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2007-26602 ResoRESOLUTION NO. 2007-26602 A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, AMENDING THE CITY'S INVESTMENT POLICY AND PROCEDURES, AS ADOPTED BY RESOLUTION NO. 95-21726 AND AMENDED BY RESOLUTION NO. 97-22315, BY INCORPORATING THE STATE'S "PROTECTING FLORIDA'S INVESTMENT ACT," (CHAPTER 2007-88, LAWS OF FLORIDA), PROHIBITING THE INVESTMENT OF PUBLIC FUNDS MANAGED BY THE CITY IN ANY "SCRUTINIZED COMPANIES" WITH ACTIVE BUSINESS OPERATIONS IN SUDAN OR IRAN, AS LISTED BY THE STATE BOARD OF ADMINISTRATION (SBA) ON A QUARTERLY BASIS, IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. WHEREAS, Senate Bill 2142, which created Sections 215.442 and 215.473, Florida Statutes, referred to as the "Protecting Florida's Investment Act" ("Act"), provides a series of legislative findings relative to current conditions in the countries of Sudan and Iran; and WHEREAS, the Act describes, in detail, declarations by the U.S. Congress, U.S. Secretary of State, and the U.S. President regarding the genocide and atrocities against the citizens of regions of Sudan; and WHEREAS, it also recognizes that Iran has failed to suspend its uranium- enrichment activities; that the United Nations Security Council and the United States have imposed sanctions against Iran; and that the United Nations has imposed an 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 program; and WHEREAS, the Act states that it is the responsibility of the State of Florida to decide how, where, and by whom financial resources in its control should be invested; and WHEREAS, moreover, it is the prerogative of the State not to participate in ownership or capital-providing capacity with entities that provide significant practical support for genocide, including certain non-U.S. companies presently doing business in Sudan; and WHEREAS, the Act also recognizes that there are financial risks with investments in publicly traded companies that have business activities in and ties to Iran's petroleum-energy sector; and WHEREAS, the Act requires the State Board of Administration (SBA) to perform certain tasks related to the "Public Fund", which is defined as all funds, assets, trustees, and other designatees under the SBA; and WHEREAS, the SBA is required to make its best efforts to identify all scrutinized companies in which the Public Fund has direct or indirect holdings, or could possibly have such holdings in the future; and WHEREAS, the definition of "scrutinized company" as to Sudan, includes a company with business operations in Sudan with revenues or assets linked to oil-related or power-production activities under certain circumstances; or a company that is complicit in the Darfur genocide; or a company that supplies military equipment within Sudan under certain conditions; and WHEREAS, the definition of "scrutinized company" as to Iran, includes a company with business operations that involve the government of Iran or certain companies, and have revenues or assets linked to Iran and involve oil-related or mineral-extraction under certain conditions; and WHEREAS, the Act requires the SBA to assemble a list of "scrutinized companies" and update it quarterly; and WHEREAS, the Public Fund is prohibited from acquiring securities of any companies on the scrutinized companies list which have active business operations in Sudan or Iran, with certain exceptions; and WHEREAS, in response to the financial risk posed by investments in companies doing business with countries that sponsors terrorists, the Securities and Exchange Commission established its Office of Global Security Risk to provide for enhanced disclosure of material information regarding such companies; and WHEREAS, the current Sudan divestment movement encompasses nearly 100 universities, municipalities, states, and private pension plans; and WHEREAS, companies facing such widespread divestment present further material risk to remaining investors; and WHEREAS, it is a fundamental responsibility of the City of Miami Beach to decide where, how, and by whom financial resources in its control should be invested, taking into account numerous pertinent factors; and WHEREAS, divestiture should be considered with the intent to improve investment performance and, by the rules of prudence, fiduciaries must take into account all relevant substantive factors in arriving at an investment decision; and WHEREAS, it is the prerogative and desire of the City of Miami Beach, with respect to investment resources in its control and to the extent reasonable, with due consideration for return on investment on behalf of the City and its investment beneficiaries, not to participate in an ownership or capital-providing capacity with entities that provide significant practical support for genocide, including certain non-United States companies presently doing business in Sudan; and WHEREAS, the City of Miami Beach is seriously concerned about investments in publicly traded companies with business activities in and ties to Iran's petroleum- energy sector as a financial risk to the shareholders; and WHEREAS, by investing in publicly traded companies having ties to Iran's petroleum-energy sector, the City of Miami Beach is putting the funds it oversees at substantial financial risk; and WHEREAS, 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 consistent with the rules of prudence; and WHEREAS, to protect the City of Miami Beach's assets, it is in the best interest of the City to amend the City's Investment Policy and Procedures, as adopted by Resolution No. 95-21726 and amended by Resolution No. 97-22315, to prohibit the investment of public funds managed by the City in any "scrutinized companies" with active business operations in Sudan or in Iran, as fisted by the State Board of Administration on a quarterly basis, in accordance with the provisions of the Act; and NOW, THEREFORE, BE IT DULY RESOLVED THAT THE MAYOR AND CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, that the Mayor and City Commission hereby amend the City's Investment Policy and Procedures, as adopted by Resolution 95-21726 and amended by Resolution 97-22315, by incorporating the State's "Protecting Florida's Investment Act" (Chapter 2007-88, Laws of Florida), prohibiting the investment of public funds in any "scrutinized companies" with active business operations in Sudan or Iran, as listed y t State Board of Administration (SBA) on a quarterly basis, in accordance with~h o isions of the Act. PASSED and ADOPTED this 11th day of J~1Y `~' MAYOR David Dermer A E T: CITY CLE K Robert Parcher APPROVED AS TO FORM & LANGUAGE & FOR EXFE~JTION Condensed Title: COMMISSION ITEM SUMMARY A Resolution amending the City's Investment Policy and Procedures as adopted by Resolution 95-21726 and amended by Resolution 97-22315, by incorporating the State's "Protecting Florida's Investment Act" (Chapter 2007-88, Laws of Florida), prohibiting the investment of public funds in any "scrutinized companies" with active business operations in Sudan or Iran as listed by the State Board of Administration (SBA) on a quarterly basis, in accordance with the provisions of the Act. rce intended outcome Su orted: Improve the City's overall financial health and maintain overall bond rating. Supporting Data (Surveys, Environmental Scan, etc.): As required by the Florida Legislature, Florida Statutes 215.442 and 215.473 Issue: Shall the Mayor and City Commission approve the Resolution? item summa /Recommendation: The Administration recommends that the Mayor and City Commissioners follow the State of Florida and prohibit the investment of public funds in any "scrutinized companies" with active business operations in Sudan or Iran as listed by the State Board of Administration (SBA) on a quarterly basis, and that such policy be adopted and incorporated into the City's Investment Policy. In addition, this recommendation will be provided to the Boards of Trustees of the following City pensions for their review: Miami Beach Employees' Retirement System, Retirement System for Firefighters and Police Officers, and Firemen's and Police Relief and Pension Funds. Board Recommendation: Financial Information: Source of Amount Account Funds: 1 N/A 2 3 OBPI Total Financial Impact Summary: City Clerk's Office Legislative Tracking: Patricia Walker, Chief Financial Officer Si n-Offs• Department Director sistant City Manager City Manager JAR PW JMG _~ ~ ~~ ~ ~ ~~ ~ AGENDA ITEM R DATE 7-- ~(7 7 m MIAMIBEACH City of Miami Beach, 1700 Convention Center Drive, Miami Beach, Florida 33139, www.miamibeachfl.gov COMMISSION MEMORANDUM TO: Mayor David Dermer and Members of the City Commission FROM: Jorge M. Gonzalez, City Manager /.- DATE: July 11, 2007 SUBJECT: A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, AMENDING THE CITY'S INVESTMENT POLICY AND PROCEDURES AS ADOPTED BY RESOLUTION 95-21726 AND AMENDED BY RESOLUTION 97-22315 BY INCORPORATING THE STATE'S "PROTECTING FLORIDA'S INVESTMENT ACT" (CHAPTER 2007-88, LAWS OF FLORIDA), PROHIBITING THE INVESTMENT OF PUBLIC FUNDS IN ANY "SCRUTINIZED COMPANIES" WITH ACTIVE BUSINESS OPERATIONS IN SUDAN OR IRAN AS LISTED BY THE STATE BOARD OF ADMINISTRATION (SBA) ON A QUARTERLY BASIS, IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. ADMINISTRATION RECOMMENDATION Adopt the Resolution KEY INTENDED OUTCOME SUPPORTED Improve the City's overall financial health and maintain overall bond rating. ANALYSIS Senate Bill 2142, which created Florida Statutes 215.442 and 215.473 referred to as the Protecting Florida's Investment Act ("Act"), provides a series of legislative findings relative to current conditions in the countries of Sudan and Iran. It describes, in detail, declarations by the U.S. Congress, U.S. Secretary of State, and the U.S. President regarding the genocide and atrocities against the citizens of regions of Sudan. It also recognizes that Iran has failed to suspend its uranium-enrichment activities, that the United Nations Security Council and the United States have imposed sanctions against Iran, and that the United Nations has imposed an 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 program. The Act states that it is the responsibility of the State of Florida to decide how, where, and by whom financial resources in its control should be invested. Moreover, it is the prerogative of the State not to participate in ownership or capital-providing capacity with entities that provide significant practical support for genocide, including certain non-U.S. companies presently doing business in Sudan. The Act also recognizes that there are financial risks We are committed to providing excellent public service and safety to all who live, work, and play in our vibrant, tropical, historic community. Commission Memorandum Amending Investment Policy July 11, 2007 Page 2 of 2 with investments in publicly traded companies that have business activities in and ties to Iran's petroleum-energy sector. It finds that divestment 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. The Act should remain in effect only if it continues to be consistent with and does not unduly interfere with the foreign policy of the United States. The Act requires the State Board of Administration (SBA) to perform certain tasks related to the "Public Fund", which is defined as all funds, assets, trustees, and other designates under the State Board of Administration. The SBA is required to make its best efforts to identify all scrutinized companies in which the Public Fund has direct or indirect holdings or could possibly have such holdings in the future. The definition of "scrutinized company" as to Sudan, includes a company with business operations in Sudan with revenues or assets linked to oil-related or power-production activities under certain circumstances, or the company is complicit in the Darfur genocide, or the company supplies military equipment within Sudan under certain conditions. The definition of "scrutinized company" as to Iran, includes a company with business operations that involve the Government of Iran or certain companies, and have revenues or assets linked to Iran and involve oil-related ormineral-extraction under certain conditions. The Act requires the SBA to assemble a list of "scrutinized companies" and update it quarterly. This list is due within 90 days after the effective date of the Act, which will probably be publicized the first week of September 2007. The Public Fund is prohibited from acquiring securities of any companies on the Scrutinized Companies list which have active business operations in Sudan or Iran, with certain exceptions. A company that the U.S. government affirmatively declares to be excluded from federal sanctions related to Sudan or Iran is not subject to investment prohibitions. Additionally, the investment prohibition provisions do not apply to indirect holdings in actively managed investment funds. However, the Public Fund is required to send letters to the managers of such funds requesting that they consider removing those companies from the fund or create an alternative fund. If an alternative fund is created, the Public Fund is required to replace all applicable funds with the new fund. CONCLUSION The Administration recommends that the Mayor and City Commissioners amend the City's Investment Policy and Procedures as adopted by Resolution 95-21726 and amended by Resolution 97-22315 by incorporating the State's "Protecting Florida's Investment Act" (Chapter 2007-88, Laws of Florida), prohibiting the investment of public funds in any "scrutinized companies" with active business operations in Sudan or Iran as listed by the State Board of Administration (SBA) on a quarterly basis, in accordance with the provisions of the Act. Attachment JMG/PDW/jar T:Wgenda\2007\ju1y110 conse t\Investment Comm Memo.doc We are committed to providing excellent public service and safety to all who live, work, and play in our vibrant, tropical, historic community. ~ ~-I--a cl.