May a lawyer hold an interest in a corporation he sets up to act as fiscal agent for cities on bond issues if he also represents municipalities that hire the corporation?

Plain-English summary

A member asked whether he could set up a corporation to act as fiscal agent for cities in arranging the purchase and sale of bonds to the public, with him holding a small interest in the corporation.

The committee concluded that such an interest would be improper if the member was also going to represent municipalities employing the corporation's services. It reasoned that it would be almost impossible to avoid the suggestion, once the corporate fiscal agent was employed on a particular bond issue, that its stockholder be employed to handle the legal matters incident to validation; the effect would be for the lawyer, through his corporate alter ego, to solicit business. The committee added that differences not infrequently arise over a fiscal agent's performance of its obligations to municipalities, and the lawyer should not place himself in the position of representing a municipality while financially interested in a corporation whose interests are possibly adverse. It therefore suggested that he not hold any interest in such a corporation.

Currency note

This opinion was issued in 1961, before The Florida Bar's adoption of the 2006 revisions to the Rules of Professional Conduct. The opinion applied former Canons 6 and 27 of the Canons of Professional Ethics; conflicts of interest and solicitation of legal work are now addressed by Rules 4-1.7 and 4-7.18 of the Rules Regulating The Florida Bar (Model Rules 1.7 and 7.3). Treat this page as historical context, not current guidance. Verify against the current rules before relying on any specific requirement mentioned here.

Common questions

Q: Could the lawyer form the fiscal-agent corporation at all?

A: Yes. The committee did not object to setting up the corporation itself; its concern was the lawyer holding an interest in it while also representing client municipalities.

Q: Why was holding an interest a problem?

A: The committee identified two concerns: the corporation would tend to feed legal work to its lawyer-stockholder (soliciting business through the corporate alter ego), and the lawyer would have a financial interest in an entity whose interests could become adverse to a client municipality.

Background and rules framework

The opinion applied former Canons 6 and 27 of the Canons of Professional Ethics. Conflicts of interest are now addressed by Rule 4-1.7, and solicitation of legal business by Rule 4-7.18, of the Rules Regulating The Florida Bar (Model Rules 1.7 and 7.3). The committee's analysis turned on the dual risk of self-solicitation through the corporation and of a financial interest adverse to a represented municipality.

Citations and references

Rules of Professional Conduct:

• Canon 6 [Canons of Professional Ethics; see current Rule 4-1.7]
• Canon 27 [Canons of Professional Ethics; see current Rule 4-7.18]

See also

• FL Bar Ethics Op. 63-37: Condominium Consulting Corporation
• FL Bar Ethics Op. 64-29: Employment by a Broker's Tax Advisory Company
• FL Bar Ethics Op. 62-17: Lawyer Holding a Non-Active Real Estate Broker License

Source

• Landing page: https://www.floridabar.org/etopinions/etopinion-61-13/
• Original PDF: https://www-media.floridabar.org/uploads/2017/04/FL-Bar-Ethics-Op-61-13-1.pdf

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

FLORIDA BAR ETHICS OPINION
OPINION 61-13
September 8, 1961
Advisory ethics opinions are not binding.
A lawyer may set up a corporation to act as fiscal agent for cities in arranging for the purchase and sale of bonds, but he may not hold any interest in such corporation if he also represents municipalities that employ the corporation.
Canons: 6, 27
Chairman Holcomb stated the opinion of the committee:
A member of The Florida Bar has posed the question as to whether he might set up a corporation to act as fiscal agent for cities in arranging for the purchase and sale of bonds to the public with him holding a small interest in the corporation.
We feel that such an interest would be improper if the member is also going to represent municipalities employing the services of the corporation, and feel that it would be almost impossible to avoid a suggestion, when the corporate fiscal agent has been employed with respect to a particular bond issue, that its stockholder be employed to handle the legal matters incident to the validation. The effect of this would be for the lawyer through his corporate alter ego to solicit business. Also, not infrequently differences arise with respect to the proper performance by fiscal agents of their obligations to the municipalities, and the lawyer should not place himself in the position of representing a municipality while he is financially interested in a corporation whose interests are possibly adverse.
We would, therefore, suggest that he not hold any interest in such a corporation.