Senate Bill sb2250c1
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Florida Senate - 2007 CS for SB 2250
By the Committee on Military Affairs and Domestic Security;
and Senators Deutch, Ring, Atwater, Gaetz, Margolis and Baker
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1 A bill to be entitled
2 An act relating to divestment of public funds
3 related to Iran; providing definitions;
4 requiring the State Board of Administration to
5 identify all companies doing certain types of
6 business in or with Iran in which public moneys
7 are invested; requiring the board to create and
8 maintain a Scrutinized Company List that names
9 all such companies; requiring the board to
10 periodically contact all scrutinized companies
11 and encourage them to refrain from engaging in
12 certain types of business in or with Iran;
13 requiring the board to inform scrutinized
14 companies of their status as a scrutinized
15 company and to ask for clarification as to the
16 nature of each company's business activities;
17 providing that a company may be removed from
18 the list under certain conditions; providing
19 for reintroduction of a company onto the list;
20 requiring the board to divest the company of
21 all publicly traded securities of a scrutinized
22 company under certain conditions; providing
23 exceptions to the divestment requirement;
24 prohibiting the board from acquiring securities
25 of scrutinized companies that have active
26 business operations; providing exceptions to
27 the investment prohibition; providing an
28 additional exception from the divestment
29 requirement and the investment prohibition
30 concerning certain indirect holdings in
31 actively managed investment funds; requiring
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1 the board to request that the managers of such
2 investment funds consider removing scrutinized
3 companies from the fund or create a similar
4 fund that excludes such companies; requiring
5 the board to file a report to the Board of
6 Trustees of the State Board of Administration
7 and the Legislature within a specified period
8 after creation of the Scrutinized Company List;
9 requiring the annual filing of an updated
10 report; requiring that all such reports be made
11 available to the public; requiring that the
12 report include certain information; providing
13 for the expiration of the act; exempting the
14 board from certain statutory or common law
15 obligations; authorizing the board to cease
16 divesting or to reinvest in certain scrutinized
17 companies if the value of all assets under
18 management by the board becomes equal to or
19 less than a specified amount; requiring the
20 board to file a written report to the Board of
21 Trustees of the State Board of Administration
22 and the Legislature before such reinvestment;
23 requiring that the report contain certain
24 information; requiring semiannual updates to
25 such reports when applicable; providing for
26 severability; providing an effective date.
27
28 WHEREAS, a resolution of the United Nations Security
29 Council imposes sanctions on Iran for its failure to suspend
30 its uranium-enrichment activities, and
31
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1 WHEREAS, the United Nations Security Council voted
2 unanimously for an additional embargo on Iranian arms exports
3 which is a freeze on assets abroad of an expanded list of
4 individuals and companies involved in Iran's nuclear and
5 ballistic missile programs and calls for nations and
6 institutions to bar new grants or loans to Iran except for
7 humanitarian and developmental purposes, and
8 WHEREAS, Iran's financial ability to pay its debts to
9 foreign entities involved in the petroleum-energy sector
10 amounting to more than $20 million is put at risk by the Iran
11 and Libya Sanctions Act embargo and sanctions, and
12 WHEREAS, foreign entities have invested in Iran's
13 petroleum-energy sector despite United States and United
14 Nations sanctions against Iran, and
15 WHEREAS, all United States and foreign entities that
16 have invested more than $20 million in Iran's energy sector
17 since August 5, 1996, are subject to sanctions under United
18 States law pursuant to the Iran and Libya Sanctions Act of
19 1996, and
20 WHEREAS, United States renewed the Iran and Libya
21 Sanctions Act of 1996 in 2001 and 2006, and
22 WHEREAS, while divestiture should be considered with
23 the intent to improve investment performance and, by the rules
24 of prudence, fiduciaries must take into account all relevant
25 substantive factors in arriving at an investment decision, and
26 WHEREAS, divestiture from markets that are vulnerable
27 to embargo, loan restrictions, and sanctions from the United
28 States and the international community, including the United
29 Nations Security Council, is in accordance with the rules of
30 prudence, and
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1 WHEREAS, the State of Florida is deeply concerned about
2 investments in publicly traded companies that have business
3 activities in and ties to Iran's petroleum-energy sector as a
4 financial risk to the shareholders, and
5 WHEREAS, by investing in publicly traded companies
6 having ties to Iran's petroleum-energy sector, the Florida
7 State Board of Administration is putting the funds it oversees
8 at substantial financial risk, and
9 WHEREAS, to protect Florida's assets, it is in the best
10 interest of the state to enact a statutory prohibition
11 regarding the investments managed by the State Board of
12 Administration doing business in or with Iran's
13 petroleum-energy sector, NOW, THEREFORE,
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15 Be It Enacted by the Legislature of the State of Florida:
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17 Section 1. (1) DEFINITIONS.--As used in this act, the
18 term:
19 (a) "Active business operations" means all business
20 operations that are not inactive business operations.
