Florida Senate - 2016                               CS for SB 86
       
       
        
       By the Committee on Governmental Oversight and Accountability;
       and Senators Negron and Gaetz
       
       
       
       
       585-00723-16                                            201686c1
    1                        A bill to be entitled                      
    2         An act relating to scrutinized companies; creating s.
    3         215.4725, F.S.; providing definitions; requiring the
    4         State Board of Administration to identify all
    5         companies that are boycotting Israel or are engaged in
    6         a boycott of Israel in which the public fund owns
    7         direct or indirect holdings in; requiring the public
    8         fund to create and maintain a scrutinized companies
    9         list that names all such companies; requiring the
   10         public fund to provide written notice to a company
   11         that is identified as a scrutinized company;
   12         specifying contents of the notice; specifying
   13         circumstances under which a company may be removed
   14         from the list; prohibiting the acquisition of certain
   15         securities of scrutinized companies; prescribing
   16         reporting requirements; requiring certain information
   17         to be included in the investment policy statement;
   18         authorizing the public fund to invest in certain
   19         scrutinized companies if the value of all assets under
   20         management by the public fund becomes equal to or less
   21         than a specified amount; requiring the public fund to
   22         provide a written report to the Board of Trustees of
   23         the state board and the Legislature before such
   24         investment occurs; specifying required contents of the
   25         report; reenacting and amending s. 287.135, F.S.,
   26         relating to the prohibition against contracting with
   27         scrutinized companies; prohibiting a state agency or
   28         local governmental entity from contracting for goods
   29         and services that exceed a specified amount if the
   30         company has been placed on the Scrutinized Companies
   31         that Boycott Israel List; requiring inclusion of a
   32         contract provision that authorizes termination of a
   33         contract if a company has been placed on the
   34         Scrutinized Companies that Boycott Israel List;
   35         providing exceptions; requiring certification upon
   36         submission of a bid or proposal for a contract, or
   37         before a company enters into or renews a contract,
   38         with an agency or governmental entity that the
   39         company; providing procedures upon determination that
   40         a company has submitted a false certification;
   41         providing for civil action; providing penalties;
   42         providing attorney fees and costs; providing a statute
   43         of repose; prohibiting a private right of action;
   44         providing for preemption of conflicting ordinances and
   45         rules; revising provisions relating to federal
   46         preemption; providing effective dates.
   47          
   48  Be It Enacted by the Legislature of the State of Florida:
   49  
   50         Section 1. Section 215.4725, Florida Statutes, is created
   51  to read:
   52         215.4725 Prohibited investments by the State Board of
   53  Administration; companies that boycott Israel.—
   54         (1) DEFINITIONS.—As used in this section, the term:
   55         (a) “Boycott Israel” or “boycott of Israel means refusing
   56  to deal, terminating business activities, or taking other
   57  actions that are intended to penalize, inflict economic harm, or
   58  otherwise limit commercial relations with Israel, or persons or
   59  entities doing business in Israel or in Israeli-controlled
   60  territories for reasons other than a business, investment, or
   61  commercial reason. The term does not apply to decisions made
   62  during the course of a company’s ordinary business or for other
   63  business, investment or commercial reasons. A statement by a
   64  company that it is participating in a boycott of Israel, or that
   65  it has initiated a boycott in response to a request for a
   66  boycott of Israel or in compliance with, or in furtherance of,
   67  calls for a boycott of Israel, may be considered by the State
   68  Board of Administration to be evidence that a company is
   69  participating in a boycott of Israel.
   70         (b) “Company” means a sole proprietorship, organization,
   71  association, corporation, partnership, joint venture, limited
   72  partnership, limited liability partnership, limited liability
   73  company, or other entity or business association, including all
   74  wholly owned subsidiaries, majority-owned subsidiaries, and
   75  parent companies, that exists for the purpose of making profit.
   76         (c) “Direct holdings” in a company means all securities of
   77  that company that are held directly by the public fund or in an
   78  account or fund in which the public fund owns all shares or
   79  interests.