~ n.~e~ The Florida Senate PROFESSIONAL STAFF ANALYSIS AND ECONOMIC IMPACT STATEMENT (This document is based on the provisions contained in the legislation as of the latest date listed below.) Prepared By: General Government Appropriations Committee ____-_ GILL: CS/SB 2142 INTRODUCER: Governmental Operations Committee, Senator Deutch, and others suB~ECT: Investments of the State Board of Administration DATE: l~pCrl 24, 207 REVISED: ------ -- -- ANALYST STAFF DIRECTOR REFERENCE ACTION 1. Pardue/Skelton Skelton _ MS Favorable 2. Wilson _Wilson GO Fav/CS 3. Luczynski __ _ _Maclure JU Favorable 4. iylcVanev _ DeLoach G.A _ Favorable __ S. ----------- - ---- -- --- 6. - ---- - ------ -- Sumrt~ary: The bill provides a series of legislative findings relative to current conditions in the countries of Sudan and Iran. It describes, in detail, declarations by the U.S. Congress, U.S Secretary of State, and the U.S. President regarding the ongoing genocide and atrocities against citizens of regions of S>.rdan. The bill recognizes that Sudan is designated as a State Sponsor of Terror by the U.S. Department of State and that the U.S. government applies trade sanctions against Sudan for its ongoing actions. The findings include information regarding universities, municipalities, states, and private pension plans that have chosen to divest of securities with equity ties to companies doing business with the Government of Sudan. "Tyre bill recugnizes that Iran Iias failed to suspend its uranium-enrichment activities: the United Nations Security Council and the United States have imposed sanctions against Iran; and the United Nations has imposed an 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. The bill finds that it is the responsibility of the State of Florida to decide how, where, and by whom financial resources in its control should be invested. Moreover, it is the prerogative of the state not to participate in ownership or capital-providing capacity with entities that provide significant practical support for genocide, including certain non-U.S. companies presently doing business in Sudan. Further, the bill recognizes that there are financial risks with investments in publicly traded companies that have business activities in and ties to Iran's petroleum-energy sector. It finds that divestment from markets that are vulnerable to embargo, loan restrictions, and sanctions from the ! Initeri States aril the iotcr-natianal community, including the United ~.S.i..._~ r,..__..it~ .`'fit' t ;`'. :~ 1„;- ' ,~f11i'. ~ if~ I~r t"del ?f .~ it-j?P,.'P_ ~2iC lll~t t111E:~ tll3t tI~C aCt BILL: CS/SB 2142 Page 2 should remain in effect only if it continues to be consistent with and does not unduly interfere with the foreign policy of the United States. The bill requires the State Board of Administration (SBA) to perform certain tasks related to the "Public Fund." The Public Fund is defined as all funds, assets, trustees, and other designates under the State Board of Administration. The SBA is required to make its best efforts to identify all scrutinized companies in which the Public Fund has direct or indirect holdings or could possibly have such holdings in the future. 'hhe definition of "scrutinized company" as to Sudan, includes a company with business operations in Sudan with revenues or assets linked to oil-related orpower-production activities under certain circumstances, or the company is complicit in the Darfur genocide, or the company supplies military equipment within Sudan under certain conditions. The definition of "scrutinized company" as to Iran, includes a company with business operations that involve the Government of Iran or certain companies, and have revenues or assets linked to Iran and involve oil-related or mineral-extraction under certain conditions. A company designated as a "social-development company" that is not complicit in the Darfur genocide is not considered a scrutinized company. The SBA is required to assemble a list of "scrutinized companies." "The list shall be updated quarterly. The Public Fund is required to actively engage any company on the list to encourage the company to refrain from active business operations with the Government of Sudan. For a company which is newly identified on the list as having active business operations, the Public Fund is required to send the company a written notice of its status as a scnrtinized company and the possibility that it may become subject to divestment by the Public Fund. If, after 90 days following the Public Fund's first engagement through written notice, the company on the Scrutinized Companies i,ist continues to have scrutinized active business operations, the Public Fund is required to sell, redeem, divest, or wiihdraw all publicly traded securities of the company, subject to certain exceptions, within t 2 months after the company's -nost recent appearance on the Scrutinized Companies List. If a company reswnes active. business operations in Sudan, it is to be added back to the Scrutinized Companies List immediate]}~. The Public Fund is prohibited from acquiring securities of any companies on the Scrutinized Companies list which have active business operations in Sudan or Iran, with certain exceptions. The divestment provisions do not apply to indirect holdings in actively managed investment funds. 'The Public Fund is required to send letters to the managers of such funds requesting that they consider removing these c~ompanics from the tznd or create an alternative fund. If an .~r~ `3 ¢'~;i{~)1 e~;., E'.-lc•Ct =.!~ f ,~7~ u,-~rU ..x.,i-. :it f11_ r ~iC C%;: «.tl ~k'~I! I(„ni ~1 ~_f-~i ..., : ~.t C:i1L ),i ri1P.,;. t3-~[.: CS/SB 2142 Page 3 alternate fund is created, the Public Fund is required to replace all applicable funds with the new fund. The Public Fund must file a report with each member of the Board of Trustees of the State Board of Administration, the President of the Senate, and the Speaker of the House of Representatives that includes the Scrutinized Countries List for Sudan and Iran within 30 days of the creation of the list. At each quarterly meeting of the Board of Trustees thereafter, the Public Fund must fi1.e~ another report with additional information as specified in the bill. This report is also to be distributed to the U.S. Presidential Special Envoy to Sudan and to the U.S. Presidential Special Envoy to Iran. The act expires if certain conditions are met as specified in the bill. With respect to this act, the Public 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 the Public Fund's security portfolios. The Public Fund may cease divesting, or reinvest, in certain scrutinized companies if the value of all assets under management by the Public Fund becomes equal to or less than 99.50 percent, or 50 basis points, of the hypothetical value of all assets under management by the Public Fund assuming no divestment had occurred under the divestment provisions of this act. Such activities require an additional report to the Board of Trustees of the State Board of Administration, the President of the Senate, and the Speaker of the House of Representatives. The act includes a severability clause. This bill creates sections 215.442 and 215.473, Florida Statutes. li. Present Situation: I~istory of the Conflict in the Republic of the Sudan and li~arfur' According to the U.S. Department of State, Sudan is the largest country in Afi-ica comprising an area almost the sire of the cortine~~tal Crn; P.a St tes n+ ~ t ~~ ~ '~ tau a ea.,~ f he ?~Iiss..,r~ppi Ri~.~c:r. Su,lan .~ population is one of the most diverse on the African continent. The country has two distinct major cultures, "Arab" and "black African," which include hundreds of ethnic and tribal subdivisions and language groups. Sudan was a collection of small, independent kingdoms until 1820-1821 when Egypt conquered and unified the northern portion of the country. A nationalist revolt led by religious leader Muhammand ibn Abdalla resulted in a brief period of independence beginning in 1885. In 1898, an Invading force led by Lord Kirchner established a period of Anglo-Egyptian rule that lasted until Sudan achieved independe~~~ce on .lanuary (; 1956. - ice. U. ~3c~:1 ~,,..,~,~ . ~ ~....~. ~ u.,l H .~...,~~ ~ ., ~ - ~~,.1 u v I IJ i. .. ~UV BILL: CS/SB 2142 Page 4 Independent Sudan was established under a provisional constitution that was silent on t~vo issues that were considered crucial for southern Sudanese leaders-the secular or Islamic character of the state and its federal or unitary structure. Due to the failure of the Arab-led government in Khartoum to create a federal system as promised, southern army officers led a mutiny that resulted in 17 years of civil war (1955-] 972). Sudan has been at war with itself for more than three-quarters of its existence since 1956. In 1972, an agreement was signed in Addis Ababa granting the South a measure of autonomy. The western regions of Darfur and Kordofan then sought similar privileges but were denied. Political maneuvering continued wail 1979 when Chevron discovered oil in the South. Northern pressure began to build to abrogate those provisions of the peace treaty granting the South financial autonomy. Ultimately in 1983, the Southern Region was abolished, Arabic was declared the official language, traditional Islamic punishments derived from Shari'a (Islamic Law) were incorporated into the penal code, and control of the southern arn~ed forces was transferred to the central government. The second Sudan civil ~~ar effectively began in January 1983. The 1990's saw a succession of regional efforts to broker an end to the Sudanese civil war. In July 2002, an agreement was reached on the role of the state and religion and the right of Southern Sudan to self-determination. This was followed by an agreement in November 2004 committing to a 6na1 comprehensive peace agreement and a United Nations Security Council Resolution 1574 calling for an end to the violence in Darfur. The Comprehensive Peace Agreement (CPA) was formally signed on January 9, 2005. The CPA established a new Sudanese Government of National Unity and the interim Government of Southern Sudan v~ith a call for wealth and power sharing, a ceasefire, withdrawal of troops from Southern Sudan, and security arrangements betwecrl the two parties. In 2003, while the historic north-south conflict was on its way to resolution, increasing reports of attacks on civilians especially aimed at non-Arab tribes began to surface. A rebellion broke out in Darfur, in t}'ie extremely marginalized western Sudan, led by two rebel groups--the Sudan Liberation Movement/Army (SLM/A) and the Justice and Equality Movement (JEM). These groups represented agrarian fanners who are mostly non-Arabized black African Muslims. In seeking to defeat the rebel movements, the Government of Sudan increased anus and support to local tribal and CriliCr militias, which have wnl~ to be knov,-n as }ie Janjaweed. Attacks on the civilian population by the Janjaweed, often with the direct support of Government of Sudan forces, have resulted in the deaths of tens of thousands of persons and the d;'splacement ofapproximateiy 2.5 niiilion people.3 On September 9, 2004, Secretary of State Colin Powell told the Senate Foreign Relations Committee. "genocide has been committed in Darfur and that the Government of Sudan and the Janjaweed bear responsibility--and that the genocide may still be occurs°ing." President Bush echoed this in July 2005, ~vh;:n he stated that the situa±icn ii: Darfur •~tas "clearl} gea~o~idc.'° ?W at ~I.~ E `lit?t•r~ ' <.£. _ ~ t .. £aE~~ rh it ,. ~ h; ,~ ~`~(' (1O~ ~ , <1 ~ ~. ~ ,' '~ ~t~L: CS/SB 2142 Page 5 In March 2005, United Nations Security Council Resolution 1590 established a UN mission in Sudan, with up to 10,000 African Union military personnel, in order to foster peace in Darfur. Security Council Resolution 1591 subsequently criticized the Government of Sudan and rebels in Darfur for failing to comply with several previous resolutions, for ceasefire violations, and for human rights abuses. On May $, 2006, the Government of Sudan and a faction of the SLM/A signed the Darfur Peace Agreement. Shortly thereafter, the conflict in Darfur intensified, led by rebel groups who refused to sign the agreement. After government forces began a major offensive on rebel areas in northeia~ Darfur in late August 2006, Security Council Resolution 1706 authorized the transition of the African Union mission to a more robust UN peacekeeping operation. The Government of Sudan has resisted the establishment of such an LJN operation. On November 16, 2006, UN Secretary General Koli Annan announced in Addis Ababa, Ethiopia, that further agreement on peacekeeping forces had been reached. However, recent reports indicate that Sudanese President Omar Hassan al-Bashir has refused to accept the plan. In an attempt to document the atrocities in Darfur, the U. S. State Department characterized the situation in 2004 as a humanitarian crisis. At that time, 405 villages in Darfur had been completely destroyed and another 123 substantially destroyed. Approximately 200,000 persons had sought refuge in eastern Chad and the UN reported an estimated 1.2 million internally displaced persons remained in western Sudan.a Since that assessment, the situation has become worse. As previously stated, the current estimate of displaced persons is approximately 2.5 million. Humanitarian relief efforts for displaced persons camps have been blocked and aid workers have been forced to leave. Dav to day life in and around the camps is dangerous with an ever present threat of rape, torture, or murder. The United Nations and the international community are continuing efforts to arrive at peace in Darfur. SUdan'S 1".COnf3lny ~iZda'~ 4. n.