21 (b) "Business operations" means engaging in commerce
22 in any form in Iran, including, but not limited to,
23 acquiring, developing, maintaining, owning, selling,
24 possessing, leasing, or operating equipment, facilities,
25 personnel, products, services, personal property, real
26 property, or any other apparatus of business or commerce.
27 (c) "Company" means any sole proprietorship,
28 organization, association, corporation, partnership, joint
29 venture, limited partnership, limited liability partnership,
30 limited liability company, or other entity or business
31 association, including all wholly owned subsidiaries,
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1 majority-owned subsidiaries, parent companies, or affiliates
2 of such entities or business associations, which exists for
3 the purpose of making profit.
4 (d) "Complicit" means taking actions during any
5 preceding 20-month period which have directly invested in the
6 petroleum energy sector of Iran.
7 (e) "Direct holdings" in a company means all
8 securities of that company which are held directly by the
9 Public Fund or in an account or fund in which the Public Fund
10 owns all shares or interests.
11 (f) "Inactive business operations" means the mere
12 continued holding or renewal of rights to property previously
13 operated for the purpose of generating revenues but not
14 presently deployed for such purpose.
15 (g) "Indirect holdings" in a company means all
16 securities of that company which are held in an account or
17 fund, such as a mutual fund, managed by one or more persons
18 not employed by the Public Fund, in which the Public Fund owns
19 shares or interests together with other investors not subject
20 to the provisions of this act.
21 (h) "Military equipment" means weapons, arms, military
22 supplies, and equipment that readily may be used for military
23 purposes, including, but not limited to, radar systems,
24 military-grade transport vehicles, or supplies or services
25 sold or provided directly or indirectly to any force actively
26 participating in international terrorism.
27 (i) "Mineral-extraction activities" include exploring,
28 extracting, processing, transporting, or wholesale selling or
29 trading of elemental minerals or associated metal alloys or
30 oxides (ore), including gold, copper, chromium, chromite,
31 diamonds, iron, iron ore, silver, tungsten, uranium, and zinc,
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1 as well as facilitating such activities, including, providing
2 supplies or services in support of such activities.
3 (j) "Oil-related activities" include, but are not
4 limited to, owning rights to oil blocks; exporting,
5 extracting, producing, refining, processing, exploring for,
6 transporting, selling, or trading of oil; constructing,
7 maintaining, or operating a pipeline, refinery, or other
8 oil-field infrastructure; and facilitating such activities,
9 including providing supplies or services in support of such
10 activities, except that the mere retail sale of gasoline and
11 related consumer products is not considered an oil-related
12 activity.
13 (k) "Petroleum resources" means petroleum, petroleum
14 by-products, or natural gas.
15 (l) "Public Fund" means all funds, assets, trustees,
16 and other designates under the State Board of Administration.