   80         (d) “Indirect holdings” in a company means all securities
   81  of that company that are held in a commingled fund or other
   82  collective investment, such as a mutual fund, in which the
   83  public fund owns shares or interests, together with other
   84  investors not subject to this section or which are held in an
   85  index fund.
   86         (e)“Public fund” means all funds, assets, trustee, and
   87  other designates under the State Board of Administration
   88  pursuant to part I of chapter 121.
   89         (f) “Scrutinized companies” means companies that boycott
   90  Israel or engage in a boycott of Israel.
   91         (2) IDENTIFICATION OF COMPANIES.—
   92         (a) By August 1, 2016, the public fund shall make its best
   93  efforts to identify all scrutinized companies in which the
   94  public fund has direct or indirect holdings or could possibly
   95  have such holdings in the future. Such efforts include:
   96         1. To the extent that the public fund finds it appropriate,
   97  reviewing and relying on publicly available information
   98  regarding companies that boycott Israel, including information
   99  provided by nonprofit organizations, research firms,
  100  international organizations, and government entities;
  101         2. Contacting asset managers contracted by the public fund
  102  for information regarding companies that boycott Israel; or
  103         3. Contacting other institutional investors that prohibit
  104  such investments or that have engaged with companies that
  105  boycott Israel.
  106         (b) By the first meeting of the public fund following the
  107  identification of scrutinized companies in accordance with
  108  paragraph (a), the public fund shall compile and make available
  109  the “Scrutinized Companies that Boycott Israel List.
  110         (c) The public fund shall update and make publicly
  111  available quarterly the Scrutinized Companies that Boycott
  112  Israel List based on evolving information from, among other
  113  sources, those listed in paragraph (a).
  114         (3) REQUIRED ACTIONS.—The public fund shall adhere to the
  115  following procedures for assembling companies on the Scrutinized
  116  Companies that Boycott Israel List.
  117         (a) Engagement.
  118         1. The public fund shall immediately determine the
  119  companies on the Scrutinized Companies that Boycott Israel List
  120  in which the public fund owns direct or indirect holdings.
  121         2. For each company newly identified under this paragraph
  122  after August 1, 2016, the public fund shall send a written
  123  notice informing the company of its scrutinized company status
  124  and that it may become subject to investment prohibition by the
  125  public fund. The notice must inform the company of the
  126  opportunity to clarify its activities regarding the boycott of
  127  Israel and encourage the company to cease the boycott of Israel
  128  within 90 days in order to avoid qualifying for investment
  129  prohibition.
  130         3. If, within 90 days after the public fund’s first
  131  engagement with a company pursuant to this paragraph, the
  132  company ceases a boycott of Israel, the company shall be removed
  133  from the Scrutinized Companies that Boycott Israel List, and the
  134  provisions of this section shall cease to apply to that company
  135  unless that company resumes a boycott of Israel.
  136         (b) Prohibition.—The public fund may not acquire securities
  137  of companies on the Scrutinized Companies that Boycott Israel
  138  List, except as provided in paragraph (c) and subsection (6).
  139         (c) Excluded securities.—Notwithstanding the provisions of
  140  this section, paragraph (b) does not apply to:
  141         1. Indirect holdings. However, the public fund shall submit
  142  letters to the managers of such investment funds containing
  143  companies that boycott Israel requesting that they consider
  144  removing such companies from the fund or create a similar fund
  145  having indirect holdings devoid of such companies. If the
  146  manager creates a similar fund, the public fund shall replace
  147  all applicable investments with investments in the similar fund
  148  in an expedited timeframe consistent with prudent investing
  149  standards. For the purposes of this section, an alternative
  150  investment, as the term is defined in s. 215.4401, and
  151  securities that are not publicly traded are deemed to be
  152  indirect holdings.
  153         2. Exchange-traded funds.