-j r..ri~r .7 n.,~. n~t:y ,~,a,.i.r CQ"7 ,, ?~ l)' 1 n- '.~ .4 4. .. Nu ~ b..,~., uviit~,.r pr~u~+~.~ v, ~......,.. b: i30ii n _~,~J ~~il„ a pcr Capi~u iiiC07iiC vl $2,100. Sudan has modest reserves of oil, natural gas, gold, iron ore, copper, and other industrial metals. Its primary resources are agricultural with products including cotton, peanuts, sorghum, sesame seeds, gum Arabic, sugarcane, millet, and livestock. However, oil production and export has taken on increasing importance since October 2000 when oil began to b:, exported. There are indications of significant potential reserves of oil and natural gas in Southern Sudan, the Kordofan region and the Red Sea province. Sudan's major markets include Egypt, The Persian Ciulf states, Saudi Arabia, Malaysia, Cliina, and South Korea. Sudan's maj~~r suppliers include the E'i.irnpean Union, China, Malaysia, Canada, the United Kingdom, Italy, Germany, Saudi Arabia, Egypt, the Persian Gulf states, and surroundiria Fast African nations. r i c c,, ~o r,,~~,r~,it, ,r ct- , ~ ~,~~ , t t c n + ~,r~._ .l..,f i~.~,7 .. ~ t,i p 1 I',~'.'tl r,. ,rt r~ f c t ~ 1 BILL: CS/SB 2142 Page 5 Sudan has an estimated population of approximately 41 million people. Of these, approximately 22 million live in the northern region including most of the urban centers. Six million live in the southern region. The remaining population is located in the eastern and western regions. State Sponsors of Terrorism Countries which are determined L-y the United States Secretary of State to I~tave repeatedly provided support for acts of international terrorism are designated as "State Sponsors of Terrorism" and are subject to sanctions under the Export Administration Acts, the Arms Exp~_~rt Control Act,G and the Foreign Assistance Act.' The four main categories of sanctions resulting from designations under these acts are: restrictions on U.S. foreign assistance, a ban on defense exports and sales, certain controls over exports of dual use items, and miscellaneous financial and other restrictions.g Some of the miscellaneous restrictions include opposition to loans by the World Bank and other financial institutions, removal of diplomatic immunity to allow victims of~ terrorism to file civil lawsuits, denial of tax credits to companies and individuals for income earned in named countries, authorit}~ to prohibit U.S. citizens from engaging in transactions without a Treasury Department license, and prohibition of Department of Defense contracts above $100,000 with companies controlled by terrorist-list Mates.`' The five cot.uitries currently designated by the U.S. Secretar~ of State as "State Sponsors of Terrorism" are Cuba, Iran, North Korea, Sudan, and Syria.' The Republic of the Sudan was recognized as a State Sponsor of Terrorism on August 12, 1993, and has retained that designation continuously since that time. While terrorist activity appears to have subsided in recent years, concerns remain. In the April 2005 "Country Reports on Terrorism" released by the Office of the Coordinator for Counterterrorism for the U.S. Department of State, Sudan is cited for its continued cooperation against known and suspected international terrorist elements believed to be operating in and out of Sudanese territory. The report cited Sudan's cooperation with the international community in calling for strong condemnation of ten-orism. However, the report cautions that Sudan's history of hosting al-Qaida leader Usama bin L.adin in the 1990s continues to reflect heavily on any assessment of Sudan's role in international terrorism. While there is considerable international concern about Sudan's handling of tntcr~~al rebel movcmc:^ts, the rcpcrt !ndtctcs th«t thc:c :~ no ct;r."cnt data tnd,::att:"~~ that international terrorists operate in Darfur. The flow of weapons into and out of Sudan has weakened international efforts to stabilize the region. There is continued concern that Sudanese fighters are among the insurgents in Iraq. There is evidence of their presence, and of the Sudanese government's attempts to curb this activity. ' Section 6(j), U.S. Export Administration A.et. `' Section 4U, U.S. Arms Export .ontroi Act. 'Section f,2(iA, l;.S. Foreign Assistance Ac.t. "li.S. Department of State wehsite, h)t~7:j%www_s~iat~ t~;vr's~c11c la (i I.hun. Offiue o. C~~ordir,at~ir for i ~uinrertrrr~~ritim. „>r,~re. Sponsors of Terrorism." `'' U S. DepartmcntofStatc ,~ebsit2,._!ii ", :~,c_,tar ~G,~:~ Cou~r~r} Pc~,;.t, ~,~ T~rror,sri." io C, ~ , ..v Footnote ; ah~~~.~e_ BILL: CS/SB 2142 Page 7 The U.S. government attributes progress made in working with Sudan to reduce terrorism to diplomatic actions and economic pressure applied by sanctions, both U.S. and international, Current U.S. Sanctions Against Sudan ~ ~ The United States has imposed trade sanctions on the Government of Sudan since November 1997. Executive Order No. 13067, its successor orders, and associated regulations have remained in effect continuously. Among the reasons for the ongoing trade sanctions are the continued support for international terrorism, the ongoing efforts to destabilize neighboring govemrnenis, the prevalence of human rights violations including slavery, and the denial of religious freedoms. In addition to U.S. sanctions, the United Nations Security Council (UNSC) issued Resolution 1591 and Resolution 1672 condemning the actions of the Government of Sudan and calling on member nations to take certain measures against persons responsible for continuing conflicts. In response to UNSC F.esolution 1672, President Bush issued a ne~~~ Executive Order (EO) expanding on the original sanctions of EO No. 13067. The expanded order specifically names persons subject to its provisions and authorizes the DeparUnent of Treasury and Department of State to designate additional persons, as needed. Persons Warned as, or doing business with persons named as "Specially Designated Nationals" of Sudan face the following sanctions: • U.S. persons are prohibited from transacting business with these individuals and. entities, and all of their property in the United States or in the possession or control of a U.S. person, is blocked. • Any U.S. individual or organization engaging in transactions with foreign nationals must take reasonable care to make certain such foreign nationals are not owned, controlled by, or acting on behalf of Sudan. U.S. individuals or organizations that violate the regulations r~?ay be subject to civil or criminal prosecution. y Goods or services of Sudanese origin may nol be iniportod into i1re Uuiied Slates, either directly or indirectly without a license. Except for certain exempted goods (information, donated articles to relieve human suffering, and licensed export of agricultural, medicine and medical devices}, no goads, technology or services may be exported from the U.S. to Sudan. No U.S. bank may do business with Sudanese customers or customers doing business with the Sudanese government. All property and interest in property of the Government of Sudan in U.S. possession or control is frozen and may only be released with approval of the U.S. Deparn~ent of Treasury, Office of Foreign Assets Control A11 unspecif;ed transactions with Sudan are prohibited. I/~nited States persons are prohibited from facilitating trade with Sudan. ~~ U.S. DepaaL~,eni of!he. T!casury, (~itice ~~fl oreign !lsseis Cnutrol, "4l~hat Yew Nc.cd To Knew about t~-S. Sanctio~~s ~*L~;z R. BI[.L: CS/SB 2142 Page 8 Florida State Pension Funds and Annuities The State Board of Administration is created in Article IV, Section 4(e) of the State Constitution. Its members are the Governor, the Chief Financial Officer, and the Attorney General. The Board derives its powers to oversee state funds from Article XII, Section 9 of the Constitution. 7'he State Board of Administration (SBA) has responsibility for oversight of the Florida Retirement System (FRS} Pension Plan and the FRS Investment Plan, which represent approximately $129 billion or 73 percent of the $177 billion in assets managed by the SBA (as oI~ December 31, 2006). The Pension Plan is a defined benefit: plan and the Investment Plan is a defined contribution plan that employees may choose in lieu of the Pension Plan.12 The FRS receives employer contributions from approximately 950 employers (local government entities). The state share of the FRS equals approximately 25 percent of the total annual contributions with the remainder coming from other government sources.13 Investment decisions for the pension plan are made by fiduciaries hired for that purpose by the state. Im~estment decisions for the investment plan are made by individual employees «~ho may design their own portfolios based on participating offering companies. The State of Florida has adopted federal fiduciary standards for management of the FRS funds. The .Employee Retirement Income Security Act of 1974 (ERISA) is regulated by the t}.S. Department of Treasury and is the Florida standard for management of public funds. ~~ The Trustees of the SBA and ail fiduciaries who manage Florida funds are bound by law to follow the standards established in ERISA. The SBA investment managers are contractually bound to follow all federal and state laws in performance of their services to the state. The SBA does not invest in the securities of any company domiciled in countries on the U.S. State Department list of State Sponsors of Ten-orism, which as previously mentioned includes Sudan and Iran.15 ©ivestment of Securities Divestment of securities is one method of applying economic pressures to companies, groups, or countries .~~hose practices are n~,t condoned by .,.hareholders. Divestme~~t ~nav be ~!sed in conjunction with or in lieu of other sanctioning methods such as economic embargoes, and diplomatic and military activities. Alternatively, divestment may be used as protective device if a particular investment carries a high level of risk to the performance of a fund. Several tools are available to fund managers, and their trustees, to protect funds against harm. The federal government has established the Office of Global Security Risk within the Securities and Exchange Commission to provide information to fund managers about potential risks of securities becoming unstable or losing value due to risk conditions, either political, or economic, that might. exist in cer~ain circumstances or locations around the world. Since fiduciaries are ~` SE3A Staff a,nal~~si~ of NR 7C1• February ~. 20(17. ' ~ Id. _ _ 'a Secti~~n ; 12.6E~i(~), I'.S. is St3~ CL;ff ~i.;ai- ,: ;,~~~{(; ?Q"i_ r' ytry~ ; •.. ci -,a~~~ BtLL: CS/SB 2142 Page 9 required to divest using prudent expert standards, they must have valid economic reasons for making decisions related to investment, divestment, or repositioning in any particular securit}~. The purpose of the Office of Global Security Risk is to provide fund managers with the information needed to make those decisions; however, the SEC does not take a position about investing in individual companies.16 There is no known definitive federal list of companies that have equity ties to, or do business with, Sudan. Several organizations provide lists of companies suspected of doing business in or with these countries, but none are definitive. The Department of Treasury does keep a list of "Specially Designated Nationals" (SDN} made up of companies or individuals who are not authorized to do business with the United States or its citizens. These SDN lists are either specific to a particular country designated as a State Sponsor of Terrorism or generic to the Global War on Terrorism.~~ "Engagement" is a tool that fund managers can use to attempt to change the behavior of a company that appears to be at high risk of exposure to losses. This process involves a direct conversation with a company by stockholders to express concerns about the high risk activity of the company. Companies may be asked to change their behavior to reduce investment risk. Engagement has been credited with changing the investment strategies of several large companies over time. Recently, ABB (Swiss power engineering group) and Siemens AG (German electronics and electrical engineering company] have suspended business operations in Sudan as a result of the engagement process which included the possibility of divestment. is If the engagement process fails, or if it is not used, the next tool available to fund managers is to divest of a security. Generally, this practice is only used i-i the most dire circumstances. ~~ Divestment, or "Targeted Divestment," may be used to illustrate to an offending country that the actions of its government are causing companies that do business with the country to lose money. Divestment on a large scale may apply enough economic or political pressure to change the behavior of a country. The State of Florida has practiced divestment twice in modem history. From ] 986 to 199>, the Legislature directed the SBA to divest of companies doing business with South Africa. From 1997 until 2001, the SBA made a decision to divest of 16 tobacco stocks due to pending litigation involving the state and those companies. There are no specific records to quantify tl;e impact of the South Africa divestment by Florida, but the overall boycott campaign was succcssfu! i-i changing tl~-e social envire~ru~nerrt in South Aliica.'