CEO 84-113 -- November 29, 1984
CONFLICT OF INTEREST
STATE BOARD OF ADMINISTRATION INVESTMENT ADVISORY COUNCIL MEMBER PRESIDENT OF FINANCIAL INSTITUTION ISSUING CERTIFICATES OF DEPOSIT PURCHASED BY BOARD
To: (Name withheld at the person's request.)
So long as the State Board of Administration votes to waive the conflict of interest as provided in Section 112.313(12), Florida Statutes, for Advisory Board Members, no prohibited conflict of interest would exist where a member of the Investment Advisory Council to the State Board of Administration is the president of a savings and loan association which has issued certificates of deposit purchased by the State Board. The disclosure required for waiver should be made on Commission on Ethics Form 4A, Disclosure of Business Transaction, Relationship, or Interest.
Does a prohibited conflict of interest exist where a member of the Investment Advisory Council to the State Board of Administration is the President of a financial institution which has issued certificates of deposit purchased by the State Board?
Your question is answered in the negative, so long as the terms of the exemption noted below are met.
In your letter of inquiry you advise that Mr. Gary R. Crum is a member of the Investment Advisory Council to the State Board of Administration. You also advise that he is the President of a savings and loan association which has issued certificates of deposit purchased by the State Board. The CD's typically have varied from $1 million to $5 million with terms from 90 to 180 days. The Board has outstanding CD investments with approximately ten other banks and savings and loan associations.
You also advise that the Council makes recommendations to the Board regarding investment policies, strategies, and procedures but does not make individual investment decisions. The decision regarding which CD to purchase and from what source is made on a competitive basis, with the most important criterion being the highest offered interest rate. Many banks and savings and loan associations are contacted before the Board invests in a particular CD.
The Code of Ethics for Public Officers and Employees prohibits a public officer from acting in a private capacity to sell any goods or services to his agency. Section 112.313(3), Florida Statutes (1983). In addition, Section 112.313(7)(a) prohibits a public officer from being employed by a business entity which is doing business with his agency. With respect to members of advisory boards, however, the Code of Ethics provides the following exemption:
EXEMPTION. -- The requirements of subsections (3) and (7) as they pertain to persons serving on advisory boards may be waived in a particular instance by the body which appointed the person to the advisory board, upon a full disclosure of the transaction or relationship to the appointing body prior to the waiver and an affirmative vote in favor of waiver by two-thirds vote of that body. In instances in which appointment to the advisory board is made by an individual, waiver may be effected, after public hearing, by a determination by the appointing person and full disclosure of the transaction or relationship by the appointee to the appointing person. [Section 112.313(12), Florida Statutes (1983).]
The Investment Advisory Council has been created
to review the investments made by the staff of the Board of Administration and to make recommendations to the Board regarding investment policy, strategy, and procedures. [Section 215.444(1), Florida Statutes (1983).]
The six members of the Council are appointed by the Board, subject to confirmation by the Senate.
In our view, the responsibilities of the Investment Advisory Council are advisory. Therefore, transactions between the subject Council member's savings and loan association and the State Board would not be prohibited by the Code of Ethics if a waiver is given by a two-thirds vote by the State Board, following disclosure of the transaction and the Council member's relationship to the Board. In making the required disclosure, Commission on Ethics Form 4A, Disclosure of Business Transaction, Relationship, or Interest, should be used.
Accordingly, we find that the subject Council member's savings and loan association may sell certificates of deposit to the State Board if the terms of the exemption noted above are met.