  154         (4) REPORTING.—
  155         (a) The public fund shall file a report with each member of
  156  the Board of Trustees of the State Board of Administration, the
  157  President of the Senate, and the Speaker of the House of
  158  Representatives which includes the Scrutinized Companies that
  159  Boycott Israel List within 30 days after the list is created.
  160  This report shall be made available to the public.
  161         (b) At each quarterly meeting of the Board of Trustees
  162  thereafter, the public fund shall file a report, which shall be
  163  made available to the public and to each member of the Board of
  164  Trustees of the State Board of Administration, the President of
  165  the Senate, and the Speaker of the House of Representatives,
  166  which includes:
  167         1. A summary of correspondence with companies engaged by
  168  the public fund under subparagraph (3)(a)2.;
  169         2. All prohibited investments under paragraph (3)(b);
  170         3. Any progress made under paragraph (3)(c); and
  171         4. A list of all publicly traded securities held directly
  172  by the public fund.
  173         (5) INVESTMENT POLICY STATEMENT OBLIGATIONS.—The public
  174  fund’s actions taken in compliance with this section, including
  175  all good faith determinations regarding companies as required by
  176  this act, shall be adopted and incorporated into the public
  177  fund’s investment policy statement as provided in s. 215.475.
  178         (6) INVESTMENT IN CERTAIN SCRUTINIZED COMPANIES.
  179  Notwithstanding any other provision of this section, the public
  180  fund may invest in certain scrutinized companies if clear and
  181  convincing evidence shows that the value of all assets under
  182  management by the public fund becomes equal to or less than
  183  99.50 percent, or 50 basis points, of the hypothetical value of
  184  all assets under management by the public fund assuming no
  185  investment prohibition for any company had occurred under
  186  paragraph (3)(b). Cessation of the investment prohibition and
  187  any new investment in a scrutinized company is limited to the
  188  minimum steps necessary to avoid the contingency described in
  189  this subsection. For any cessation of the investment prohibition
  190  and new investment authorized by this subsection, the public
  191  fund shall provide a written report to each member of the Board
  192  of Trustees of the State Board of Administration, the President
  193  of the Senate, and the Speaker of the House of Representatives
  194  in advance of the new investment, updated semiannually
  195  thereafter as applicable, setting forth the reasons and
  196  justification, supported by clear and convincing evidence, for
  197  its decisions to cease the investment prohibition in scrutinized
  198  companies.
  199         Section 2. Effective October 1, 2016, section 287.135,
  200  Florida Statutes, is reenacted and amended to read:
  201         287.135 Prohibition against contracting with scrutinized
  202  companies.—
  203         (1) In addition to the terms defined in ss. 287.012 and
  204  215.473, as used in this section, the term:
  205         (a) “Awarding body” means, for purposes of state contracts,
  206  an agency or the department, and for purposes of local
  207  contracts, the governing body of the local governmental entity.
  208         (b) “Business operations” means, for purposes specifically
  209  related to Cuba or Syria, engaging in commerce in any form in
  210  Cuba or Syria, including, but not limited to, acquiring,
  211  developing, maintaining, owning, selling, possessing, leasing,
  212  or operating equipment, facilities, personnel, products,
  213  services, personal property, real property, military equipment,
  214  or any other apparatus of business or commerce.
  215         (c) “Local governmental entity” means a county,
  216  municipality, special district, or other political subdivision
  217  of the state.
  218         (2) A company is ineligible to, and may not, bid on, submit
  219  a proposal for, or enter into or renew a contract with an agency
  220  or local governmental entity for goods or services of $1 million
  221  or more if that, at the time of bidding or submitting a proposal
  222  for a new contract or renewal of an existing contract, the
  223  company:
  224         (a) Is on the Scrutinized Companies that Boycott Israel
  225  List, created pursuant to s. 215.4725;
  226         (b)Is on the Scrutinized Companies with Activities in
  227  Sudan List or the Scrutinized Companies with Activities in the
  228  Iran Petroleum Energy Sector List, created pursuant to s.
  229  215.473;, or
  230         (c) Is engaged in business operations in Cuba or Syria, is
  231  ineligible for, and may not bid on, submit a proposal for, or
  232  enter into or renew a contract with an agency or local
  233  governmental entity for goods or services of $1 million or more.
