Citations Affected: IC 5-10.2-10; IC 34-30-2-11.4.
Synopsis: Divestment from states that sponsor terror. Requires the
public employees' retirement fund (PERF) and the state teachers'
retirement fund (TRF), in the capacity of shareholders, to contact
companies with certain business activities in states that sponsor terror
and request that the companies cease those business activities.
Prohibits PERF and TRF from investing in companies that are
unresponsive to the requests. Requires PERF and TRF to sell or
transfer any investments in a company that is unresponsive to the
requests. Requires PERF and TRF to report to the general assembly any
investments with a company with business operations in states that
sponsor terror.
Effective: July 1, 2009.
January 20, 2009, read first time and referred to Committee on Pensions and Labor.
A BILL FOR AN ACT to amend the Indiana Code concerning
pensions.
terror.
Sec. 5. (a) As used in this chapter, "company" means any of the
following:
(1) A sole proprietorship.
(2) An organization.
(3) An association.
(4) A corporation.
(5) A partnership.
(6) A joint venture.
(7) A limited partnership.
(8) A limited liability partnership.
(9) A limited liability company.
(10) A business association.
(b) The term includes all wholly owned subsidiaries, majority
owned subsidiaries, parent companies, and affiliates of such
entities or business associations that exist for profit making
purposes.
Sec. 6. As used in this chapter, "direct holdings" means all
securities of a company held directly by a fund or in an account in
which the fund owns all shares or interests.
Sec. 7. As used in this chapter, "fund" refers to the following:
(1) The Indiana state teachers' retirement fund.
(2) The public employees' retirement fund.
Sec. 8. As used in this chapter, "inactive business operations"
means the mere continued holding or renewal of rights to property
previously operated to generate revenues but not presently
deployed for that purpose.
Sec. 9. As used in this chapter, "indirect holdings" means all
securities of a company that are:
(1) held in an account or a fund; and
(2) managed by one (1) or more persons:
(A) that are not employed by the fund; and
(B) in which the fund owns shares or interests together
with other investors not subject to this chapter.
Sec. 10. As used in this chapter, "private market fund" means
any:
(1) private equity fund;
(2) private equity fund of funds;
(3) venture capital fund;
(4) hedge fund;
(5) hedge fund of funds;
(6) real estate fund; or
companies into a scrutinized company list and indicate whether
each scrutinized company has active or inactive business
operations in a state sponsor of terror.
(e) Each board shall update its scrutinized company list at least
on an annual basis based on evolving information from sources
described in subsections (b) and (c).
(f) If the Secretary of State of the United States determines that
a country is a state sponsor of terror after June 30, 2009, each
board shall add any additional scrutinized company resulting from
the Secretary of State's determination when each board updates its
scrutinized company list under subsection (e).
Sec. 17. After a board creates or updates the scrutinized
company list under section 16 of this chapter, the board shall
immediately identify the companies on the scrutinized company list
in which the fund administered by the board has direct or indirect
holdings.
Sec. 18. (a) Each fund shall send to each scrutinized company:
(1) that is identified under section 17 of this chapter as one in
which the fund has direct or indirect holdings; and
(2) that has only inactive business operations;
a written notice concerning the provisions of this chapter and a
statement encouraging the company to continue to refrain from
initiating active business operations in a state sponsor of terror
until the company is able to avoid scrutinized business operations
altogether.
(b) Each fund shall continue to correspond on a semiannual
basis with scrutinized companies:
(1) in which the fund has direct or indirect holdings; and
(2) that have only inactive business operations.
Sec. 19. (a) Each fund shall send to each scrutinized company:
(1) that is identified under section 17 of this chapter as one in
which the fund has direct or indirect holdings; and
(2) that has active business operations;
a written notice concerning the contents of this chapter and a
statement indicating that the fund's holdings in the company may
become subject to divestment by the fund.
(b) A notice sent under this section must:
(1) offer the company the opportunity to clarify the
company's state sponsor of terror related activities; and
(2) encourage the company to:
(A) cease its scrutinized business operations; or
(B) convert the company's operations to inactive business
operations in order to avoid divestment by the fund of the
fund's holdings in the company;
not later than ninety (90) days after the date of the notice.
Sec. 20. (a) If, within ninety (90) days after a fund first sends
written notice to a company under section 19 of this chapter, the
company ceases scrutinized business operations, the company shall
be removed from the fund's scrutinized company list, and sections
21, 22, 23, and 24 of this chapter do not apply to the company
unless the company resumes scrutinized business operations.
(b) If, within ninety (90) days after a fund first sends written
notice to a company under section 19 of this chapter, the company
converts its scrutinized active business operations to inactive
business operations, the company is subject to section 18 of this
chapter.
Sec. 21. (a) Except as provided in sections 23 and 24 of this
chapter, if a company continues to have scrutinized active business
operations ninety (90) days after a fund first sends written notice
to the company under section 19 of this chapter, the fund shall sell,
redeem, divest, or withdraw all publicly traded securities of the
company that are held by the fund, as follows:
(1) At least fifty percent (50%) of the securities shall be
removed from the fund's assets under management within
nine (9) months after the company's appearance on the
scrutinized company list.
(2) One hundred percent (100%) of the securities shall be
removed from the fund's assets under management within
fifteen (15) months after the company's appearance on the
scrutinized company list.
