Advisory Opinion No. 2016-40 Rhode Island Ethics Commission Advisory Opinion No. 2016-40 Approved: December 6, 2016 Re: The Honorable Daniel Da Ponte QUESTION PRESENTED: The Petitioner, a legislator serving as a member of the Rhode Island Senate, a state elected position, requests an advisory opinion regarding whether the Code of Ethics prohibits him from acting as a financial advisor to employee/participants of the Rhode Island Public Transit Authority’s 457 deferred compensation plan administered by MassMutual. RESPONSE: It is the opinion of the Rhode Island Ethics Commission that the Petitioner, a legislator serving as a member of the Rhode Island Senate, a state elected position, is not prohibited by the Code of Ethics from acting as a financial advisor to employee/participants of the Rhode Island Public Transit Authority’s 457 deferred compensation plan administered by MassMutual. The Petitioner is an elected member of the Rhode Island Senate, representing the City of East Providence. In his private capacity, the Petitioner is the owner and President of Axis Advisors, LLC (“Axis”), an independent registered investment advisor based in East Providence. The Petitioner, through Axis, provides fee-only investment and financial planning advice to individuals, families and organizations. The Petitioner represents that he was approached by employees of the Rhode Island Public Transit Authority (“RIPTA”), where his father worked for many years prior to his retirement, seeking to utilize him as an investment advisor relative to RIPTA’s 457 deferred compensation plan (“457 plan”). The Petitioner notes that he would not enter into any contract or agreement with RIPTA or the State of Rhode Island. Rather, he states that in RIPTA’s 457 Plan, administered by MassMutual, participants are permitted to appoint their own financial advisor for their account. Plan participants make such a selection by executing a form provided by MassMutual (attached to the Petitioner’s request for an advisory opinion), which must also be signed by RIPTA as the plan sponsor. The selected financial advisor is not paid by RIPTA but by the participant through a debit from his or her MassMutual account which is then remitted to the investment advisor. The Petitioner is aware that the Code of Ethics contains certain provisions which restrict members of the General Assembly from engaging in new employment or consulting relationships with state agencies. Although he does not believe that the above-described services fall within these prohibitions, out of an abundance of caution and in the spirit of transparency, the Petitioner seeks guidance from the Ethics Commission. The Code of Ethics contains both statutory and regulatory revolving door provisions that are applicable to current and former members of the legislature. R.I. Gen. Laws § 36-14-5(n)(1) of the Code of Ethics provides: No state elected official, while holding state office and for a period of one (1) year after leaving state office, shall seek or accept employment with any other state agency, as defined in section 36-14-2(4), other than employment which was held at the time of the official’s election or at the time of enactment of this subsection, except as provided herein. The term “employment,” as used in section 5(n), includes “service as an independent contractor or consultant to the state or any state agency, whether as an individual or principal of an entity performing such service.” Commission Regulation 36-14-5017. While section 5(n) applies generally to all state elected officials, the Code of Ethics contains a more specific, regulatory prohibition that applies only to members of the General Assembly. Originally adopted in 1991 by the Ethics Commission, along with several other regulations aimed at strengthening the Code of Ethics, Commission Regulation 36-14-5007 (“Regulation 5007”) currently reads as follows: No member of the General Assembly shall seek or accept state employment, not held at the time of the member’s election, while serving in the General Assembly and for a period of one (1) year after leaving legislative office. For purposes of this regulation, “employment” shall include service as defined in R.I. Gen Laws § 36-14-2(4) and shall also include service as an independent contractor or consultant to the state or any state agency, whether as an individual or a principal of an entity performing such service. The Rhode Island Supreme Court issued a decision in 1993 specifically upholding the constitutionality of both section 5(n) and Regulation 5007. In re Advisory from the Governor, 633 A.2d 664 (R.I. 1993). In its decision, our Supreme Court recognized that “[t]he legislative aim of the revolving-door provisions is to ensure that public officials adhere to the highest standards of conduct, avoid the appearance of impropriety, and do not use their positions for private gain or advantage.” Id. at 671 (citing R.I. Const., art. 3, sec. 7). The Court further observed that “[t]he integrity of our government officials is quintessential to our system of representation. In general the purpose of revolving-door provisions is to prevent ‘government employees from unfairly profiting from or otherwise trading upon the contacts, associations and special knowledge that they acquired * * *.’” Id. (quoting Forti v. New York State Ethics Comm’n, 554 N.E.2d 876, 878 (1990)). The Court concluded that “the revolving-door legislation is an effective device by which the public trust may be enhanced.” Id. In the years following our Supreme Court’s 1993 decision, the Ethics Commission has several times applied section 5(n) and Regulation 5007 to legislators. For example, in Advisory Opinion 2006-25, it was determined that Regulation 5007 would apply to prohibit a member of the House of Representatives from providing insurance brokerage services (a consulting relationship) to a quasi-public state agency. In Advisory Opinion 2001-6, the Ethics Commission opined that both section 5(n) and Regulation 5007 prohibited a member of the House of Representatives from accepting work as a part-time instructor at Rhode Island College. In both of these instances, it was clear that the legislator sought to become engaged by a state agency as a consultant or employee and to be paid by the agency for such services. This does not appear to be the case in the facts presented by the instant Petitioner. A fact pattern that is more analogous to the present case is found at Advisory Opinion 2009-44. There, a member of the Rhode Island Senate asked whether, in his private capacity as a mediator, he could be approved by the Rhode Island Division of Purchasing to be included in a master price agreement and remain on the list of qualified providers of mediation services. Although state agencies regularly utilized mediators included in the list, the Senator represented that he would not contract with or provide any mediation services to state agencies. Instead, he represented that municipalities and private entities also utilized the state’s master price agreement list to find qualified mediators, and he would only enter into contracts to provide services to such non-state entities. The Ethics Commission considered the application of section 5(n) and Regulation 5007 and determined that, under these circumstances, there was no prohibition because the petitioner would only contract with non-state entities and would not become a state employee, consultant or independent contractor. This same reasoning applies to the instant facts. Here, the only role of the state agency, RIPTA, is to approve its employee/participant’s selection of an investment advisor. This is similar to Advisory Opinion 2009-44, where the Division of Purchasing’s only role was to determine that a mediator was qualified to be on its master price agreement list. Furthermore, the instant Petitioner’s contract and fiduciary duties are to his client, the employee/participant, and not to RIPTA. The Petitioner does not receive any compensation from RIPTA but, instead, is paid by MassMutual from funds debited from his client’s accounts. Under these circumstances, the Petitioner would not be considered an employee, consultant or independent contractor of RIPTA or the State of Rhode Island. Accordingly, it is the opinion of the Rhode Island Ethics Commission that the Petitioner is not prohibited by the Code of Ethics from acting as a financial advisor to employee/participants of the RIPTA’s 457 deferred compensation plan administered by MassMutual. This Advisory Opinion is strictly limited to the facts stated herein and relates only to the application of the Rhode Island Code of Ethics. Under the Code of Ethics, advisory opinions are based on the representations made by, or on behalf of, a public official or employee and are not adversarial or investigative proceedings. Finally, this Commission offers no opinion on the effect that any other statute, regulation, ordinance, constitutional provision, charter provision, or canon of professional ethics may have on this situation. Code Citations: § 36-14-5(n) Commission Regulation 36-14-5007 Commission Regulation 36-14-5017 Other Authority Cited: In re Advisory from the Governor, 633 A.2d 664 (R.I. 1993). Related Advisory Opinions: A.O. 2010-54 A.O. 2009-44 A.O. 2006-25 A.O. 2001-6 A.O. 93-53 Keywords: Revolving Door Prospective Employment