~ Thu tobacco divcstnle]li way done .related to a court case and was not directed toward a specific social change. Organized I)ivestenent 1Vtovements Several states, local governments, and universities have initiated efforts to practice divestment of their holdings to protest the ongoing genocide and atrocities against humanity in the Darfur iv Phone conversation with Cecelia ~!}~e, Chief of the Office of Global Securit~~ Risk; Division of Corporate Finance Securities any Exchange Comrriission; cited in SBA Statf Analysis oi~HB "7U3, February ~, 2Uf17. ~' http:Uwww.treasury.gov/of}ices/enforcement/ofaasdn/index.shtml 18 h[t}~:/iwww_sudan~livestment.orgidivestrr!ent.nsp~g6 iv ld 2a "Tlae Effect ofSoc~ally .1ct~~-ts[ In~~estiri~nt 1'oli~i~s oi~ ;lip l~uia,~c:a1 Markcas. L~vidccce Gvm thr South P, fi~..r~ ~c~y~..ot( BILL: CS/SB 2I42 Page 10 region of the Republic of Sudan.21 Some states have used the Sudan Divestment Task Force Model Legislation,22 while others have drafted legislation or policy that is either more or less restrictive than the model legislation. In addition, there are multiple resolutions and bills filed in the 1 IOth Congress calling for divestment of public funds by federal and state and local government entities to protest the Sudan situation. The State of Illinois passed a broad divestment bill, which addressed the deposit of certain funds in banks in the state as well as securities which were prohibited. The U.S. District Coul-t for thr Northern District of Illinois found the legislation to be unconstitutional.`3 Apermanent injunction against implementation of the legislation was ordered. In the portion of the holding related to the prohibited actions on the part of the state managed pension funds, the court held that the Illinois law violated the Foreign Commerce Clause of the U.S. Constitution.``' III. Effect of Proposed Changes: The bill provides a series of legislative findings relative to current conditions in the countries of Sudan and Iran. It describes, in detail, declarations by the 11.5. Congresc, 11.5 Secretary of State; and the U.S. President regarding the ongoing genocide and atrocities against citizens of regions of Sudan. The bill recognizes that Sudan is designated as a Statc Sponsor of Terror by the U.S. Department of State and that the U.S. government applies trade sanctions against Sudan for its ongoing actions. The. findings include information regarding universities, municipalities, states, and private pension plans that have chosen to divest of securities with equity ties to companies doing business with the Government of Sudan. Further, the bill finds that it is the responsibility of the State of Florida to decide how, where, and by whom f nancial resources in its control sho~Ild be im~ested, and it is the prerogative of the state not to participate in ownership or capital-providing capacity with entities that provide significant practical support for genocide, including certain non-U.S. companies presently doing business in Sudan. It finds that divestment should only be used sparingly and judiciously and that a Congressional and Presidential declaration of genocide satisfies this high threshold. The bill finds that the act should remain in effect only if it continues to be consistent with and does not unduly interfere with the foreign policy of the United States. t tac -c ~p to ~ tip t i~ rl he blll regUir~`; the Cute I3Cir ~~ ^f A dITIIn!StI";'.tir~n (C~ n ~ n ~ arfnr~?7 `nrt:3!n 1'. la "Public Fund." The Public Fund is defined as all funds, assets, trustees, and other designates under the State Board of Administration. Within 90 days of the effective date of this bill, the. SBA is required to make its best efforts to identify all "scrutinized companies" in which the Public Fund has direct or indirect holdings or could possibly have such holdings in the firture. "Scrutinized compan}~" is defined as a company that meets any of the follo~~ing criteria: _• ~~~~~"~~.~..Sn:,ianD!~~eshncnl.c~r~, 'z lcl. ~' Nai'i rureigri Trade Cuuncii-inc. v.v'iaunoulias, N,~. ;)G C' ~;~51, X00? bt'I ' ''G~=.O (P~~.ll. EIL I e'u. I, ?00-j. ,~ " S~ ,.:~<`Peu~t ~`J C< iw11l:~ei ~ i` ~s ~~~~~~:, n,~re,it tarle<i ~«~ ~~ssum. BILL: CS/SB 2I42 Page I I 1. The company has business operations that involve contracts with or provision of supplies or services to the Government of Sudan, companies in which the Government of Sudan has any direct or indirect equity shares, consortiums or projects commissioned by the Government of Sudan, or companies involved in consortiums or projects commissioned by the Government of Sudan; and: More than 10 percent of the company's revenues or assets linked to Sudan involve oil-related activities ormineral-extraction activities; less than 75 percent of the company's revenues or assets linked to Sudan involve contracts with or provision ofoil-related or mineral-extraction products or services to the regional government of Southern Sudan or a project or consortium created exclusively by that regional government; and the company has failed to take substantial action;' or More than 10 percent of the company's revenues or assets linked to Sudan involve power-production activities; less than 75 percent of the company's power- production activities include projects whose intent is to provide power or e{ectricity to the marginalized populations of Sudan; and the company has failed to take substantial action. The company is complicit in the Darfur genocide. The company supplies military equipment within Sudan, unless it is clean}' shown that the equipment cannot be used to facilitate offensive military actions or the company implements rigorous and verifiable safeguards to prevent use of the equipment by forces participating in armed conflict. The company has business operations that involve contracts with or provisions of supplies or services to the Government of Iran or other specified entities and: a. More than 10 percent of the company's total revenues or assets are linked to Iran and involve oil-related activities ormineral-extraction activities; and the company has failed to take substantial action;26 or b. The company has, with actual knowledge, on or after August 5, 199E, made an investment of $20 million or more, or any combination of investments of at least $20 million in any 1~'-month period, and which directly or significantly cuttiributes iu the ct,ltar,~crnent of Itan's auiiity to ue~el~p the tic;ruieutir resources of Iran. Within 90 days after the effective date of this act, the SBA is required to assemble all scrutinized companies that fit any one of the above criteria 1, 2, or 3 into a "Scrutinized Companies with Activities in Sudan List" and all scrutinized companies that fit the above criterion 4 into a ,s"Substantial action specific to Sudan" means adopting, publicizing, and implementing a formal plan u, cease scru[ii~ized business operations within) year and to refrain from any such new business operations; undertaking humanitarian efforrs in conjunction with an international organization, the government of Sudan; the regional government of Southern Sudan. or a nonprofit entity evaluated and certified by an independent third party to he substantially in a relationship to the company's Sudan business operations ancJ of benefit to one or mere marginalized populations of.Sudan; ~~r_ thrnu~~h engagemr°nt ~~-ith thr Government of Sudan, nrateriaity improving conditions for the genocidally victimized population in C)arfur. ~,, `"Suhstantiai action specifc to Iran" means udoptrnK, pull crzu~g, and i~;iplcn~ci;ting a formal plan t~ cease ~:~u,~n:za; hi;<r iegg i~pf t'<lipltti With~a 'qtr ?r~~! t,_~ rP fi .il.~ it-~l'~t ,.t V ctlCh i ,_ is } i ,i~~: < c rHPi~tI1 S. I31LL: CS/SB 2142 Page 12 "Scrutinized Companies with Activities in the Iran Petroleum Energy Sector List." This report with generally refer to these two lists as the Scrutinized Companies List. The SBA is required to update the list quarterly. A company designated as a "social-development company" that is not complicit in the Darfur genocide is not considered a scrutinized company. The Public Fund is required to provide written notice to any cornpany on tine list with roar"rive business operations to encourage the cornpany to continue to refrain from initiating active business operations in Sudan ar Iran until it is able to avoid scrutinized business operations. A new written notice is to be sent semiannually. For a company that is newly identified on the list as a scrutinized company with active business operations, the Public Fund is required to send the company a written notice of its status as a scrutinized company and the possibility that it may become subject to divestment by the Public Fund. 'C'he notice is to inform the company of actions it can take to avoid qualifying for divestment. The requirement is that the company must cease scrutinized business operations or convert to inactive operations within 90 days. If a company on the Scrutinized Companies List fails to take action within 90 days after engagement through written notice, the Public Fund is required to sell, redeem, divest, or withdraw ail publicly traded securities of the company, subject to certain exceptions, within 12 months after the company's most recent appearance on the Scrutinized Companies List. A company that the U.S. government affirmatively declares to be excluded from federal sanctions related to Sudan or Iran is not subject to divestment. Further, the divestment provisions do not apply to indirect holdings in actively managed im-estment funds. If a company that ceased scnrtinized active business operations resumes scrutinized active business operations, it is to be added back to the Scrutinized Companies List immediately. The written notice process begins again for that company. "hhe Public Fund is prohibited from acquiring securities of any companies on the list which have active business operations in Sudan or Iran, with certain exceptions. A company that the U.S. government affirmatively declares to be excluded from federal sarrctiuns related to Sudan i>r Iran is not subject to the investment prohibitions. Additionally, the investment prohibition provisions do not apply to indirect holdings in actively managed investment funds. However, the Public Fund is required to send letters to the managers of such funds requesting that they consider removing those companies from the fund or create an alternative fund. If an alternate fund is created, the Public Fund is required to replace all applicable funds with the new fund. The bill creates another exclusion for defined contribution plans. However, the Public Fund is required to 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 offering without scrutinized companies. The. Public Fund must file a report with the Board of Trustees of the State Board of ,'~dmi:;i~'raf~~~n t~.€.: ~;er.ate President. ar:d the I-l~t~se Speaker which inciirdes the Scrutinized a-t,L: CS/SB 2142 Page 1 Companies List within 30 days of the creation of the list. The report is a public document. At each quarterly meeting of the Board of Trustees thereafter, the Public Fund must file another report with additional information as specified in the bill. This report is also to be distributed to the U.S. Presidential Special Envoy to Sudan and to the U.S. Presidential Special Envoy to Iran. The report is to include: 1. A summary of correspondence with companies engaged by the Public Fund that are active or inactive scrutinized companies; 2. All investments sold, redeemed, divested, or withdrawn in compliance with the divestment provisions of the bill; 3. All prohibited investments under the investment prohibition provisions of the bill; 4. Any progress made toward the removal of scrutinized companies from actively managed investment funds or the creation of similar funds without scrutinized companies; and 5. A list of all publicly traded securities held directly by the State of Florida. The act expires upon the occurrence of all of the following conditions: 1. The Public Fund is no longer required to assemble the Scrutinized Companies with Activities in Sudan List, shall cease engagement and divestment of such companies, and may reinvest in such companies' because one of the following has occurred: ^ The Congress or the President declares that the Darfur genocide has been halted for at least 12 months; ^ The United States revokes all sanctions against the Government of Sudan; ^ The Congress or the President declares that the Government of Sudan has honored its commitments to cease attacks on civilians, demobilize and demilitarize the Janjaweed and associated militia, grant free and unfettered access for deliveries of humanitarian assistance, and allow for the safe and voluntary return of refugees and internally displaced persons, or ^ The Congress or the President declares that mandatory divestment of the type required in this act interferes with the conduct of U.S. foreign policy. and 2. 