08 LC 21
9928S
The
House Committee on Retirement offers the following substitute to SB
451:
A
BILL TO BE ENTITLED
AN ACT
AN ACT
To
amend Article 7 of Chapter 20 of Title 47 of the Official Code of Georgia
Annotated, relating to the Public Retirement Systems Investment Authority Law,
so as to provide a short title; to provide for legislative findings; to provide
for definitions; to require that boards administering public retirement funds of
this state identify all companies in which public funds are invested that are
doing certain types of investments in Iran; to require such boards to create and
maintain certain scrutinized company lists that name all such companies; to
require such boards to periodically contact all scrutinized companies and
encourage them to refrain from engaging in certain types of investments in Iran;
to require such boards to inform scrutinized companies of their status as a
scrutinized company and to ask for clarification as to the nature of each
company´s business activities; to provide that a company may be removed
from the list under certain conditions; to provide for the reintroduction of a
company onto the list; to provide for the divestment of all directly held,
publicly traded securities of a scrutinized company under certain conditions; to
provide exceptions to the divestment requirements; to prohibit such boards from
acquiring securities of scrutinized companies that have certain active
investments; to provide exceptions to the investment prohibition; to provide an
additional exception from the divestment requirement and the investment
prohibition to certain indirect holdings in actively managed investment funds;
to require such boards to request that the managers of such investment funds
consider removing scrutinized companies from the fund or creating a similar fund
that excludes such companies; to require certain reports; to provide for
termination of such prohibitions and divestments; to provide for certain
notices; to provide for related matters; to provide for automatic repeal; to
provide for immunity; to repeal conflicting laws; and for other
purposes.
BE
IT ENACTED BY THE GENERAL ASSEMBLY OF GEORGIA:
SECTION
1.
This
Act shall be known and may be cited as the "Protecting Georgia´s
Investments Act."
SECTION
2.
The
General Assembly finds that:
(1)
In 2001, the federal Securities and Exchange Commission determined that
companies with business operations in terrorist-sponsored states are exposed to
a special risk category known as global security risk: the risk to share value
and corporate reputation stemming from the intersection of a publicly traded
company´s international business activities and security-related concerns,
such as terrorism and weapons proliferation;
(2)
In response to the financial risk posed by investments in companies doing
business with a state that sponsors terrorists, the federal Securities and
Exchange Commission established its Office of Global Security Risk to provide
for enhanced disclosure of material information regarding such
companies;
(3)
According to the former chair of the federal Securities and Exchange Commission
Laura Unger, the fact that a foreign company is doing material business with a
country, government, or entity on OFAC´s sanctions list is, in the view of
the staff of the federal Securities and Exchange Commission, substantially
likely to be significant to a reasonable investor´s decision about whether
to invest in that company;
(4)
A 2006 report by the United States House of Representatives Committee on
Appropriations states that "a company´s association with sponsors of
terrorism and human rights abuses, no matter how large or small, can have a
materially adverse result on a public company´s activities, financial
condition, earnings, and stock prices, all of which can negatively affect the
value of an investment";
(5)
Iran tops the United States State Department´s list of state sponsors of
terrorism, funding such groups as Hamas, Hezbollah, and Islamic Jihad, as well
as fueling the insurgency in Iraq via its Al-Quds force;
(6)
The United States imposed sanctions on Iran by designating the Islamic
Revolutionary Guard Corps, its Al-Quds Force, and three state-owned banks as
weapons proliferators and supporters of terrorism;
(7)
The United Nations Security Council has twice voted unanimously to impose
sanctions on Iran for its failure to suspend its uranium-enrichment activities
calling for an additional embargo on Iranian arms exports, which is a freeze on
assets abroad of an expanded list of individuals and companies involved in
Iran´s nuclear and ballistic missile programs, and calls for nations and
institutions to bar new grants or loans to Iran except for humanitarian and
developmental purposes;
(8)
Foreign entities have invested in Iran´s petroleum energy sector despite
United States and United Nations sanctions against Iran;
(9)
All entities that have invested more than $20 million in any given year in
Iran´s petroleum sector since August 5, 1996, are subject to sanctions
under United States law pursuant to the Iran Sanctions Act of 1996;
(10)
The United States renewed the Iran Sanctions Act of 1996 in 2001 and
2006;
(11)
It is a fundamental responsibility of the State of Georgia to decide where, how,
and by whom financial resources in its control should be invested, taking into
account numerous pertinent factors;
(12)
While divestiture should be considered with the intent to improve investment
performance, by the rules of prudence, fiduciaries must take into account all
relevant substantive factors in arriving at an investment decision;
(13)
The State of Georgia is deeply concerned about investments in publicly traded
companies that have investments in Iran´s petroleum sector as a financial
risk to the shareholders;
(14)
By investing in publicly traded companies having investments in Iran´s
petroleum sector, public retirement systems are putting their funds at
substantial financial risk;
(15)
Divestiture from markets that are vulnerable to embargo, loan restrictions, and
sanctions from the United States and the international community, including the
United Nations Security Council, is in accordance with the rules of
prudence;
(16)
This Act should remain in effect only insofar as it continues to be consistent
with and does not unduly interfere with the foreign policy of the United States
as determined by the federal government;
(17)
To protect Georgia´s assets, it is in the best interest of the state to
enact a statutory prohibition regarding the investments managed by public
retirement systems doing business in Iran´s petroleum-energy
sector;
(18)
Nevertheless, the members of this body have serious concerns regarding the
efficacy of requiring the divestment of Georgia´s retirement funds in large
companies with fiscally sound histories and enviable histories of returns, and
whether any effect on world-wide business activities might be too insubstantial
as to warrant the cost to the state and to public retirees of
divestment;
(19)
Further, the members of this body are concerned about the cost of compliance,
both in terms of the necessity of employing additional administrative staff to
ferret certain companies out of the investment pool and in the potential for
lost investment revenue caused by a possibly ineffective but costly investment
policy; and
(20)
The members of this body have faith that the boards of trustees and investment
managers of our public retirement systems are patriotic Americans who would not
aid or assist terrorism in any manner, and that restrictive and potentially
costly micro-managing by this body is unnecessary.
