HomeMy WebLinkAbout99-1021 ConfidentialOPINION OF THE COMMISSION
Before: Austin M. Lee, Vice Chair
Julius Uehlein
John J. Bolger
Frank M. Brown
Susan Mosites Bicket
DATE DECIDED: 11/22/99
DATE MAILED: 12/7/99
99 -1021
Re: Lobbying, Principal, Direct Communication, Indirect Communication, State Official,
Legislative Action, Administrative Action, Broker - dealer, Firm, Consultant, Municipal
Securities, Underwriting, Issuer, Registration.
This Opinion is issued in response to your confidential advisory request received on
October 14, 1999.
I. ISSUE: Whether a regional broker - dealer firm would be subject to the
registration and reporting requirements of the Lobbying Disclosure Act as the result of its
retention of a consultant solely for the purpose of obtaining or retaining municipal
securities business in Pennsylvania, specifically through the consultant's assistance in
identifying and producing potential opportunities to provide municipal underwriting and
financial advisory services to this Commonwealth's issuing state and local agencies and
authorities.
II. FACTUAL BASIS FOR DETERMINATION: Firm A (Firm) is a regional broker -
dealer which mainly operates in Area B of the United States. Besides brokerage services,
the Firm offers a variety of other financial services including municipal securities
underwriting and financial advisory services to state and local government agencies and
authorities.
While seeking to obtain and retain municipal securities underwriting and financial
advisory business, the Firm may, from time to time, retain the services of municipal
consultants. Pursuant to Municipal Securities Rulemaking Board (MSRB) Rule G -38, a
photocopy of which has been submitted, before a consultant may communicate with an
issuer of municipal securities on behalf of a municipal securities dealer, the municipal
securities dealer that wishes to retain the consultant must evidence the consulting
arrangement in a writing setting forth, among other things, the consultant's role and
compensation arrangement.
The Firm has recently entered into a consulting agreement pursuant to MSRB Rule
Confidential Opinion, 99 -1021
December 7, 1999
Page 2
G -38. Under the agreement, the consultant must assist the Firm in identifying and
producing potential opportunities to provide municipal underwriting and financial advisory
services to the Commonwealth's issuing state and local agencies and authorities. The
consultant is expected to perform these services by providing the Firm with information
about upcoming issuances of municipal securities and by directly or indirectly contacting
officials of issuing agencies and authorities in Pennsylvania for the purpose of introducing
the Firm, its public finance personnel, and the municipal securities underwriting and
financial advisory services that the Firm offers.
You ask whether the above activities would require the Firm to register as a
principal under the Lobbying Disclosure Act (Act).
You argue that before the Firm could be required to register as a principal under the
Act, the Firm's consultant would have to directly or indirectly communicate with a state
official for the purpose of influencing "legislative action" or "administrative action" as those
terms are defined in the Act.
After comparing Pennsylvania's Act to the regulation of lobbying in other states,
you opine that the Pennsylvania Act does not require the registration of those engaged in
efforts to influence the award of contracts or other financial arrangements involving state
agencies and authorities.
You contend that none of the services to be performed by the Firm's consultant
under the consulting agreement would constitute an effort to influence "legislative action"
or "administrative action" as those terms are defined in the Act. You emphasize that the
Consultant has not been retained to contact legislators, their staff, or other state
employees regarding pending or proposed legislation or appointments or to otherwise seek
to influence such activities. Further, the Consultant has not been retained to contact
employees of state agencies, boards, commissions, authorities, or departments regarding
pending or proposed regulations, orders or appointments. Rather, the Consultant has
been retained specifically to provide the types of services that would influence the award
of contracts and other financial arrangements. You therefore conclude that neither the
Firm nor its consultant should be subject to the registration requirements of the Act.
By letter dated November 2, 1999, you were notified of the date, time, and location
of the public meeting at which your request for an Opinion was to be considered.
III. DISCUSSION: It is initially noted that pursuant to Section 1308(c) of the Act in
conjunction with Sections 1107(10) and 1107(11) of the Ethics Act, 65 Pa.C.S.
§ §1107(10), (11), advisories are issued to the requestor based upon the facts which the
requestor has submitted. The Commission does not engage in an independent
investigation of the facts, nor does it speculate as to facts which have not been submitted,
in issuing advisories. It is the burden of the requestor to truthfully disclose all of the
material facts relevant to the inquiry. An advisory only affords a defense to the extent the
requestor has truthfully disclosed all of the material facts.
In order to decide the issues which you have raised, this Commission must review
the pertinent definitions and substantive provisions of the Act and related Regulations.
Section 1303 of the Act defines "lobbying" as follows:
"Lobbying." An effort to influence legislative action or
administrative action. The term includes:
(1) providing any gift, entertainment, meal, transportation or lodging
to a State official or employee for the purpose of advancing the
interest of the lobbyist or principal; and
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December 7, 1999
Page 3
(2) direct or indirect communication.
65 Pa.C.S. §1303.
The key terms "legislative action," "administrative action," "direct communication,"
and "indirect communication" that are within the definition of "lobbying" are themselves
defined as follows:
"Legislative action." An action taken by a State official or
employee involving the preparation, research, drafting, introduction,
consideration, modification, amendment, approval, passage,
enactment, tabling, postponement, defeat or rejection of legislation;
legislative motions; overriding or sustaining a veto by the Governor;
or confirmation of appointments by the Governor or of appointments
to public boards or commissions by a member of the General
Assembly.
