Could Morgan Stanley sell public bonds if one of its advisers became a South Carolina House member?

Plain-English summary

A legislator asked whether Morgan Stanley could still bid on, sell, manage, and advise on public bonds if one of its financial advisers won a South Carolina House seat. The AG found no absolute prohibition on the firm's proposed activities under the 2004 State Ethics Act. Its conclusion depended on the elected adviser observing restrictions on using office for financial gain, participating in matters that substantially affected his or the firm's financial interests, using confidential information, receiving outside compensation for official duties, and holding an interest in a contract whose award he officially handled.

The AG deferred to the House Legislative Ethics Committee on the propriety of a House member's particular activities. It addressed a possible future election, not a finding that the candidate had won or violated any rule.

Currency note

This opinion was issued in 2004. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Q: Did the adviser’s election automatically bar the firm from bidding on public bonds?
A: The AG said no absolute bar appeared in the ethics law it reviewed, provided the elected adviser complied with the relevant restrictions.

Q: What if a House decision substantially affected the adviser or firm financially?
A: The opinion described a written conflict statement to the House presiding officer and excusal from votes, deliberations, and other action on the affected matter.

Q: Could the adviser take part in awarding a state or local contract in which he had an economic interest?
A: The AG cited a rule barring that situation if his official function involved preparing specifications, accepting bids, awarding the contract, or another award-related act.

Q: Who would supervise the member’s ethics compliance?
A: The AG identified the House Legislative Ethics Committee as the appropriate supervisory office and deferred to its findings.

Background and statutory framework

Section 8-13-700 addressed use of office for financial gain and conflicts affecting official decisions. Section 8-13-725 addressed financially beneficial use of confidential information, and Section 8-13-775 addressed economic interests in contracts linked to the member's official functions. The opinion used these restrictions to explain why there was no categorical ban on the firm's business.

Citations

• Section 8-13-700
• Section 8-13-725
• Section 8-13-775

Source

• Landing page: https://www.scag.gov/opinions/opinions-archive/february-19-2004/
• Original PDF: https://www.scag.gov/wp-content/uploads/2011/03/04feb19cotty.pdf

Original opinion text

The State of South Carolina

OFFICE OF THE ATTORNEY GENERAL
HENRY McMAsrER
ATTORNEY GEi'IERAL

February 19, 2004

The Honorable Bill Cotty
Member, House of Representatives
522-A Blatt Building
Columbia, South Carolina 29211

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Dear Representative Cotty:

In a letter to this office you indicated that Mr. Donald Spivey, a licensed financial adviser for Morgan Stanley, is interested in running for election to the State House of Representatives. Referencing such, you have raised the following questions:

1. Can Morgan Stanley continue to bid on government bonds (school, state, etc.)?
2. Can Morgan Stanley continue to distribute, sell and manage the sale of such
   bonds?
3. Can Morgan Stanley continue to receive advisor fees for consulting with and for
   public entities like city and county government, state agencies, or school boards? Of course, there is no prohibition upon the individual's running for office. I assume you are raising the questions based upon the assumption that Mr. Spivey would be elected to the House. Based upon a review of the State Ethics Act, codified at S. C. Code Ann. Sections 8-13-100 et seq. (Supp. 2003), it appears that there would be no absolute prohibitions to the referenced activities involving Morgan Stanley if Mr. Spivey was elected to the House. However, certain provisions ofthe Ethics Act must be followed to avoid conflicts therewith. Moreover, as you know, the House ofRepresentatives Legislative Ethics Committee is the designated appropriate supervisory office under the Ethics Act for State representatives. See Sections 8-1 3-510 et seq. As a result, that Committee is charged with supervisory enforcement of the Act and we would defer to its findings on the propriety of the activities of House members. However, to be of assistance, I would refer you to particular provisions of the Ethics Act which may be applicable to the questions raised. I am also enclosing copies of these provisions for Mr. Spivey's complete review.

In particular, Mr. Spivey would have to avoid the use of his official position or office to obtain financial gain for himself or the business with which he was associated. See Section 8-13-700. If Mr. Spivey, as a House member, would be faced with a situation, in the discharge of his official duties, which would require him to take action or make a decision which would

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The Honorable Bill Cotty
Page2
February 19, 2 004

substantially affect his personal financial interests or those of Morgan Stanley, he would have to comply with the provisions of Section 8-13-700. In sum, these provisions require the preparation of a written statement describing the matter requiring action, and the nature of the potential conflict of interest with respect to that action. The statement would be delivered to the presiding officer of the House, and he then would be excused from votes, deliberations, and other actions on the matter on which a potential conflict of interest exists.

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Mr. Spivey should not solicit or receive any compensation in addition to that received by him in his official capacity for purpose of influence or for advice or assistance which would be included in the normal course of the representative's public duties. See Sections 8-13-705 and 8-13-720. Furthermore, pursuant to the provisions of Section 8-13-725, Mr. Spivey could not use or disclose any confidential information gained by him in the course ofhis official activities in a way that would result in financial gain for himself or for Morgan Stanley. Pursuant to Section 8-13-775, Mr. Spivey as a House member could not have an economic interest in a contract with the State or its political subdivisions ifhe was authorized to perform an official function relating to the contract. As set forth by such provision, "(o)fficial function means writing or preparing the contract specifications, acceptance of bids, award of the contract, or other action on the preparation or award of the contract." As long as Mr. Spivey would comply with the restrictions set forth in the State Ethics Act, it appears that Morgan Stanley could continue to conduct business in the manner suggested by his questions.

If there is anything further, please advise.
Sincerely,

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Charles H. Richardson
Senior Assistant Attorney General
Enclosures
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Mr. Don Spivey

REVIEWED AND APPROVED BY:

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Robert D. Cook
Assistant Deputy Attorney General