FOMC Transcripts Show Insider Trading Concerns


FOMC transcripts released recently showed that the Federal Reserve expressed concerns about a 2010 leak of policy discussions, fearing that this could result in a loss of credibility and expose the central bank to potential insider trading charges.

Background of the Story

In 2010 Reuters reported that a research firm headed by former Federal Reserve Governor Larry Meyer called Macroeconomic Advisers sent a note to clients on Aug. 19, 2010 with a detailed report and analysis of the FOMC’s policy-setting meeting held nine days earlier.  This note was sent to clients 12 days ahead of the public release of the August FOMC meeting minutes.

According to transcripts of subsequent FOMC meetings, Fed Chairman Ben Bernanke was concerned about the consequence of what Reuters reported.  “It is obviously a serious problem and one that could even have legal consequences,” Bernanke told the FOMC committee.

Dallas Fed President Richard Fisher was more angered by the leak, saying “If we can’t solve this, then I think we should seriously look at some kind of firm legal strictures that are equivalent to the prosecution of insider trading.”

The source of the information revealed in Macroeconomic Advisers’ research report has never been determined.  However, it raises serious questions for the Fed over research firms’ access to policy makers.

Other Fed Leaks

Unfortunately for the Fed, the 2010 leak of the FOMC’s minutes hasn’t been the only time that policymaker’s deliberations have been broadcast to professional investors ahead of the public release of the minutes of their meetings.

Last year various news agencies reported that market-moving details from the FOMC’s September 13, 2012 meeting were potentially leaked to policy research firm, Medley Global Advisors, and included in a research report sent to buy-side clients on October 3rd 2012 – one day before the Fed publicly released minutes of the meeting.  Congress is currently probing the Fed over a 2012 leak.

Our Take

As we have said before, insider trading law is not very clear in the policy research space as there is little to no precedence in this area.  In addition, information has traditionally been swapped freely between various constituents in Washington as part of the political process.  Consequently few in Washington think that leaks regarding policy discussions could be considered illicit insider information.

Thus far, there is no indication that Macroeconomic Advisers did anything wrong or illegal in gathering information about Fed deliberations and distributing this information to clients in their research reports.

However, this does eliminate the problem for the Federal Reserve as these leaks look like they are benefiting one small group of connected investors over the general public.  As a result, repeated incidents like these are likely to prompt increased political pressure for Fed policymakers to tighten up their seemingly lax compliance.



About Author

Mike Mayhew is one of the leading experts on the investment research industry. In addition to founding Integrity Research, Mike is on the board of directors of Investorside Research Association, the non-profit trade association for the independent research industry, and a frequent speaker on research industry trends and developments. Mike has over thirty years of research industry experience. Email:

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