  234         (3)(a) Any contract with an agency or local governmental
  235  entity for goods or services of $1 million or more entered into
  236  or renewed on or after:
  237         (a) July 1, 2011, through June 30, 2012, must contain a
  238  provision that allows for the termination of such contract at
  239  the option of the awarding body if the company is found to have
  240  submitted a false certification as provided under subsection (5)
  241  or been placed on the Scrutinized Companies with Activities in
  242  Sudan List or the Scrutinized Companies with Activities in the
  243  Iran Petroleum Energy Sector List.
  244         (b) Any contract with an agency or local governmental
  245  entity for goods or services of $1 million or more entered into
  246  or renewed on or after July 1, 2012, through September 30, 2016,
  247  must contain a provision that allows for the termination of such
  248  contract at the option of the awarding body if the company is
  249  found to have submitted a false certification as provided under
  250  subsection (5), been placed on the Scrutinized Companies with
  251  Activities in Sudan List or the Scrutinized Companies with
  252  Activities in the Iran Petroleum Energy Sector List, or been
  253  engaged in business operations in Cuba or Syria.
  254         (c) October 1, 2016, must contain a provision that allows
  255  for the termination of such contract at the option of the
  256  awarding body if the company:
  257         1. Is found to have submitted a false certification as
  258  provided under subsection (5);
  259         2. Has been placed on the Scrutinized Companies that
  260  Boycott Israel List;
  261         3. Has been placed on the Scrutinized Companies with
  262  Activities in Sudan List or the Scrutinized Companies with
  263  Activities in the Iran Petroleum Energy Sector List; or
  264         4. Has been engaged in business operations in Cuba or
  265  Syria.
  266         (4) Notwithstanding subsection (2) or subsection (3), an
  267  agency or local governmental entity, on a case-by-case basis,
  268  may permit a company on the Scrutinized Companies that Boycott
  269  Israel List, the Scrutinized Companies with Activities in Sudan
  270  List or the Scrutinized Companies with Activities in the Iran
  271  Petroleum Energy Sector List, or a company with business
  272  operations in Cuba or Syria, to be eligible for, bid on, submit
  273  a proposal for, or enter into or renew a contract for goods or
  274  services of $1 million or more under the conditions set forth in
  275  paragraph (a) or the conditions set forth in paragraph (b):
  276         (a)1. With respect to a company on the Scrutinized
  277  Companies with Activities in Sudan List or the Scrutinized
  278  Companies with Activities in the Iran Petroleum Energy Sector
  279  List, all of the following occur:
  280         a. The scrutinized business operations were made before
  281  July 1, 2011.
  282         b. The scrutinized business operations have not been
  283  expanded or renewed after July 1, 2011.
  284         c. The agency or local governmental entity determines that
  285  it is in the best interest of the state or local community to
  286  contract with the company.
  287         d. The company has adopted, has publicized, and is
  288  implementing a formal plan to cease scrutinized business
  289  operations and to refrain from engaging in any new scrutinized
  290  business operations.
  291         2. With respect to a company engaged in business operations
  292  in Cuba or Syria, all of the following occur:
  293         a. The business operations were made before July 1, 2012.
  294         b. The business operations have not been expanded or
  295  renewed after July 1, 2012.
  296         c. The agency or local governmental entity determines that
  297  it is in the best interest of the state or local community to
  298  contract with the company.
  299         d. The company has adopted, has publicized, and is
  300  implementing a formal plan to cease business operations and to
  301  refrain from engaging in any new business operations.