7 ne Public Fund is no Longer reyuired to assemble pile Scrutinized lompanies with f~.ctiviti~s in the h-an Petroleum Energy Sector List, shall cease engagement and divestment of such companies, and may reinvest in such companiesZ$ because one of the following has occurred: ^ The Congress or the President. states that the Government of Iran has ceased to acquire weapons of mass destruction and support international terrorism; ^ The United States revokes all sanctions against the Government of Iran; or • The Congress or the President declares that mandatory divestment of the type required in this act interferes with the conduct of U.S. foreign policy. ,, "['he .public Find may reim~est u~ such cnnl~~an~es if~the~' do not sat~st~~ t!~rc~ crirene i`_u mc!~!s~~n m the ~cr ~r.~~ized z=ompanies with Activities in Iran Petroleum Energy Sector List ~~ The Pubic Fund may reinve.~i in such companies ififtcy do not 5~itisfv ihu.:riicria foi in~lusi.u~ in E; u: Suuf~nied _.~-'tp.?n'es ,4~i(iry 'i, rat ~[;~•~; ir1 4 Ll i11n jrc, B[LL: CS/SB 2142 Page 14 With respect to this act, the Public 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 the Public Fund's security portfolios. The Public Fund may cease divesting, or reinvest, in certain scrutinized companies if the value of all assets under management by the Public Fund becomes equal to or less than 99.50 percent, or 50 basis points, of the hypothetical value of all assets under management by the Public Fund assuming no divestment had occur--ed under the divestment provisions of this act. Such activities require an additional report to the Board of Trustees of the State IIoard of Administration, the President of the Senate, and the Speaker of the House of Representatives. The act includes a severability clause. The bill provides that it shall take effect upon becoming a law. IV. Constitutionallssues: A. Municipality/County Mandates Restrictions: Article VII, section 18(a) of the Florida Constitution (the unfunded mandate provision) provides that "[n]o county or municipality shall be bound by any general law requiring such county or municipality to spend funds." The bill may result in divestment costs that are estimated to range from $3 million to $20 million. It is unclear what percentage of these costs could be related to the participation of local government. "I'o the extent that local government absorbs more than an insignificant percentage of these estimated costs and that the absorption of these costs could be characterized as a requirement to spend funds, the bill might violate the unfunded mandate provision of the constitution. B. Public Records/Open Meetings Issues: None. C. Trust Funds Restrictions: None. D. Other Constitutional .Issues: In National Foreign Tilade Cozrrrci/, Inc. v. Giannou/ias,`9 the Federal I?istrict Court held unconstitutional the Illinois Act to End Atrocities and Terrorism in the Sudan (Act), which imposed various restrictions on the deposit of state funds in financial institutions whose customers have certain types of connections with Sudan and on the investment of public pension funds in Sudan-connected entities. "1'he court discussed the following three argu-rents asserting that the Act violated the tJ.S. COII~htutlon: ~~ ~`, t?~-! t--._i;t i n . _-.?. c ~_ _~t!l1. i. ~•-;;~ (,;;fir?'~ t.,.a5. ~ ~. ilft i,_ i ic; ?~)ii~ ~rtr 7_ _~(ii(i I~r.1 } ( I E-Cn. _ ~i li 1 B1~L: CS/SB 2142 Page 1 ~ i. The Aci violates the Supremacy Clause because it is preempted by federal law governing relations with Sudan; ii. The Act interferes with the federal government's ability to conduct foreign affairs; and iii. The Act violates the Constitution's Foreign Commerce Clause.30 The Act amends the Deposit of State Moneys Act and the Illinois Pension Code to prohibit certain investments in the goverr-ment of Sudan and companies doing business in or with Sudan. The Act's effect on the Illinois Pension Code is somewhat analogous to this bill The Act amends the Illinois Pension Code in pertinent part to prohibit the fiduciary of any pension fund established. under the Code from investing in any forbidden entity. A "forbidden entity" is essentially any company transacting business in Sudan, lending or investing in Sudan, or domiciled in Sudan. The court held that the Act did not violate the Supremacy Clause or interfere with the federal government's ability to conduct foreign affairs. However, the court did hold that the Aci violates the Cunstitutiur-'s Fureign Curn-ncrce Clause. Foreign Commerce Clause The court noted that "State regulations that facially discriminate against foreign commerce are per se invalid."31 Additionally, "nondiscriminatory state regulations affecting foreign commerce violate the Foreign Commerce Clause if they create a substantial risk of conflicts with foreign governments or impede the federal goven~ment's ability to speak with one voice in regulating commercial affairs with foreign states."" The opinion noted that courts are split on the issue of whether the market participatior- exception to the Commerce Clause applies to the Foreign Commerce Clause. However, the court did not have to resolve the issue because it found that Illinois is not acting exclusively as a market participant through its enforcement of the Illinois Sudan Act. The act affects the pension funds of municipal entities, which are not part of the state for purposes of the market participant doctrine. "f hus, with regards to the pension funds of the municipal entities, the state of Illinois is a regulator. Therefore, even if the market participant ductri-te appliCS to the Fureig-- Cunnr;c;rc~ Clause, it would r-ot appiy iti tl,i, situation. To the extent that the market participant exception to the .Foreign Commerce Clause does apply and to the extent that the State Board of Administration acts exclusively as a market participant as to the Public Fund, arguably this bill does not violate the Foreign Commerce Clause. '0 Id. at *5. ~~ 1c±. at * i5lc~ting Yiazza'.~ Se:~fnod ~~~urid, i.Li.~ v. (i~;~in~, 4wti f~~. ~cl 7~id, X50 ~ih Cis. ~(~~G). /~U,. BILL: CS/SB 2142 ______ __ __ _Page ] b V. Economic Impact and Fiscal Note: A. Tax/Fee Issues: None. B. Private Sector Impact: "the intended impact of the legislation is to reduce the state's investment to companies that are. included on the Scrutinized Companies with Activities in Sudan List or the Scrutinized Companies with Activities in the Iran Petroleum Energy Sector List. Depending on the size of such holdings in the Public Fund, some private companies could suffer losses from divestment. C. Government Sector Impact: The State Board of Administration (SBA) may be required to divest of certain holdi-zg in companies on the Scrutinized Companies with Activities in Sudan List or the Scrutinized Companies with Activities in the Iran Petroleum Energy Sector List. If this activity results in lost investment income, or administrative costs associated with divestment and replacement of the divested funds, those costs will have to be absorbed by the Public Fund in the forn~ of a revised investment policy statement or by higher employer payroll contribution rates. The table below reports what are believed by the SBA to be the scale and scope of the divestitures affected by this bill, assuming that none of the scrutinized cornparies cease scrutinized business operations within 90 days after engagement. "hhe following is an explanation of the columns in the table: i. The column labeled "Sponsor List SB 2142" represents an estimate of the number of companies, the estimated cost of divesting, and tl~e estimated asset values of the companies that would be included on the Scrutinized Companies with Activities in Sudan List, based on the application of certain criteria to a list of companies provided by the sponsor of the bill to the SBA which was matched up with the FRS holdings as of February 28, 2007. This column is based on the pre-committee substitute version of the bill. ii. The column labeled "Sponsor List SB 2250" represents one estimate of the number of companies, the estimated cost of divesting, and the estimated asset values of the companies that would be included on the Scrutinized Companies with Activities in the Iran Petroleum Energy Sector List, based on the application of certain criteria to a list of companies provided by the sponsor of the bill to the SBA which was matched up with the FRS holdings as of February 28, 2007. This column is based on the pre-committee substitute version of the bill. iii. The column labeled "SBA Estimate SB 2142" represents an estimate of the number of companies, the estimated cost of divesting, and the estimated asset values of the companies that would be included on the Scrutinized Companies with Activities in Sudan List, based un the application of certain criteria to a fist of companies obtained fmm In~tifr.~tirmal Shareholder Services which was BtLt_: CSiSB 2142 Page 17 matched up with the FRS holdings as of February 28, 2007. This column is based on the pre-committee substitute version of the bill. iv. The column labeled "Sponsor List SB 2250" represents one estimate of the number of companies, the estimated cost of divesting, and the estimated asset values of the companies that would be included on the Scrutinized Companies with Activities in the Iran Petroleum Energy Sector List, based on the application of certain criteria to a list of companies obtained from Institutional Shareholder Services which was matched up with the FRS holdings as of February 28, 2007. This column is based on the pre-committee substitute version of the bill. v. The column labeled "Peer SBA Estimate CS/SB 2142 (CALPERSI" represents an estimate of the number of companies, the estimated cost of divesting, and tLe estimated asset values of the companies that would be included on the Scrutinized Companies with Activities in Sudan List, based on the list of companies that satisfy the criteria for divestment under a somewhat similar California law which was matched up with the FRS holdings as of February 28, 2007. Tlris coiumr~ presenis estirnate5 that appear to be basctl ou ~ritctia ~lusci to the committee substitute version of the bill. 'T'here is disagreement as to the scale and scope of the effects including the names of the affected companies. Attempts to narrow the differ~nccs are ongoing, but there is considerable factual uncertainty since the assumptions of the parties and the data sources used cannot be presently reconciled: l3 R~n- m t v n,~~.~f ..?fit .flt.i ~~~' ~.i „ ~":;.~ i.;ac. i. et ri ~ . 7 ~ iv,~~ i~ ~ ~ i~ ~.~., ~ . ...... ~ ,~,ti._, ~.~", .,. _ _.~.., ~. ~. The SBA bill analyses for t17e pre-conunittee substitute versicns of SB 2142 (HB 1431 ) and SB '2~0 provide rnure dcta~ieu c;sti~riatcs ~_~f file FK> Pe;nSiun Piati i~tipl~~tii~t;ta~i«i~ BELL: CS/SB 2142 Page 18 costs associated with these bills. In addition to providing the estimated costs of divestment, the analyses provide an estimate of the higher annual fees that SBA believes would be necessary because of anticipated changes in investment vehicles. Additionally, the analyses provide estimates for increased SBA staffing requirements, and increased costs of research and communications. As the committee substitute contains substantial changes, including the addition of sanction provisions related to Iran, the cost estimates based on the pre-committee substitute version of the bill is not included in this professional staff analysis. T'he SBA indicated that it is in the process of updating its analysis to reflect the committee substitute version of the bill. VI. Technical Deficiencies: The third provision of the bill34 specifying what best efforts in the identification of scrutinized companies includes appears to be missing the words "Reviewing the" at the beginning of the provision. The Legislature may wish to amend this provision to correct this apparent omission. The prevision in the section. of the bill concemin ;the identification of scrutinized companies provides an exception for social-development companies that are not complicit in the Darfur genocide. 'The exception appears to leave an inapplicable reference to the criterion that would qualify a company to be included on the Scrutinized Companies with Activities in the Iran Petroleum Energy Sector List.~5 The Legislature may wish to consider deleting this reference. V{I. Related Issues: None. ~rti;~ co.,.,r» P~~rvcc~nnal Staff Anafvsis does not reiiect the intent or oftlci:~~ position of the bile's introducer or the Florida Senate:- ~ ~ ee ~a~,e I ~, Itne 4 of me t ~ ft~~ ~ti ~~ l ~t _ „~ Sec the. R~iefCi c i.) ~~,b,;..t ., .t.~~ ~ ,,.; t ' 's,-~ ~ 1 I„~~> _ nf~ihe i '7 iut ~ 7 ? I ~+._ BILL: CS/SB 2342 Page 19 VIII. Summary of Amendments: None. This Senate Professional Staff Analysis does not reflect the intent or official position of ~hc bill's introducer or the Florida Senate. A~{a~l~n~c~ -3 ENROLLED 2007 Legislature CS for SB 2192, 1st Engrossed 1 2 An act relating to investments cf the State Buaru of Aun;inistiation; oreaLi;;y ti; 9 "Protecting Florida's Investments Act"; S creating s. 215.992, P.S.; providing reporting 6 requirements for the executive director of the 7 State Board of Administration; requiring the 8 State Board of Administration to publish 9 certain quarterly reports on its website; 1~ creating ~. 