17 (m) "Scrutinized company" means the company has
18 business operations that involve contracts with or provision
19 of supplies or services to the Government of Iran, companies
20 in which the Government of Iran has any direct or indirect
21 equity share, consortiums or projects commissioned by the
22 Government of Iran, or companies involved in consortiums or
23 projects commissioned by the Government of Iran and:
24 1. More than 10 percent of the company's revenues or
25 assets linked to Iran involve oil-related activities or
26 mineral-extraction activities; less than 75 percent of the
27 company's revenues or assets linked to Iran involve contracts
28 with or provision of oil-related or mineral-extracting
29 products or services to the Government of Iran or a project or
30 consortium created exclusively by that government; and the
31 company has failed to take substantial action; or
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1 2. The company has, with actual knowledge, on or after
2 August 5, 1996, made an investment of $20 million or more, or
3 any combination of investments of at least $10 million each
4 which in the aggregate equals or exceeds $20 million in any
5 12-month period, which directly or significantly contributes
6 to the enhancement of Iran's ability to develop petroleum
7 resources of Iran.
8 (n) "Substantial action" means adopting, publicizing,
9 and implementing a formal plan to cease scrutinized business
10 operations within 1 year and to refrain from any such new
11 business operations.
12 (2) IDENTIFICATION OF COMPANIES.--
13 (a) Within 90 days after the effective date of this
14 act, the Public Fund shall make its best efforts to identify
15 all scrutinized companies in which the Public Fund has direct
16 or indirect holdings or could possibly have such holdings in
17 the future. Such efforts include:
18 1. Reviewing and relying, as appropriate in the Public
19 Fund's judgment, on publicly available information regarding
20 companies having business operations in Iran, including
21 information provided by nonprofit organizations, research
22 firms, international organizations, and government entities;
23 2. Contacting asset managers contracted by the Public
24 Fund which invest in companies having business operations in
25 Iran; or
26 3. Contacting other institutional investors that have
27 divested from or engaged with companies that have business
28 operations in Iran.
29 (b) By the first meeting of the Public Fund following
30 the 90-day period described in paragraph (a), the Public Fund
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1 shall assemble all scrutinized companies identified into a
2 "Scrutinized Companies List."
3 (c) The Public Fund shall update the Scrutinized
4 Companies List quarterly based on evolving information from,
5 among other sources, those listed in paragraph (a).
6 (3) REQUIRED ACTIONS.--The Public Fund shall adhere to
7 the following procedure for companies on the Scrutinized
8 Companies List:
9 (a) Engagement.--
10 1. The Public Fund shall immediately determine the
11 companies on the Scrutinized Companies List in which the
12 Public Fund owns direct or indirect holdings.
13 2. For each company identified in this paragraph which
14 has only inactive business operations, the Public Fund shall
15 send a written notice informing the company of this act and
16 encouraging it to continue to refrain from initiating active
17 business operations in Iran until it is able to avoid
18 scrutinized business operations. The Public Fund shall
19 continue such correspondence semiannually.
20 3. For each company newly identified under this
21 paragraph which has active business operations, the Public
22 Fund shall send a written notice informing the company of its
23 scrutinized company status and that it may become subject to
24 divestment by the Public Fund. The notice must inform the
25 company of the opportunity to clarify its Iran-related
26 activities and encourage the company, within 90 days, to cease
27 its scrutinized business operations or convert such operations
28 to inactive business operations in order to avoid qualifying
29 for divestment by the Public Fund.
30 4. If, within 90 days after the Public Fund's first
31 engagement with a company pursuant to this paragraph, that
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1 company ceases scrutinized business operations, the company
2 shall be removed from the Scrutinized Companies List and the
3 provisions of this act shall cease to apply to it unless it
4 resumes scrutinized business operations. If, within 90 days
5 after the Public Fund's first engagement, the company converts
6 its scrutinized active business operations to inactive
7 business operations, the company is subject to all provisions
8 relating thereto.
9 (b) Divestment.--
10 1. If, after 90 days following the Public Fund's first
11 engagement with a company pursuant to paragraph (a), the
12 company continues to have scrutinized active business
13 operations, and only while such company continues to have
14 scrutinized active business operations, the Public Fund shall
15 sell, redeem, divest, or withdraw all publicly traded
16 securities of the company, except as provided in paragraph
17 (d), from the Public Fund's assets under management within 12
18 months after the company's most recent appearance on the
19 Scrutinized Companies List.
20 2. If a company that ceased scrutinized active
21 business operations following engagement pursuant to paragraph
22 (a) resumes such operations, this paragraph immediately
23 applies, and the Public Fund shall send a written notice to
24 the company. The company shall also be immediately
25 reintroduced onto the Scrutinized Companies List.