SECTION
3.
Article
7 of Chapter 20 of Title 47 of the Official Code of Georgia Annotated, relating
to the Public Retirement Systems Investment Authority Law, is revised by adding
a new Code section to read as follows:
"47-20-83.1.
(a)
As used in this Code section, the term:
(1)
'Company' means any sole proprietorship, organization, association, corporation,
partnership, joint venture, limited partnership, limited liability partnership,
limited liability company, or other entity or business association that exists
for the purpose of making profit.
(2)
'Direct holdings' in a company means all securities of that company that are
held directly by the public fund or in an account or fund in which the public
fund owns all shares or interests.
(3)
'Government of Iran' means the government of Iran, its instrumentalities, and
companies owned or controlled by the government of Iran.
(4)
'Inactive business activities' means the mere continued holding or renewal of
rights to property previously operated for the purpose of generating revenues
but not presently deployed for such purpose.
(5)
'Indirect holdings' in a company means all securities of that company that are
held in an account or fund, such as a mutual fund, managed by one or more
persons not employed by the public fund, in which the public fund owns shares or
interests together with other investors not subject to the provisions of this
Code section.
(6)
'Iran' means the Islamic Republic of Iran.
(7)
'Petroleum resources' means petroleum or natural gas.
(8)
'Public fund' means a large retirement system as defined in Code Section
47-20-84.
(9)
'Scrutinized business activities' means business activities that have resulted
in a company becoming a scrutinized company.
(10)
'Scrutinized company' means any company that has, with actual knowledge, on or
after August 5, 1996, made an investment of $20 million or more in Iran´s
petroleum sector which directly or significantly contributes to the enhancement
of Iran´s ability to develop the petroleum resources of Iran.
(11)
'Substantial action specific to Iran' means adopting, publicizing, and
implementing a formal plan to cease scrutinized business activities within one
year and to refrain from any such new business activities.
(b)
On or before October 1, 2008, each public fund shall make its best efforts to
identify all scrutinized companies in which the public fund has direct or
indirect holdings. Such efforts include reviewing and relying, as appropriate
in the public fund´s judgment, on publicly available information regarding
companies that have invested more than $20 million in any given year since
August 5, 1996, in Iran´s petroleum energy sector, including information
provided by nonprofit organizations, research firms, international
organizations, and government entities.
(c)
By the first meeting of each board responsible for the management of a public
fund after October 1, 2008, the board shall assemble all scrutinized companies
that fit the criteria specified in paragraph (10) of subsection (a) of this Code
section into a 'Scrutinized Companies with Activities in the Iran Petroleum
Energy Sector List.'
(d)
The board of each public fund shall update and make publicly available annually
the Scrutinized Companies with Activities in the Iran Petroleum Energy Sector
List based on evolving information from, among other sources, those listed in
subsection (b) of this Code section.
(e)
Each public fund shall adhere to the following procedure for assembling
companies on the Scrutinized Companies with Activities in the Iran Petroleum
Energy Sector List:
(1)
For each company in which the public fund has direct holdings newly identified
under subsection (c) of this Code section, the public fund shall send a written
notice informing the company of its scrutinized company status and that it may
become subject to divestment by the public fund. The notice must inform the
company of the opportunity to clarify its Iran related activities and encourage
the company, within 90 days, to cease its scrutinized business activities or
convert such activities to inactive business activities in order to avoid
qualifying for divestment by the public fund. Such notice shall be sent no
later than December 15, 2008; and
(2)
If, within 90 days after the public fund´s first engagement with a company
pursuant to this subsection, that company announces by public disclosure
substantial action specific to Iran, the public fund may maintain its direct
holdings, but the company shall remain on the Scrutinized Companies with
Activities in Iran Petroleum Energy Sector List pending completion of its
cessation of scrutinized business activities.