215.973, F.S., providing 11 legislative findings; providing defi;iitions; 12 requiring the State Board cf Administration to 13 .identify all companies in which public moneys 19 are invested that are doing certain types of 15 business in or with Sudan and Iran; requiring 16 the board tc create and maintain, certain 17 ~cruti:,ized companies lasts that name all such 18 companies; requiring the board to periodically 19 contact all scrutinized companies and encourage 20 them to refrain from engaging in certain types 2' OF ~?L~1.^, f?~., i!1 nr ,,;~i th C,; !~,~n nr Tr~n~ roC~!i, i,rinn 22 the board to inform scrutinized companies of ._. ~ ~ i c i L .~ ~ d. ~ i.i ..; dv 1 :~ ~. 1 i.: ~ i. ~ i ~: E. _. _ ~.i i,`, u , 1jr , u ~. ,. 29 ask for clarification as to the nature of each 25 company's business activities; providing that a 26 company may b~ removed from the list under 27 certain conditions; providing for 28 reintroduction of a company onto the list; 29 ,«=q„i ring the board to ,ii vest of all publicly ,iGI ~LUUt'.d ~e~:'ui i~.i .,~ a ~..i i. i lil ~ E~.:, L~:.ripa~iy 31) under certain conditions; providing exceptions i ,: Y T ~ ,.,_ .:. , ENROLLED 2007 Legislature CS for SB 2192, 1st Engrossed 1 to the divestment requirement; prohibiting the 2 board from acquiring securities of scrutinized s companies than. have active business operations; 4 providing exceptions to the investment 5 prohibition; providing an additional exception 6 from the divestment requirement and the 7 investment prohibition to certain indirect 8 holdings in actively managed investment funds; 9 requiring the board to request that the 10 managers cf .,,:ch investmcr,t fur,d~ ccn~idcr 11 removing scrutinized companies from the fund or 12 create a similar fund that excludes such 13 co:r:parries; requiring the board to file a report 19 with the Governor, the Legislature, and 1~ Attorney General witr;in a specified period 16 after creation of each scrutinized companies l~~ list; requiring the annual filing of ar: up..~ ^'ated 18 report; requiring that all such reports be made 19 available to the public; requiring that the 20 report include certain information; providing 21 ~ f ~ t',« er;pir~'~i~n ;,f `h~ a~ ~~y _~::y 22I certain information to be included in the '.; ~:-~vt5i.."~t~Iit N,.~~Cy' ~'~aL~.i`';L, uuL,'-.b'i~1.1"", .{ tSE~ 29I board to cease divesting or to reinvest in 25 certain scrutinized companies if the value for 26 all assets under mar,ageme;~t by the board 27 becomes equal to or less than a specified 28 amount; requiring the board to provide a ~9 ,.~~tt~.. report tc the ~-o.%~~r-._=, th=~ Jai 1, cyl5iati]T e, alia Atis i)r ile y" i~e:ntr<~i uELCirc uCi1 31f reinvestment; requiring that the report contain CODING: ~ .._ ~;c~=3~cFC-~':. u t ,i:~ ~_"_ ., . ... ~ .. .. . . ENROLLED 2007 Legislature CS for SB 2192, lst Engrossed 1 certain information; requiring semiannual 2 updates to such reports when applicable; -: , ., pxv'~1Cli:iy iCix S2~'clu.i~~ 'y; plv i:iiil~ d;. 9 effective date. 5 6 WHEREAS, on July 23, 2009, the United States Congress 7 declared that "the atrocities unfolding in Darfur, Sudan, are 8 genocide," and 9 WHEREAS, on December 7, 2009, the United States 10 Congress noted that the genocidal policy in Darfur has led to 11 reports of "systematic rape of thousands of women and girls, 12 the abduction of women and children, and the destruction of 7.3 hundreds of ethnically African vi.1_iages, including the 19 poisoning cf their wells and the plunder of their crops and 15 cattle upon which the people of such villages sustai.. 16 Lhemseives," and 17 WHEREAS, on December 7, 2009, Congress found that "the 18 Government of Sudan has restricted access by humanitarian and 19 human rights workers to the Darfur area through intimidation 20 by military and security forces, and through bureaucratic and 21 adm~~nistrativc ob.str.rtior., _.. an attempt to infl.ic*_ the most 22 devastating harm on those individuals displaced from their 23 ciiicye~ c.;(:! `:ot?te~~ ~~~..~.? t;:n; i;"loot r5 __ ct_~tc:.an,~e ~.~ 29 shelter," and 25 WHEREAS, on September 25, 2006, Congress reaffirmed 26 that "the genocide unfolding in the Darfur region of Sudan i_s 27 characterized by acts of terrorism and atrocities directed 28 against civilians, including mass murder, rape, and sexual 2° violen:-e committed by the Janjaweed and a~~seciated m:il.iti.a~ _S ~ ~h~ Ur(~ri r. S.ty =+nd ~-r.~ - i ~: ,...,i _ - ~ ~rl c. ~ O. ~ _ 31I Fatty-led faction of tt,e _,~.~e_nme.,r_ of Suda.,,' end :e~ubPvT t ~ -.-r~-per-~ __ ~~ _ _~, _.. .. _ ~_i ,. __ ENROLLED 2007 Legislature CS for SB 2192, 1st Engrossed 1 WHEREAS, on September 26, 2006, the United States Hcuse 2 of Representatives stated that "an estimated 300,000 to i^O,C~, pc~r~l~ 1.U~_ :~E~r~ .~1'~_:1 }. y, t!:e _..~~ _...er., .;f "~'a:, and 9 its Janjaweed allies since the crisis began in 2003, more than 0 , 000, 000 pevpl~ have been ~'lsplaced from tt,eir hc;;nes, and 6 more than 250,000 people from Darfur remain in refugee camps 7 in Chad," and 8 WHEREAS, the Darfur crisis represents the first time 9 the United States Government has labeled ongoing atrocities as 10 genocide, and 11 WHEREAS, the Federal Government has imposed sanctions 12 against the Government of Sudan since 1997, These sanctions i3 are monitored through the United States Treasury Department's 14 Office of Foreign Assets Control (OFAC), and l5 WHEP.EAS, ;~_cerding tc ~ fc-°m~r ,,^hair of the United i6 States Securities and Exchange Commission, the fact that a 17 fore.ian company is doing material .r,usiness with a country, 18 government, or entity on OFAC's sanctions list is, in the SEC 19 staff's view, substantially likely to be significant to a 20 reasonable investor's decision about whether to invest in that 21 companv, and 22 WHEREAS, since 1993, tl-~e United States Secretary of <,.~ ~~ 3~~ '11u5 ~ldi E. r,an "1 ih dt. :~U~1a;l _~. C~iUI ~._Y Sri : ~., UUbC1fI1L'c:it 29 has repeatedly provided support for acts of international. 25 terrorism, and, as a result, the United States has restricted 2h assistance, defense exports, defense sales, financial 27 transactions, and various other transactions with the 28 Government of Sudan, and 29 WHEREAS, a 2006 report by United States House of '~~ AFL ~F i't__,. *.. _~i~ .-. .. *. .... *'~.,. .. ,i ..., .- .: _, _~.+_~r'. ice}. 't, ~ _ ?1 Si: ,.,.~Cr~~ Of t:r?i~.~'L...sm ~.:d ?:umar, _ i_~!~ts a~us~G, ro matter l,oc.r .. ,. ~ ~~ , ,, _ ~, ~ , _. .. ENROLLED 2007 Legislature CS for SB 2192, lst Engrossed 1 large or small, can have a materially adverse result on a 2 public company's operations, financial condition, ear.nin.gs, ~f ~ ~r '~hr~ ,]~,e 3 aad sr~~ ,}. ~.~_ ~."_ r,f wh~ ri _;~~ .gig= _i~~e1}% f _ - - T' 4 of an investment," and fit{ ,~-~:E li :~, 11~ YE_'Sp vI15 c. tv ti;G f1. i~idnClai r1.Sf I-~O Sid ;"iy E investments in companies doing business with a state that 7 sponsors terrorists, the Securities and Exchange Commission 8 established its Office of Global Security Risk to provide for 9 enhanced disclosure of material information regarding such 1C companies, and 11 WHEREP.S, t?^:e current Sudan divestment mo~.~ement 12 encompasses r.eariy 100 un.i_versities, municipalities, states, 13 and private pension plans, and lq WHEREAS, companies facing such widespread divestment 1r.. .->.-e~'c^t F',.rtner m3t'~'r1a~. r1S'~ t0 rE`ma1P.1nC 1nVe5t01"c, and I- 1~ WHEF<EAS, 1_t_ i° a fundamental respor.sib..lity of the 17 State of Florida to decide where, how, and by whom financial 18 resources in its control should be invested, taking into 19 account numerous pertinent factors, and 2p WHEREAS, it is the prerogative and desire of the State 21 of Florida, wish respect to investment resources in its 22 control and to the extent reasonable, with due consideration ~_ for iet~.ain :?; ,.;e !rit.nL i;r; k~l,ali ;,F the str.te grid its 29 investment beneficiaries, pct tc par.ticipate in an ownership 25 or capital-providing capacity with entities that provide 2F, significant pr.acti.cal support for genocide, including certain 27 non-United States companies presently doing business in Sudan, 28 and 29 WHEREAS, a resolution of the United Nations Security ~~"c,_.,~~ l ~_^t,~osr~'_ sa,~_~o~ _ ~_„ 7ra:, for i_t n f:~i ll;r^ s~~sp2nd 31 i*_ uran i,..m-enx:.ic:}_r".~:~`_ ~cti „i ties, ai:d __ '~ ENROLLED 2007 Legislature CS for SB 2192, 1st Engrossed 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 u~ an expar;dtu list o: 9 individuals and companies involved in Iran's nuclear and 5 ballistic missile programs, and calls fen nations and 6 institutions to bar new grants or loans to Iran except fur 7 humanitarian and developmental purposes, and 6 WHEREAS, Iran's financial ability to pay its debts to 9 foreign entities involved in the petroleum-energy sector 10 amounting tc more than $20 million is put at ris}: by the Iran 11 arnd Libya Sanctions Act embargo and sanctions, and 12 WHEREAS, foreign entities have i,~vested in Iran's 13 petroleum-energy sector despite United States and United. 19 Nations sanctions against Iran, and 1~ wHr.REAJ, 0111 UnitE~ .cJtdtCS Gild lOrelgn e:,tltlP.J LnGI 16 have invested more than $20 million in Iran's energy sector 1? sir:ce August 5, 1996, are ~ub;ect to s~nctiens under United 18 States law pursuant to the Iran and Libya Sanctions Act of 19 1996, and 20 WHEREAS, the United States renewed the Iran and Libya 21 Sanctions Act of. 1996 in 2001 and 20n6 ~,rd 22 WHEREAS, while divestiture should be considered with 2.3 LIiC 1Ltc!i ~~ tG illi~~l.vJC il:Veo ~iiroL i. i..•E'Livlil.a;: ~: ~: alr..t, y _i.~ 1~~L:3. 29 of prudence,. fiduciaries must take into account all relevant 25 substantive factors in arriving at an investment decision, and 2E WHEREAS, the State of Florida is deeply concerned abou*_ 27 investments in publicly traded companies that have business 28 activities in and ties to Iran's petroleum-energy sector as a 29 f1n~ 11 :~1a1 r1_ck tC. t. I's shareh~a 1. .a ,_~ ,. '"!G Jli W~; Z: t: Li-1:~r by ~!1 `v _J~i71~.j J_I-: LiLLliClj% ~..u~: rQ ~Ci ti r. x',i ~-S 31. having ties to Iran's petroleum-energy sector, the Florida 6 i_~L3S?`iCa. /~ _ , ;~ -~-j`-r iF~'Tt ~ _ ~ x~ ~ _ „r,s ; _ 1~ _r ~ _ ~ _ ~ ~ , ~ _ . _ . ENROLLED 2007 Legislature CS for SB 2192, lst Engrossed 1 State Board of Administration i_s putting the funds it oversees 2 at substantial financial risk, and 3 Wti Ei~EA5, dlVc'Stiturc L~viti Ilai't:c t_, glut uY@ ?";.- +~1-~ 9 to embargo, loan restrictions, and sanctions from the United ~' States and the international community, including the United 6 Nations Security Council, is in accordance with the rules of 7 prudence, and g WHEREAS, the Legislature finds that this act should 9 remain in effect only insofar as it continues to be consistent 10 with and does lint unduly interfere with the foreign policy of 11 the United States as determined by the Federal Government, and 12 WHERER.S, to protect Florida's assets, it is in the best 13 interest of the state to enact a statutory prohibition 19 regarding the investments managed by the State Board of 1.'. 'ridmli~l~tratlOri dOlny bliS1I;?SS 1I1 ~Udan Gr ,.n irarV' 16 petroleum-energy sector, hOF7, THEREfOP.E, 17 18 Be It Enacted by the Legislature of the State of Florida: 19 20 Section 1. This ac* r~av be cited as the "Protecting 21~ Flc;rida`s i-n~.~estmer~ts Act. ' 22I Section 2. Section 215.992, Florida Statutes, is ~:~ ~L~<i,_Cl.i to leaa: 29 215 992 Executive director reporting requirements, 25 public meeting. __ 26 (1) Rexinnina October 20C7_an~uarter.ly thereafter 27 the executive director shall present to the Board_of Trustees 28 of the State Board ~f Administration a quarterly report to 2" incl'.~de the following.- ?ii ;ai :~2 tat*g= ` ta: t ~, r 1 ;~v _+ _a.- ~_ ~1 ~ of Adrnil 1 fiat-_oli has in/E~~ tee' i. t ~ =~''iE- ,. _ - ENROLLED 2007 Legislature CS for SB 2192, lst Engrossed 1 (b) The industry category of each eauity• 2 (2) The executive director shall present each 3 ~arter~___rep!ort at__a_ rlee_ting oT .tle_r~ua_rd a trustec_~__ni~i,_ 4 shall be open and noticed to the public pursuant to the S requirements of s 286 Oll and s %9 (b) Art. I of the State 6 Constitution- 7 {3) The State Board of Administration shall publish a 8 copy of teach quarterly ~c-wort on its website prior to 9 p_resenting_the report at Pach quarterly meeting of the board IO of trustees. 11 Section 3. Section 215.973, Florida Statutes, is 12 created to read: 13 215.973 Di~~estitura by the State Board of 14 Administration• Sudan; Iran.-- 15 (lj DEF'NIT1OiVS.--As used in this act, tc:e terra: 16 ~~~ '"A~tive business operations" means all business 17 c-erativns *_hat are not inactive business onerat_-or,s. 18 (b) "Business operations" means engaging in commerce 19 'n any form in Sudan or 'ran includi~a but not limited to, 20 ac~cuiring, develop~na maintairinq owning ~ellinc 21 poss .i,~ ~a° rg c° ~p,_ -~+i ,g :g,~=pmenr f=.i~ ~r, sL 22 personnel, products services personal property, real 2., 1-1V{~E_iLV1._~~Z a~ ~~;}ler ~i~;ycic:Cii= v .~u_ _nC~S ~i ~.iJll _ fj_ 24 ~ "Comgan~' means any sole proprietorship, 25 organizationassociation, corporation, p_artner_ship,_ joint 2E venture lim~ted partrership lim~te~i 1iability partnership, 27 limited liability ~om~anyl or ether entity or business 28 association including all wholly owned subsidiaries, 2y n~a;c'-_t','-:%~-~nec subsi-'~ rie~ Fa_~nt. ~onLa.n~es. cr affila~es- t_'I,t1L1CJ iir LllSiIIC SS GJ-C'~1 1~i, :/• i-_l c.