26 (c) Prohibition.--The Public Fund may not acquire
27 securities of companies on the Scrutinized Companies List
28 which have active business operations, except as provided in
29 paragraph (d).
30 (d) Exemption.--A company that the United States
31 Government affirmatively declares to be excluded from its
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1 present or any future federal sanctions regime relating to
2 Iran is not subject to divestment or the investment
3 prohibition pursuant to paragraphs (b) and (c).
4 (e) Excluded securities.--Notwithstanding the
5 provisions of this act, paragraphs (b) and (c) do not apply to
6 indirect holdings in actively managed investment funds.
7 However, the Public Fund shall submit letters to the managers
8 of such investment funds containing companies that have
9 scrutinized active business operations requesting that they
10 consider removing such companies from the fund or create a
11 similar actively managed fund having indirect holdings devoid
12 of such companies. If the manager creates a similar fund, the
13 Public Fund shall replace all applicable investments with
14 investments in the similar fund in an expedited timeframe
15 consistent with prudent investing standards. For the purposes
16 of this section, a private equity fund is deemed to be an
17 actively managed investment fund.
18 (4) REPORTING.--
19 (a) The Public Fund shall file a report to each member
20 of the Board of Trustees of the State Board of Administration,
21 the President of the Senate, and the Speaker of the House of
22 Representatives which includes the Scrutinized Companies List
23 within 30 days after the list is created. This report shall be
24 made available to the public.
25 (b) Annually thereafter, the Public Fund shall file a
26 report, which shall be made available to the public, to each
27 member of the Board of Trustees of the State Board of
28 Administration, the President of the Senate, and the Speaker
29 of the House of Representatives and send a copy of that report
30 to the United States Presidential Special Envoy to Iran, or an
31 appropriate designee or successor, which includes:
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1 1. A summary of correspondence with companies engaged
2 by the Public Fund under subparagraphs (3)(a)2. and 3.;
3 2. All investments sold, redeemed, divested, or
4 withdrawn in compliance with paragraph (3)(b);
5 3. All prohibited investments under paragraph (3)(c);
6 and
7 4. Any progress made under paragraph (3)(e).
8 (5) EXPIRATION.--This act expires upon the occurrence
9 of any of the following:
10 (a) The United States revokes all sanctions imposed
11 against the Government of Iran;
12 (b) The Congress or President of the United States
13 declares that the Government of Iran has ceased to acquire
14 weapons of mass destruction and to support international
15 terrorism; or
16 (c) The Congress or President of the United States,
17 through legislation or executive order, declares that
18 mandatory divestment of the type provided for in this act
19 interferes with the conduct of United States foreign policy.
20 (6) OTHER LEGAL OBLIGATIONS.--With respect to actions
21 taken in compliance with this act, including all good faith
22 determinations regarding companies as required by this act,
23 the Public Fund is exempt from any conflicting statutory or
24 common law obligations, including any such obligations with
25 respect to choice of asset managers, investment funds, or
26 investments for the Public Fund's securities portfolios.
27 (7) REINVESTMENT IN CERTAIN COMPANIES HAVING
28 SCRUTINIZED ACTIVE BUSINESS OPERATIONS.--Notwithstanding any
29 other provision of this act to the contrary, the Public Fund
30 may cease divesting from certain scrutinized companies
31 pursuant to paragraph (3)(b) or reinvest in certain
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1 scrutinized companies from which it divested pursuant to
2 paragraph (3)(b) if clear and convincing evidence shows that
3 the value of all assets under management by the Public Fund
4 becomes equal to or less than 99.50 percent, or 50 basis
5 points, of the hypothetical value of all assets under
6 management by the Public Fund assuming no divestment for any
7 company had occurred under paragraph (3)(b). Cessation of
8 divestment, reinvestment, or any subsequent ongoing investment
9 authorized by this act is limited to the minimum steps
10 necessary to avoid the contingency set forth in this
11 subsection. For any cessation of divestment, reinvestment, or
12 subsequent ongoing investment authorized by this act, the
13 Public Fund shall provide a written report to each member of
14 the Board of Trustees of the State Board of Administration,
15 the President of the Senate, and the Speaker of the House of
16 Representatives in advance of initial reinvestment, updated
17 semiannually thereafter as applicable, setting forth the
18 reasons and justification, supported by clear and convincing
19 evidence, for its decisions to cease divestment, reinvest, or
20 remain invested in companies having scrutinized active
21 business operations. This act does not apply to reinvestment
22 in companies on the grounds that they have ceased to have
23 scrutinized active business operations.