"Administrative action." Any of the following:
(1) An agency's:
(i) proposal, consideration, promulgation or rescission
of a regulation;
(ii) development or modification of a guideline or a
statement of policy; or
(iii) approval or rejection of a regulation.
(2) The review, revision, approval or disapproval of a regulation
under the act of June 25, 1982 (P.L.633, No.181), known as the
Regulatory Review Act.
(3) The Governor's approval or veto of legislation.
(4) The nomination or appointment of an individual as an officer or
employee of the Commonwealth.
(5) The proposal, consideration, promulgation or rescission of an
executive order.
"Direct communication." An effort, whether written, oral or by any
other medium, made by a lobbyist or principal, directed to a State
official or employee, the purpose or foreseeable effect of which is to
influence legislative action or administrative action.
"Indirect communication." An effort, whether written, oral
or by any other medium, to encourage others, including the
general public, to take action, the purpose or foreseeable
effect of which is to directly influence legislative action or
administrative action. The term includes letter- writing
campaigns, mailings, telephone banks, print and electronic
media advertising, billboards, publications and educational
campaigns on public issues. The term does not include
regularly published periodic newsletters primarily designed for
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December 7, 1999
Page 4
65 Pa.C.S. §1303.
The terms "principal" and "lobbyist" are defined in the statute as follows:
"Principal." Any individual, firm, association, corporation,
partnership, business trust or business entity:
(1) on whose behalf a lobbyist influences or attempts
to influence an administrative action or a legislative
action; or
(2) that engages in lobbying on the principal's own
behalf.
Id.
and distributed to members of a bona fide association or
charitable or fraternal nonprofit corporation.
"Lobbyist." Any individual, firm, association, corporation,
partnership, business trust or business entity that engages in
lobbying on behalf of a principal for economic consideration.
The term includes an attorney who engages in lobbying.
The term "Agency" is defined under the Act as: "A State agency, board, commission,
authority or department. Id.
As for the substantive provisions to be reviewed, Section 1305(b)(7) of the Act
provides:
§1305. Reporting
(b) Content. --
(7) A registered principal or registered lobbyist that attempts
to influence an agency's preparing, bidding, entering into or
approving a contract shall ensure that the related expenses
are included under paragraph (2).
65 Pa.C.S. §1305(b)(7).
In applying the above provisions of law to the facts which you have submitted, we
must decide whether an effort or attempt to influence the award of a contract or financial
arrangement with an "Agency " - -in and of itself - -would constitute lobbying.
Through a straightforward application of the pertinent definitions quoted above, we
determine, and we therefore hold, that an effort or attempt to influence the award of a
contract or financial arrangement with an "Agency" would not in and of itself constitute
"lobbying," because such would neither constitute an effort to influence "legislative action"
nor an effort to influence "administrative action" as those terms are defined by the Act.
Confidential Opinion, 99 -1021
December 7, 1999
Page 5
Under the facts which you have submitted, and conditioned upon the assumption
that the Firm does not engage in any other activities which would bring it within the
definition of "principal" or "lobbyist" as set forth above, the Firm would not be subject to the
registration and reporting requirements of the Act. We do not address your inquiry as to
whether the Firm's consultant would have to register, because your advisory request letter
does not establish that you have the requisite standing to submit your inquiry on behalf of
the consultant. See, 51 Pa. Code §39.2.
In light of our holding above, we believe it is necessary to further comment upon
Section 1305(b)(7) of the Act. The reporting requirements of Section 1305(b)(7) of the Act
only apply to an individual or entity which is otherwise required to register under the Act.
Such a registrant must ensure that expenses related to attempting to influence an agency's
preparing, bidding, entering into or approving a contract are included within the four totals
submitted in the expense reports pursuant to Section 1305(b)(2).
We further note that the Act has no application as to local governmental or federal
contracting as per the definition of "Agency" quoted above.
The propriety of the proposed conduct has only been addressed under the Act and
derivatively the Ethics Act to the extent applicable; the applicability of any other statute,
code, ordinance, regulation or other code of conduct has not been considered in that they
do not involve an interpretation of the Act.
IV. CONCLUSION: An effort or attempt to influence the award of a contract or
financial arrangement with an "Agency" as that term is defined in the Lobbying Disclosure
Act would not - -in and of itself -- constitute "lobbying" under the Act. A regional broker - dealer
firm would therefore not be subject to the registration and reporting requirements of the
Lobbying Disclosure Act as the result of its retention of a consultant solely for the purpose
of obtaining or retaining municipal securities business in Pennsylvania, specifically through
the consultant's assistance in identifying and producing potential opportunities to provide
municipal underwriting and financial advisory services to this Commonwealth's issuing
state and local agencies and authorities. This ruling is conditioned upon the assumption
that the Firm would not engage in other activities which would bring it within the definition
of "principal" or "lobbyist" as set forth in the Act. The reporting requirements of Section
1305(b)(7) of the Act only apply to an individual or entity which is otherwise required to
register under the Act.
Pursuant to Section 1308 of the Act, a requestor who truthfully discloses all material
facts in a request for an advisory and who acts in good faith based upon a written opinion
of the Commission issued to the requestor shall not be held liable for a violation of the Act.
This Opinion is a public record and will be made available as such.
Finally, a party may request this Commission to reconsider its Opinion. The
reconsideration request must be received at this Commission within thirty days of the
mailing date of this Opinion. The party requesting reconsideration must include a detailed
explanation of the reasons as to why reconsideration should be granted in conformity with
51 Pa. Code §39.1.
By the Commission,
Austin M. Lee
Vice Chair