~ ~ i~ ~-i 3G of such - ~ _~. - - 31 purpose of making r~roft. ENROLLED 2007 Legislature CS for SB 2192, 1st Engrossed ]. (d) "Complicit" means taking actions during anY 2 preceding 20-month period which have directly supported or prurtuLr,d tide getiueidai carr~~ri in ualut, ii,~~iudiriy, uut ~~~'~ 9I limited to preventing Darfur's victimized population from communicating with each other encouraging Sudanese citizens 6 to speak out against an internationally approved security 7 force for Darfur actively working to deny cover uo or alter 8 the record on human rights abuses in Darfur or other similar 9 actions. 10 (e) "Direct holdings" in a company means a.ll li securities of that companv that arP held directly by tl,e i2 public fu~,d or in an account or fund in which the publi:, fund 13nwns all. shares or interests_ 19 (f) "Government of Iran" means the government of Irate l~ its ins`ruir~entalities, ar:d ccn;par~ owned :r -~;r;t ,.i=.d :; ,, i6 the government cf Iran.. 17 fig? "Government of Sud-n" means the government iP.. 18 Khartoum Sudan that is led by the Pdational Congress Part y. 19 formerly known as the Na~ional Islamic Frent, or aP,y successor. 20 government formed cn er after October 13 2005, including the 7? rp, l ; ti np n7.9t i npal ,fir { r., (~<i ~'P rPme P,r aOrr~pd >>i nn i n t1'~o 22 Comprehensive Peace Agreement for Sudan,_and does not include 23 t.}ie ;_t:y lCil cil CiV ~C ri~Il~~il ~vf J:.`~t11 t: 1"rl ,..uiac ri. 29 (h) "Inactive business operations" means the mere 25 continued holdi~nc_or renewal of rights to property previously 26 operated for trP Burp^°e ^f gePPratin~ ^v~nu~s `?>>t not 27 presently deployed for such purpose. 28 li) "Indite^t holdings" in a company means all ?~I Ser'l.l r].t ~F`c Of +hr7t t'O'!1 T'ia Py, t.},at .aL-P ~: F.ld n an 3."~OuP __`Y_ r. I u ~ u i , ~. [ a u _ ~ f .? , rr ~ ii ~~ ~ __s._ ~ ~ ~, i ~~ _1 ~ no+ ~m~lo~~ed~k,y thy. ~abll f;..,d, it ~r;~c , the ~~u~L ~u-, i ENROLLED 2007 Legislature CS for SB 2192, 1st Engrossed 1~ shares or_i_nterests together with other investors not subject 2 to thelprovisions of this act. "? i.i-L- ~ Lu" C"i_a1.16 ' plc lug _ _ i i;- '. r T ._ q (k) "Marginalized populations of Sudan" include, but are ~ 't limited ro the porti~~n of the p:,pulation in Ci;e 6 Darfur region that has been genocidally victimized; _t Le 7 portion of the population of southern Sudan victimized by 8 Sugar's north-south civil war• the Beia Rashidiva, and other 5 similarly underserved groups of eastern Sudan; the Nubian and 10 tether 4imi'ar'v underserved groups in Sudan's ~,bvei Southern it Blue Nile. and tJuba Mounta~n regions• and the Amri, Hamadan 12 Manasir and ot'~er similarly un~~Prserved groups of northern 13 Sudan. 19 (1) "Mil~tary_eguip_mert" means weapons arms military 1` Sil'~U11'~~ a.^:~ e'.;Uipm°nt `~a' ma'/ rrdC:llj' he Sc~ f^r rT`i'_t.~_ 16 purposes irlcludirg ba* got ~imifi~d to radar systems, 17 military-grade transport vehicles, or s~plies__or_ser~ic~s_ 18 sold or provided directly. or indirec*ly to any force actively 19 participating in armed conflict in Sudan. 20 (m) "Mineral-extraction activities" include the ?]. ez~loringL er,tracti^GLFr~~essinc~ transr~nrting,___C~r wholesale 22 se'ling or trading of elemental minerals or associated metal t:3 a~ i~~ :, ~__U'e:r (Cir ~'.) "'i '!_~ i~i .~ C~....l dt-. ~.Z'~;_Y1 _(_.}-i7 C.1 1_l ~=_li 29 crromite diamonds, iron ircn ore silver tur:gsten uranium 25 and zinc as well as facilitating such activities, including 26 pr""ovdinn~ supplies o"r services in suK?port of su_ch_ act_i~~ties_._ 27 (n) "Oil-related activities" include but are not 28 limited to ownirg_rights to oil blocks• exporting, ?9~ er*r.c*_ina, rrcduc - ~^, r~f,n?na___~ ocessir~___e~~lor nq__f~r,_ _ ~ .~i ~~ ~ irldintain C O~ ~01--1,=tiny ~ - 1~ _~..C r E.t '"~~r r C`~.1 :.P Y_ .. OODIF.C~. ,_ _, ~-_. .. - _ ENROLLED 2007 Legislature CS for SB 2192, 1st Engrossed 1 oil-field infrastructure; and facilitating such activities, `L including providing supplies or services in Support of such 3 activities, ~x~e~t that tt;c m~ic ret~i' 'alp c` g ~"1 ~~_% 9 related consumer products i5 not considered an oil-related 5 activity. 6 {o) "Petroleum resources" means petroleum, petroleum 7 products or natural gas. g (p) "Power-production activities" means anv business 9 aeration that involves a oroiect commissioned by the National 10 Electricity Cor~orat~on (NEC) of Sudan cr other similar entity 11 of the Government of Sudan whose purpose is to facilitzte 12 power generation and deliverer it^luding but not limited to, 13 establ.i~hi_ng power-ceneratina plants or_h_Ydroelectric dams1 14 selling er installing components for t'~e p°o~ect providing 15 .SEZ'o''.'C COntraCtS LCiytPC.i tG t .e 1.rtCtaliciitiOIi Cr C",dlntc.r,arCc? iE of t'r.e pro=~ect as well as facility*i-~q such ac*ivities, 1 ~ l~id~ n~}~rnt" r'11Pr` aUGr>1' PS ^r Sc:YV].CeS ill Spa Ort Of SUCK 18 activities. 19 (a) "Pub~~c fund" means all funds assets, trustee 20 and other designates under the State Board of Administration ~~ p': Orr r~ ,-)-;~.-•r~- ~~1 f" 22 (r) "Scrutinized active business operations" means ~.> ciltl'/~ L:i ~1'IC'JS GUeLa t1V~ ~Ci _ )_~_; 'v (: Ll :, .ii~_ i. 11 ~ ~-~1 ': i='1_i 29 bF~coming a scrutinized companv. 25 (s) "Scrutinized business operations" means business 2E cpC'-at' On" tha* )''3V~ ream] rer~ ~ n a "!~mT~anV becnming__a 27 scrutinized company. 28 (t) "Scrutinized companv" means any companv that meets ~~ c ., ti, ,,f the f~'> > nwina criteria ~l ~ contracts wilt r~~ro-%lsior; vi ~u~. c:- ~c - she 11 _ ~+s ~,y ENROLLED 2007 Legislature CS for SB 2192, 1st Engrossed 1 Government of Sudan companies in which the Government of 2 Svdan has any direct or indirect equity share consortiums or 3 ~r~ects commissioned._b~_the ~uverr;ment of Suiiar~o~ c_v~;~4r,i~~~ 4 involved in consortiums or projects commissioned by the 5I Government of Sudan, and: 6~ a. More than 10 percent of the company's revenues or 7 assets linked to Sudan involve oil-related activities or B mineral-extraction activities• less than 75 percent of the 9 com an 's revenues or assets linked to Sudan involve contracts 10 with or provision of oil-related or mil:eral-extractioa 11 products or services to the regional government of southern 12 Sudan or a ~roiect or consortium created exclusively by that 13 reai~~ral ~cvernmen*_; and the company has failed t_o take 19 °ub~tantial action; or 15 L'• More tr~a~~ i0 percent of the company' ; revenues 16 assets linked to Sudan involve power-production activities; 17 ~~ss tran ~~ p°-~'e"* ~` *?-~e ~omoanp's po~,~er-production 18 activities include proiects whose intent is to provide power 19 or electr~cit~to the marainalizPd populations of Sudan; and 20 the ccmpany has failed to take substantial action. 21 %' V ~.r - i ..O:Ppl~C_` «i.,~ narf, _nnr~rl~ 22 3_. The company supplies military eauipment within ~} jUi.ldiif uui~5~ 1L ~lttiil~ ::~1~WJ ttia~ ttc ~i~,l~.i~d1`~ d U~t~illc.i..:~ 24 cannot be used to fa~-il~tate offensive military actions in 25 Sudan or the_compa>~_im~lements rigorous and verifiable 26 safeguards tc prev~rt use of that egui^rnnr b}~.forces a^t;~~e1y 27 participating_in armed conflict Examples of safeguards 28 include post-sale tracking of such equipment by the company, ~~ LeT-~iflr-a •- f,-r•+r. rr= ,~t ~;rc' .: Cld ~r~i~'?"i VC'. t_ril1-C~_~~li._r?~~' thd_r .~'.) SL CI C Ui mCri+ i5 I VC i:iC ,.fl'y` Li :: cia 'l~v._~_i t'v' i- 1~~. :.~1 ~~+t i. ~ij _a it armed conflict in Sudan o_ salef ~uct~ e~uiurnzr~t so' e1•~ t ENROLLED 2007 Legislature CS for SB 2192, 1st Engrossed 1 the regional aovernment of southern Sudan or anv 2 internationally recoar,ized peacekee~ina force or humanitarian 3 or anization. 3------ 4 9. The company has business operations that involve 5 contracts with or provision of supplies or services to the 6 Government of Iran, compan;es ;n which the Government of Iran 7 has any direct or indirect equity share consortiums, or 8 projects commissioned by the Government of Iran, or companies 9 involved in consortiums or proj ects commissioned by the i0 Government of Iran and: 11 a. More than 10 percent of the company's tota] 12 revenues or assets are linked to Iran and involve oil-related 12 activities er mineral-extrac*ior, activi.ti_es; and t_he com~an~ 19 has failed to take substantial aation• or i5 b. 'Pr.e company teas, witC' a~tua7 knowiedae, cn or after 16 August 5 1996 made an investment of 520 million or more, cr 17 =nk c~mb~nation -^{ irvPstm~n+-~ cf at least i.C million ~..-~ch, 18 which in the aaareq_ate equals or exceFds 520 million in anv 19 12-month period and which directly or significantly 20 contributes to the enhancement of Iran's ability to develop 21 t;.e pct _eur^ ~esoar~es cr .ar 22 LL "Social-development company" means a company whose 23 ~riiriaLV ~%urpuse iii Sudan is to pr~~viue ti,:manituria,~ :~c~,d~ c;~ 24 serviced including medicine or medical equipment; 25 aaricu]tural supplies o.r infrastructure; educational 26 ~portunities• journal~~m-related activities; information. nr 27 information materials• spiritual-related activities• services 28 of a purely clerical or reporting nature• food clothing or 29 ge^eral ,o:su^:er aecds that are unrel,~ted t^ ail-r2l.ated 30 ac* ivities; rr,ir~exai ~a_d~~tivn ~~t~.=ides; or_~~e, ~.r~-u~ ~~'.- 31~ activitiE 1J ENROLLED 2007 Legislature CS for SB 2192, 1st Engrossed 1 (v) "Substantial action specific to Tran" means 2 adopting publicizing, and implementinq_a forma~lan to cease i scnatin.izPd busi.rless operations within bear and to re_irairl 9 from ar,y such new business operations. 5 mow) "Substantial action specific to Sudan" means 6 adopting ~ublicizing and implementirig a formal plan to cease 7 scrutinized business operations within 1 year and. to refrain 8 from any such new busineGS operations• undertaking 9 humanitarian efforts in conjunction with an international 10 organization the government of Sudan t]le regional oovenunent 11 of Southern Sudan, or a nonprofit entity evaluated and 12 certified by an independent third party to be substantially in 13 a relatio^~h~p ro the c^^~pary's Sudan business operations an~i 19 of benefit to one or more marginalized populations of Sudan; i5 or, through e~gaaement with the Government of Sudan, lE materially improving conditions for the gene^ida_iv victimized 17 ~pulation in Darfur 18 {2) IDENTIFICATION OF COMPANIES.-- L° {a) Within 90 days after the of°ective date of this 20 pct, the public fund shall make its best efforts to identify 2' ail SCrl.tlni~ed ij Ul it-)cu' (. :5 - 'J~ `~ t~'C' ail c end ?-:~ -? ~~ 22 o_r indirect. holdings or could possibly have such holdings in G~ the LULUre__JUC:iI F. f_L UrtS i~l_1Udt: 29 ]._ Reviewing and re~in_g~_as appropriate in the public 25 f.und's ~?udgment~_on~ublicl~ avai7.able_information regarding 26 companies having business operations in Sudan inciudinq 27 information provided by nonprofit organizations research 28 firms international organizations and government entities; 29, -. !'o_r_.ta~rir~- a~°et ~^=ge• r-nn*racte'~ by rr,e o,.rbllc ,~~) fund that ~_nvest ln_colr~pan~_ts havli~g_=u~l~~ess ~~_r_uci~r5 31 ~ Sudan~or 1 ~] ENROLLED 2007 Legislature CS for SB 2192, 1st Engrossed 1 3 Contacting other institutional investors that have 2 divested from or engaged with companies that have business of=,o~" ~i;. Sud1 4 9 Reviewing the laws of the United Sta*es regarding 5 the levels of busines° a^tivity *~at would cause a~>plic=:tion 6 of sanctions for companies corducting business or investin~n 7 courtries that are designated state sponsors of_ terror. g (b) By the first meetir~q of the public fund following 9 the 90 dam period described in paragraph (a) the public _fund 10 shall assemble all scru*ini~ed companies that fit criteria li specified in subparagrap h (1){~)1 2. and 3. into a 12 "Scrutinized Com anies with Activities in Sudan List" and 13 shall .assemble all scrutinized_com~anies that fit criteria 14 ~ecified in ~ubparaaraph (1)(t)9 into a "Scrutinized 1.~i CO[Tlpa~~e~ '+.'1 t}'1 Acti '~le~ '_. P. tr1~ `?`-'i', tpYrnlr?Um F',n r?~rJ1 SPCf r;r 16 List. 17 1cZ_The_pub~ic. fur: _sh~ll_ update and make public i8 ava~labie quarterly the Scrutinized Companies with Activities 19 in Sudan List and the Scrutinized Companies with Activities in 20 the Iran Petroleum Eneray Sector Limit based on evolving %7. irft~rmat~.gr. from~_amon!~_ other so!,irces~.___those_. liste~__in 22 paragraph (a). ~a i~l~ Lw~ i_1, ~tand'~r~cy t}~c yi=~~i__ 29 social development con~ipank that is rot complicit in the Darfur 25 Genocide is not considered a scrutinized company under 26 subparagraph (] 1 (t~1.1__subpar~ara~h _t 1, ~t~.2,~or__,subpara~ra h 27 (1) (t) 3. 28 (3) RE UI~TIONS --The public fund shall adhere to 9 ~ the,_fcl_lo_w_in~_"pr~c~du_r~__f.or_assemblin companies cn the_ ?i !.I -. _ ;. ~ F i^ C~]"ra''1 T ~. '~ uhf' i -~ i .: _ ~... 1. ~ : i i .. L ;,j - - :. _ __ _. " ___ ~..._. - ._ 1~ i 1.47 LF 1 ~i 1. _ ~ , . t r ~ ~ .. ~ i t " _ " , _a- -> „-; _ - -'~ r1 ~ t _ ENROLLED 2007 Legislature CS for SB 2192, 1st Engrossed 1~ Scrutinized Compani-es with Activities in _t he Iran Petroleum 2 Energv Sector List: 3 ~_Eng_aaement.-- q 1 The public fund shall immediately determine the companies on the Scrutinized Companies with Activities in h Sudan List and the Scrutinized_.Co~anies with Activities in 7 the Iran Petroleum Energy Sector List in which the_public fund 8 owns direct or indirect holdings. 