24 Section 2. If any provision of this act or its
25 application to any person or circumstance is held invalid, the
26 invalidity does not affect other provisions or applications of
27 the act which can be given effect without the invalid
28 provision or application, and to this end the provisions of
29 this act are severable.
30 Section 3. This act shall take effect upon becoming a
31 law.
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1 STATEMENT OF SUBSTANTIAL CHANGES CONTAINED IN
COMMITTEE SUBSTITUTE FOR
2 Senate Bill 2250
3
4 This committee substitute provides for additional definitions
of terms that together describe a scrutinized company whose
5 equities may be the subject of divestiture by the Public Fund.
6 CS/SB 2250 requires that, within 90 days of the effective date
of this act, the Public Fund must make a good faith effort to
7 identify all scrutinized companies having business operations
in Iran in which the Public Fund has direct or indirect
8 holdings. For all such identified companies, the Public Fund
shall begin a process of engagement, notifying such companies
9 that they may become subject to divestiture unless they cease
scrutinized business operations in Iran or convert such
10 operations to inactive business operations. Companies that
comply within 90 days of the Public Fund's engagement shall be
11 removed from the scrutinized list and provisions of this act
shall cease to apply.
12
If, after 90 days following the Public Fund's first
13 engagement, scrutinized companies continue active business
operations in Iran, the Public Fund shall divest itself of all
14 publicly traded securities in these companies. The Public Fund
is further prohibited from future acquisition of securities
15 from companies which have active business operations in Iran.
This substitute provides for an exemption for companies that
16 have been excluded from present or future sanctions by the
United States Government relating to Iran.
17
The committee substitute provides that the provisions of this
18 act shall not apply to indirect holdings in actively managed
investment funds. However, the Public Fund shall submit
19 letters to these investment fund managers requesting that they
consider removing scrutinized companies from fund holdings or
20 creating a similarly managed fund having indirect holdings
that are devoid of such companies. If such a fund is created,
21 the Public Fund shall replace all applicable investments with
those in the similar fund in an expedited manner consistent
22 with prudent investing standards.
23 The Public Fund shall file a report of the Scrutinized
Companies list within 30 days of its creation to each member
24 of the Board of Trustees of the State Board of Administration,
the President of the Senate, and the Speaker of the House of
25 Representatives. Annually thereafter, the Public Fund shall
file a report to the above members and the United States
26 Presidential Special Envoy to Iran which includes a summary of
correspondence with companies engaged by the Public Fund; all
27 investments sold, redeemed, or divested; all prohibited
investments; and any progress made with managers of indirectly
28 held actively managed investment funds.
29 CS/SB 2250 provides for the expiration of this act upon the
occurrence of any of the following: The United States revokes
30 all sanctions imposed against the government of Iran;
Congressional or Presidential declaration that the government
31 of Iran has ceased to acquire weapons of mass destruction and
to support international terrorism; or a Congressional or
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1 Presidential declaration that mandatory divestment interferes
with the conduct of United States foreign policy.
2
Further, it provides that the Public Fund is exempt from any
3 conflicting statutory or common law obligations with respect
to actions taken in good faith in compliance with this act. It
4 also provides that the Public Fund may cease divesting from
certain scrutinized companies if clear and convincing evidence
5 shows that the value of all assets under management by the
Public Fund becomes equal to or less than 99.5 percent of the
6 hypothetical value of all assets under Fund management.
7 CS/SB 2250 provides for severability should any provision of
this act be found invalid.
8
The committee substitute takes effect upon becoming law and
9 remains effective until certain conditions are met.
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