  302         3. With respect to a company on the Scrutinized Companies
  303  that Boycott Israel List, all of the following occur:
  304         a. The scrutinized business operations were made before
  305  October 1, 2016.
  306         b. The scrutinized business operations have not been
  307  expanded or renewed after October 1, 2016.
  308         c. The agency or local governmental entity determines that
  309  it is in the best interest of the state or local community to
  310  contract with the company.
  311         d. The company has adopted, has publicized, and is
  312  implementing a formal plan to cease scrutinized business
  313  operations and to refrain from engaging in any new scrutinized
  314  business operations.
  315         (b) One of the following occurs:
  316         1. The local governmental entity makes a public finding
  317  that, absent such an exemption, the local governmental entity
  318  would be unable to obtain the goods or services for which the
  319  contract is offered.
  320         2. For a contract with an executive agency, the Governor
  321  makes a public finding that, absent such an exemption, the
  322  agency would be unable to obtain the goods or services for which
  323  the contract is offered.
  324         3. For a contract with an office of a state constitutional
  325  officer other than the Governor, the state constitutional
  326  officer makes a public finding that, absent such an exemption,
  327  the office would be unable to obtain the goods or services for
  328  which the contract is offered.
  329         (5) At the time a company submits a bid or proposal for a
  330  contract or before the company enters into or renews a contract
  331  with an agency or governmental entity for goods or services of
  332  $1 million or more, the company must certify that the company is
  333  not on the Scrutinized Companies that Boycott Israel List, the
  334  Scrutinized Companies with Activities in Sudan List or the
  335  Scrutinized Companies with Activities in the Iran Petroleum
  336  Energy Sector List, or that it does not have business operations
  337  in Cuba or Syria.
  338         (a) If, after the agency or the local governmental entity
  339  determines, using credible information available to the public,
  340  that the company has submitted a false certification, the agency
  341  or local governmental entity shall provide the company with
  342  written notice of its determination. The company shall have 90
  343  days following receipt of the notice to respond in writing and
  344  to demonstrate that the determination of false certification was
  345  made in error. If the company does not make such demonstration
  346  within 90 days after receipt of the notice, the agency or the
  347  local governmental entity shall bring a civil action against the
  348  company. If a civil action is brought and the court determines
  349  that the company submitted a false certification, the company
  350  shall pay the penalty described in subparagraph 1. and all
  351  reasonable attorney fees and costs, including any costs for
  352  investigations that led to the finding of false certification.
  353         1. A civil penalty equal to the greater of $2 million or
  354  twice the amount of the contract for which the false
  355  certification was submitted shall be imposed.
  356         2. The company is ineligible to bid on any contract with an
  357  agency or local governmental entity for 3 years after the date
  358  the agency or local governmental entity determined that the
  359  company submitted a false certification.
  360         (b) A civil action to collect the penalties described in
  361  paragraph (a) must commence within 3 years after the date the
  362  false certification is submitted.
  363         (6) Only the agency or local governmental entity that is a
  364  party to the contract may cause a civil action to be brought
  365  under this section. This section does not create or authorize a
  366  private right of action or enforcement of the penalties provided
  367  in this section. An unsuccessful bidder, or any other person
  368  other than the agency or local governmental entity, may not
  369  protest the award of a contract or contract renewal on the basis
  370  of a false certification.
  371         (7) This section preempts any ordinance or rule of any
  372  agency or local governmental entity involving public contracts
  373  for goods or services of $1 million or more with a company
  374  engaged in scrutinized business operations.
  375         (8) The contracting prohibitions in this section applicable
  376  to companies on the Scrutinized Companies with Activities in
  377  Sudan List or the Scrutinized Companies with Activities in the
  378  Iran Petroleum Energy Sector List or to companies engaged in
  379  business operations in Cuba or Syria become This section becomes
  380  inoperative on the date that federal law ceases to authorize the
  381  states to adopt and enforce such the contracting prohibitions of
  382  the type provided for in this section.
  383         Section 3. Except as otherwise expressly provided in this
  384  act, this act shall take effect upon becoming a law.