9 2 For each company identified in this paraaraph_that 10 Las only inactive business operations the public_fund shall 11 send a written notice informing the cornpa~ of this act and 12 encouraging it to continue to refrain from initiating active 13 business operations in Sudan or Iran until it: is able to avid 7.9 scrutinized business operations The public fund shall 15 con`int~e such corrGsp:ondence semunnually. 16 3 For each company newly identified under this 17 ~aragrapr `rat has a^tive business o~:~erat~cn~ the publi•^ fun: 16 shall send a written notice informing the company of its 19 scrutinized company status znd t}~at it ~nav become subject. to ?.0 divestment b the ublic fund. The notice must inform the 21 coT~pany of .'re opportunity ..o cl "y ~t_s Su<aan- ~'ar~-d or 22I Iran-related activities and encourage the com a~ within 90 L.5 days L. Ci C:eaSP 'i tS SCrllL__. 111 Ge C1 LU51ii=SS VjJ r:Latl Ollb VY ,~y%E'1= 29 su^h operations to inactive business operations in order to 25 avoid gualifying for di^~srmPnt by the public fund__ 26 9_ Tf within gp days U~ter the ^ublic fund`s first 27 engaaemPnt with a company pursuant to this paragraph, that 28 company ceases scrutinized business operations the company 29~ shah be removed from the Scr~tini ~d ('cmpanie~ o~ir'~ sU ACL1Vlt1i s in Sudan List at:ci ~t,e S~ru~in Eu i~:,r,ii:a is tt, 31 ~ Activities_ in the Iran Fetroleum Energv ~ector_List~_anaytl:_e i6 ENROLLED 2007 Legislature CS for SB 2192, 1st Engrossed 1 provisions of this act shall cease to apply to that company 2 unless that compar;v resumes crLtinized business operations. 3 If, within 90 da~~s after the ~.:,ic fu~~d' `~ -;t -,r.aaa. rant 9 the com an converts its scrutinized active business 5 aerations to inactive busire^s cpe~ations tl:e com~~air~~ is 6 subiect to all provisions relating to inactive business 7 o erations. A com an ma be removed from one list but remain 8 on the other limit in which case the company shall be subiect 9 to the provisions applicable to the list on which the company 10 remains. 11 (bi Divestment.-- 12 1. If after 90 days following the public fund's first ].3 eng3~xemPr~t with a cem an~purtuant tO~ar~ra h ta)~ the 19 compan continues to have scrutinized active business 1J Operatl ^'lS 'IZd OI"~ j% Wrille SuC:h O.ilt:an`:' CO n.ri n,.in!3 t0 hat/° 16 scrutinized active business operation t);e public f_;nd s~all 1? «11, rer?eem, divest, cr withdraw ail_~ublicl'~! traded 18 securities of the company except as provided in paragraph 19 (d) from the public fund's assets under management within 12 20 months after the ccmpanv's most recent appearance on the ~i c^"Utini~o!? ('nrr~~-;aniF+~ I~~i_th AC'tlVitl.P.^~ 1n SUdr777 L1St C:~r On_._t rle 22 Scru~inized Companies with Activities in the Iran Petroleum Ei~cr3.Y Cc~L ='_ 29 2 If a canpany tt;at c~ea°ed scrutinized active 25 business operations following engagement pursuant to paragraph 2E ~~~ rP~~~me° °u~h ^pPra*inns thist~_aragra~h_ immedi_3tel_y 27 a plies and the ublic fund shall send a written notice to 28 the company The com~panY shall also be immediately F~ S ?~ i rein=ro~u,^ed into ~ 1 e_=cru*~, izeu_ omran e~ with A~ti~~i_ > n ~-~ - 'i ,1 NAP ~L' p~-_] _ :._°.:_ ___ J~ ,uuail 'L.~~t it _ _ - ____. .__ - :51 the iran Fetr~~~'eun Ere~-gy `,e~~+c;r s~ as ac~nLic_ab]e. 17 ENROLLED 2007 Legislature CS for SB 2192, 1st Engrossed 1 (c) Prohibition --The public fund may not acquire 2 securiaies of compani.es_on the_Scrutinized Companies with 3 Activities in Sudan List or _the___Scrutinized C:omoan_ies_w_ii_n 9 Activities in the Iran Petroleum Energy Sector List that have 5 active business operations except as provided in paragraph 6 (d) 7 d Exem tion.--A com an that the United States 8 Government affirmativel declares to be excluded from its 9 present or any future federal sanctions regime relating to 10 Sudan or Iran is not sub ect to divestment or the investment 11 prohibition~ursuant *o paragraphs (b) and (c1 ._ 12 (e) ErcludPd Securities --Notwithstanding t)~e 13 provisions of this act, par,^-aphs (b) and (c) do not- ar~p1~ to 19 indirect holdings in actively managed investment funds. 15 However the public fund shall submit ietters_ to tl~e ~,~nagers 16 of such investment funds co~taini~g ccmpanies that have i7 Sl.rUtlnlZed dCt1Ve CUS1neS5 operations ~eglleSt'nq trlat tl"?~`d 18 consider removin such com anies from the fund or create a 1°, similar actively managed find having indirect holdings dzyoid 20 of such companies. If the manager creates a similar fund, the t r, 21 r/'ubiic fund_shal, replace ul' appii~aule ir.~.`~>s,~:r;er?ts y,_ 22 investments in the similar fund in an expedited timeframe 2~ cor.s.stent with r,ruder~t nvesLir,i stai~uarus. Fui ti;e iulf~~~~t-~_ 24 of this section a private equity fund is deemed to be an 25 actives many ed investment fund. 26 (f) FL tier exclusions --Notwit'~standirg any ether 27 provision of this act the public fund when dischar_g_ina its 28 responsibility for operation of a defined contribution plan, 2S hall engage t)-e rran~ge~~ of the i nvestrnent_offerir,as i n such 30 p uns requesting that then consider rcmoting scr~t~1'_cd 31 companies f.ron_the investment offerings er create an 78 C:7CrxNc~. ~. ,~ ~Y.~.'f~_~ _ _- ~ r: ~. ~ .= T t e-~ i` ,;Y ,_ - ~ _. ENROLLED 2007 Legislature CS for SB 2192, 1st Engrossed 1 alternative investment offering devoid of scrutinized 2 companies. If the manager creates an alternative investment 3 offeringand. the offerin_g__i.s deemed by_ the ~uplic. fund to_ue 4 consistent with prudent invesror standards the public fund 5 shall consider including such investment oferina in the plan. 6 (9) REPORTING== 7 (a) The public fund shall file a report with each 8 member of the Board of Trustees of the State Board of 9 Administration the President of the Senate ar,d the Speaker IO of the House of Representatives that includes the Scrutinized 11 Companies with Activities in Sudan List and the Scrutinized 12 Companies with Activities in the Iran Petroleum EnercLV Sector 13 List within 30 da~~s after the list is crea*..ed. This reQert 19 shall be made available to the public. 15 (b) A* each quay*erly meeting of the Bi)ard of Trustees 16 thereafter the public fund shall file a report, which shall 17 be made available t:; the ublic and to each member o` the 18 Board of Trustees of the State Board cf Administration the 19 President of the Senate and the Speaker of the House of 20 Representatives and send a copv of that report to the United Sudar and t'~ ~ "-, t d 21 States Pros~der,tial Spccial Ln•~cv 22 States Presidential Special Envoy to Iran or an appropriate LJ l.)E:S1~Il~e UL SU!.; I.CJSC%~ NII=l;1:=11'_LUi1~S. 2q 1. A summary of corresponderce with companies engaged 25 ~ the public fund under sub~?araaraph~ (3)(a)7_. and 3 ~. 26 2. All investments sold, redeemed divested, cr 27 withdraws in compliance with paragraph (3)(b)• 28 3 All prohibited investments under paragraph (3)(c); 29 9 Ary -rcarE made un~cr mar=arar~`~ '31(e,~ ~n~a 30 5_ A lis=uf__all pub'i~ly n~_~ec st_~~riCies :;e_ 31 direct~_~this state. ~~ ENROLLED 2007 Legislature CS for SB 2192, 1st Engrossed 1 (5) EXPTRPTION --This act expires upon the occurrence 2 of all of the following: 3' ~a_Z If__ar~_ot the following, occu.r~trte__~_ur~lic _ur,d 9 shall no longer scrutinize companies according to 5 subparagraphs (1)lt)1• 2.. and s and shall no longer 6 assemble the Scrutinized Companies with Activities in Sudan 7 List shall cease enc~aaement and divestment of such companies, 8 and may reinvest in such companies as long as such companies 9 do not satisf the criteria fgr inclusion in the Scrutinized i0 ~,umpanies with Activities irl tfe Iran Petroleum Energy Sector 1 1 L i s_t, 12 1. The Con ress or President of the United States 1~ afflrm3tlVel` dnd llnamblUOUSl' StdteS b" me3nS 'nClUding 19 but not limited to legislation executive_order or written 15 certification from trle 'resldE'nT t0 (.~nareSS that the UaTili~ 16 genocide has been halted for at least 12 months; i7 2. ^'hE Cnited State r~v~ kes al.i sect; sed 18 ~ainst the Government of Suda~~ 1g 3 The Congress or President of the United States 20 affirmatively and unambiguously state d by means including c. DLit rtut lirriltCd ti;i le'~l._;lcitlOri G:ic:Cl:ti~~ Cr'~r 22 certification from the President to Congress, that the 2~ goveinment__of_Suu'an ha_, 'r,onoret its ~onuuitrnents to c~as~ 7.4 attacks_on civilians demobilize and demilitarize the 25 _?an~aweed__and associatedmilitiasl"-grant -free -and unfettered 26 access for deliveries of hurna,;itarian assista:;ce, gnu _allcw 27 for the safe and voluntary_return of refugees and internally 28 displaced persons; or 2r° 9 Tl,e ~'cnc~rec oro~,.~enr _ rho n,„ r~_ ~:+~,rPs 20 ai f irmatively and unan~bic~ouu~_y s~ate~~ n"ieai==_ i~~'~ludin 3i but not limited to legislation, executive order, cr written 20 ENROLLED 2007 Legislature CS for SB 2142, 1st Engrossed 1 certification from the President to Congress that mandatcrV 2 divestment of the type provided for in this act interferes 3 with the conduct of United States for_eian noli~~_ 4 (b) If any of the followir.g occur the public fund 5 shall no longer scrutinize companies according to subparagraph 6 (1)(t)4 and shall no longer assemble the Scrutinized 7 Companies with Activities in the Iran Petroleum Energy Sector 8 List and shall cease engagement investment prohibitions, and 9 divestment The public fund may reinvest in such companies as 10 long_as such companies do not satisfy the criteria for 11 inclusion in the Scrutinized Companies wi*_h Activities in 12 Sudan List: 13 1 The Cergress or President of the United States 19 affirma*ive]y and unambiguously states by means including, 15 but not limited to L legislation., executive order, or written 16 certification from the Presiden* to Congress that the 17 c~ov_ernment of Iran has ceased t.o acquire wea{~ons of mass 1B destruction and support international terrorism~• 19 2. The United States revokes all sanctions im~csed 2G against the government of Iran~or 21 The Congress or eresident of the Unit~q_States 22 affirmatively ar.d unambiguous~ declares, by means nclud~~ 2:~ but not limited to, legislation, exe~u*ive order, or written 24 certification from the President to Congress, that mandat~rv 25 divestment of_the.type provided for in this act interferes 26 with the conduct of United States foreign policy. 27 (6) INVESTMENT POLICY STATEMENT OBLIGATIONS.--The 28 public fund's actions taken in compliance with this act, 29 including all. good faith determinations ~egardinc~ co;,~Jan'=-s a° 30 required ~ this act, shall be adopted and incorporated in±o 31 ~i ENROLLED 2007 Legislature CS for SB 2192, lst Engrossed 1 the public fund's investment policy statement (the IPS as set 2 forth in s. 215.475. J ~~ i~L 1i ~J E.~i'i~ENT iiV :. Ci rlTtli iv `.~J i-'irr _ 9 SCRUTINIZED ACTIVE BUSINESS OPERATIONS --Nctwithstandina any 5 other provision of this act to tike contrary, t}e public fund 6 may cease divesting from certain scrutinized companies 7 pursuant tc paragraph (3)(b) or reinvest in_certain 8 scrutinized companies from which it divested pursuant to 9 ara ra h 3 b if clear and convincin evidence shows that 10 the ~alLe f a'1 asset° unde~ manag~mer* by the public fund 11 becomes egLa1 to or less than 99 50 percent, qr 50 basis 12 points of the hypothetical value of all assets under 13 manaaemer~t _b~! the ~•ab].ic fund assuming ro dive ~.tment_for and! 19 ccmpany had occurred under paragraph (3)(b1 Cessation of 15 divc ~t-nent rei~vestmen* or arv subsea'~~~1~ cngcin , i_nvestmer_t to aUt`1CriZed b_y *'~is act lim~'~ed *-c tY~,e minimum steams 1~ nec~~sa°v '~~ avoid the eentinaenc~~ set forth ir. this. 18 sLbsection or that no divestment of any company is required 19 for less than fair value For any cessation of divestment, 20 reinvestment or subsequent onaeinq investment authorized by ,-}. h 1 `n, sha?1 ^rnvi_de a wrirtan ,-Pno_rt_Y_ ~l .is amt, t-. ~ puh__ic f'_ d - .~ - - - - 22 each member of the Board of Trustees of the State Board of t; ~_5 Tir'rn 1:113 t1u~_ivn t."t tom- dc:; t. _f t,.r .".~l:u tE, :i :? t.rF `;~%`_~~_ 29 of the House of Representatives in advance of initial 25 reinvestment, updated semiannually thereafter as applicable, 26 ett q Forth the r~ascns and i~lstification, supper_ted by 27 clear and convincin evidence for its decisions to cease 28 divestment re'nvest or remain invested in companies having ?9 scr_,ltini~ed active hl,,iness op.eraYi_ons-__Th_rs__z_c*_.dpes nct 30 ~y to r_~i, .:,tnu:;~t ~. "~a;,ics - _t} r_ds h -~ 31 have ceased to have scrutinized active bu~ine=~ oFerat-o .s• 2 ENROLLED 2007 Legislature CS for SB 2192, lst Engrossed 1 2 3 9 J 6 7 8 9 10 11 12 13 19 1.5 16 17 18 19 20 ~i 22 L J 291 25 26 27 28 ?a J 1 Section 9. If anv provision of this act or its application to anv person or circumstance is held invalid the 1nValldl t'y (1G E'S 1'iyt afft'c~ :itteCr UL J~li 1;J 1"I '= OL upLi 1. ~".t vi:•~ the act that can be Given ef~ect without the invalid provision or a lication and to this end the rovisions cf this act are severable. The Le islature hereb declares that it would have amassed this act and each provision of this act,_ irrespective of the fact that anv one or more provisions of this. act might be declared invalid ille4al unenforceable or unconstitutional inr_ludin but not limited to each of the enaa4ement divestment and prohibition provisions of this act. law. Section 5. This act steal.]. take effect. upon becoming a t l i