(f)(1)
If, after 90 days following a public fund´s first engagement with a company
pursuant to subsection (e) of this Code section, the company has not announced
by public disclosure substantial action specific to Iran, or the public fund
determines or becomes aware that the company continues to have scrutinized
business activities, the public fund within eight months after the expiration of
such 90 day period shall sell, redeem, divest, or withdraw all publicly traded
securities of the company from the public fund´s direct
holdings.
(2)
If the public fund determines or becomes aware that a company that ceased
scrutinized business activities following engagement pursuant to subsection (e)
of this Code section has resumed such activities, the public fund shall send a
written notice to the company in accordance with subsection (e) and this
subsection. The company shall also be immediately reintroduced onto the
Scrutinized Companies with Activities in Iran Petroleum Energy Sector
List.
(3)
The public fund shall monitor the scrutinized company that has announced by
public disclosure substantial action specific to Iran and, if, after one year,
the public fund determines or becomes aware that the company has not implemented
such a plan, within three months after the expiration of such one-year period
shall sell, redeem, divest, or withdraw all publicly traded securities of the
company from the public fund´s direct holdings, and the company also shall
be immediately reintroduced onto the Scrutinized Companies with Activities in
Iran Petroleum Energy Sector List.
(g)
A public fund shall not acquire securities of companies on the Scrutinized
Companies with Activities in Iran Petroleum Energy Sector List.
(h)
Subsections (f) and (g) of this Code section shall not apply to a public
fund´s indirect holdings. However, the public fund shall submit letters to
the managers of such investment funds containing companies on the Scrutinized
Companies with Activities in Iran Petroleum Energy Sector List requesting that
they consider removing such companies from the fund or create a similar actively
managed fund having indirect holdings devoid of such companies. If the manager
creates a similar fund devoid of such securities or if such funds are created
elsewhere, the board of the public fund shall determine within six months
whether to replace all applicable investments with investments in the similar
fund in an expedited time frame consistent with prudent investing standards.
For the purposes of this subsection, a private equity fund is deemed to be an
actively managed investment fund.
(i)
Notwithstanding any other provision of this Code section, the public fund, when
discharging its responsibility for operation of a defined contribution plan,
shall engage the manager of the investment offerings in such plans requesting
that they consider removing scrutinized companies from the investment offerings
or create an alternative investment offering devoid of scrutinized companies.
If the manager creates an alternative investment offering or if such funds are
created elsewhere and is deemed by the public fund to be consistent with prudent
investor standards, the public fund shall, within six months, consider including
such investment offering in the plan.
(j)
Each public fund shall file a report with the Governor, the President of the
Senate, and the Speaker of the House of Representatives that includes the
Scrutinized Companies with Activities in Iran Petroleum Energy Sector List
within 30 days after the list is created. This report shall be made available
to the public. Annually thereafter the board responsible for the management of
a public fund shall file a report, which shall be made available to the public
and to the Governor, the President of the Senate, and the Speaker of the House
of Representatives, which includes:
(1)
A summary of correspondence with companies engaged by the public fund under this
Code section;
(2)
All investments sold, redeemed, divested, or withdrawn in compliance with this
Code section;
(3)
All prohibited investments under this Code section;
(4)
Any progress made under subsection (h) of this Code section; and
(5)
A list of all publicly traded securities held directly by the public
fund.
(k)
If any of the following occur, this Code section shall be of no further force or
effect:
(1)
The Congress or President of the United States affirmatively and unambiguously
states, by means including, but not limited to, legislation, executive order, or
written certification from the President to Congress, that the government of
Iran has ceased to pursue the capabilities to develop nuclear weapons and
support international terrorism;
(2)
The United States revokes all sanctions imposed against the government of Iran;
or
(3)
The Congress or President of the United States affirmatively and unambiguously
declares, by means including, but not limited to, legislation, executive order,
or written certification from the President to Congress, that mandatory
divestment of the type provided for in this Code section interferes with the
conduct of United States foreign policy.
(l)
With respect to actions taken in compliance with this Code section, including
all good faith determinations regarding companies as required by this Code
section, the public fund shall be exempt from any conflicting statutory or
common law obligations, including any such obligations with respect to choice of
asset managers, investment funds, or investments for the public fund´s
securities portfolios.
(m)
Neither the retirement system nor any employee of the retirement system shall be
liable for a good faith omission in identifying a scrutinized
company.
(n)
The director of the Office of Treasury and Fiscal Services shall annually
prepare a list of scrutinized companies as otherwise required by this Code
section. The list shall be made available to each public fund in Georgia and
each such fund may rely on said list in meeting the requirements of this Code
section."
SECTION
3.1.
This
Act shall be automatically repealed on July 1, 2015.
SECTION
4.
All
laws and parts of laws in conflict with this Act are repealed.