(b) If a company that ceased scrutinized active business
operations following engagement under section 19 of this chapter
resumes scrutinized active business operations, the company
immediately shall be placed on the scrutinized company list and
shall remain on the scrutinized company list while the company
continues to have active business operations. A fund that has
holdings in the company shall send a written notice to the company
as described in section 19 of this chapter indicating that the
company has been placed on the scrutinized company list and is
subject to divestment. The fund shall sell, redeem, divest, or
withdraw all publicly traded securities of the company as provided
in subsection (a) based on the date the company is placed back on
the scrutinized company list.
Sec. 22. Except as provided in sections 23 and 24 of this chapter,
a fund shall not acquire securities of companies on the scrutinized
company list that have active business operations.
Sec. 23. If the government of the United States declares that a
company on the scrutinized company list with active business
operations in a state sponsor of terror is excluded from any federal
sanctions relating to a state sponsor of terror, the company is not
subject to divestment or investment prohibition under this chapter.
Sec. 24. (a) Notwithstanding any provision to the contrary,
sections 21 and 22 of this chapter do not apply to indirect holdings
in a private market fund that includes a scrutinized company with
active business operations in a state sponsor of terror.
(b) If a fund has holdings that are excluded under subsection (a),
the fund shall submit letters to the managers of the private market
fund requesting that the managers remove the securities of the
scrutinized companies with active business operations from the
fund or create a similar private market fund that does not include
the securities of the scrutinized company with active business
operations. If the manager creates such a similar fund, the fund
having holdings excluded under subsection (a) shall replace all
applicable investments with investments in the similar fund in a
period consistent with prudent investing standards.
Sec. 25. (a) On or before November 1, 2010, and thereafter as
directed by the legislative council, each board shall submit a report
in an electronic format under IC 5-14-6 to the legislative council.
Notwithstanding IC 5-14-6-4(b)(2), the submission of a report
under this subsection to the executive director of the legislative
services agency fulfills the board's requirement to send a copy of
the report to each member of the general assembly using the
member's senate or house of representatives electronic mail
address.
(b) A report submitted by the board of a fund under this section
must include at least the following information, as of the date of the
report:
(1) A copy of the fund's scrutinized company list.
(2) A summary of correspondence between the fund and
companies under sections 18 and 19 of this chapter.
(3) All investments sold, redeemed, divested, or withdrawn by
the fund in compliance with section 21 of this chapter.
(4) All companies whose securities the fund is prohibited from
acquiring under section 22 of this chapter.
(5) Any progress made under section 20 of this chapter.
Sec. 26. The provisions of this chapter regarding any country
determined to be a state sponsor of terror cease to apply to that
country on the earlier of the following:
(1) The date the Secretary of State of the United States
removes the country from its official list of state sponsors of
terrorism.
(2) The date Congress or the President of the United States,
through legislation or executive order, declares that
mandatory divestment of the type provided for in this chapter
interferes with the conduct of foreign policy of the United
States.
Sec. 27. With respect to actions taken in compliance with this
chapter, including all good faith determinations regarding
companies on the scrutinized company list, a fund is exempt from
any conflicting statutory or common law obligations, including any
obligations with respect to choice of asset managers, investment
funds, or investments for fund securities portfolios.
Sec. 28. (a) Notwithstanding any provision to the contrary, a
fund may cease divesting under this chapter and may reinvest in
certain scrutinized companies on the scrutinized company list with
active business operations in states that sponsor terror if evidence
shows that the value of all assets under management by the fund
becomes equal to or less than ninety-nine and five-tenths percent
(99.5%) of:
(1) the value of all assets under management by the fund; plus
(2) the value of the securities of the companies divested by the
fund under section 21 of this chapter.
(b) As provided by this section, any cessation of divestment or
reinvestment is strictly limited to the minimum steps necessary to
avoid the contingency set forth in subsection (a).
(c) For any cessation of divestment, reinvestment, and
subsequent ongoing investment by a fund as authorized by this
section, the board of the fund shall submit a report in an electronic
format under IC 5-14-6 to the legislative council. Notwithstanding
IC 5-14-6-4(b)(2), the submission of a report under this subsection
to the executive director of the legislative services agency fulfills
the board's requirement to send a copy of the report to each
member of the general assembly using the member's senate or
house of representatives electronic mail address for distribution to
the members of the general assembly before any initial
reinvestment. A report submitted under this subsection shall be
updated annually as applicable, setting forth the reasons and
justifications for the decision to cease divestment, reinvest, or
remain invested with companies with scrutinized active business
operations.
(d) This section does not apply to investment by a fund in the
securities of companies that have ceased to have scrutinized
business operations.
Sec. 29. (a) Both:
(1) the state and its officers, agents, and employees; and
(2) each fund and its board members, executive director,
officers, agents, and employees;
are immune from civil liability for any act or omission related to
the removal of an asset from the fund under this chapter.
(b) In addition to the immunity provided under subsection (a),
both:
(1) the officers, agents, and employees of the state; and
(2) the board members, executive director, officers, agents,
and employees of a fund;
are entitled to indemnification from the fund for all losses, costs,
and expenses, including reasonable attorney's fees, associated with
defending against any claim or suit relating to an act authorized
under this chapter.
Sec. 30. The provisions of this chapter are severable in the
manner provided in IC 1-1-1-8(b).