-grade finance at JPMorgan Chase & Co. “Hyperscalers are highly rated, but they’ve really grown as borrowers and people have more exposure, so naturally there is more client dialogue on hedging.”
A representative for Oracle declined to comment.
Trading activity is still small compared with the amount of debt that is expected to flood the market, traders said. But the growing demand for hedging is a sign of how tech companies are coming to dominate capital markets as they look to reshape the world economy with artificial intelligence.
Investment-grade companies could sell around $1.5 trillion of bonds in the coming years, according to JPMorgan strategists. A series of big bond sales tied to AI have hit the market in recent weeks, including Meta Platforms Inc. selling $30 billion of notes in late October, the biggest corporate issue of the year in the US, and Oracle offering $18 billion in September.
Tech companies, utilities, and other borrowers tied to AI are now the biggest part of the investment-grade market, a report last month from JPMorgan shows. They’ve displaced banks, which were long the biggest portion. Junk bonds and other major debt markets will see a wave of borrowing too, as firms build thousands of data centers globally.
Some of the biggest buyers of single-name credit default swaps on tech companies now are banks, which have seen their exposure to tech companies surge in recent months, traders said.