Bill Text: IA SF2281 | 2015-2016 | 86th General Assembly | Introduced
Bill Title: A bill for an act concerning investment of certain public funds in and public contracts with companies that boycott Israel. (Formerly SSB 3087.)
Spectrum: Committee Bill
Status: (Introduced - Dead) 2016-04-27 - Withdrawn. S.J. 803. [SF2281 Detail]
Download: Iowa-2015-SF2281-Introduced.html
Senate File 2281 - Introduced SENATE FILE BY COMMITTEE ON STATE GOVERNMENT (SUCCESSOR TO SSB 3087) A BILL FOR 1 An Act concerning investment of certain public funds in and 2 public contracts with companies that boycott Israel. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: TLSB 5462SV (2) 86 ec/sc PAG LIN 1 1 Section 1. NEW SECTION. 12J.1 Legislative findings and 1 2 intent. 1 3 The general assembly is deeply concerned and does not 1 4 support boycotts and related tactics that have become a tool 1 5 of economic warfare that threaten the sovereignty and security 1 6 of allies and trade partners of the United States, including 1 7 the state of Israel. Therefore, the general assembly intends 1 8 that state funds and funds administered by the state, including 1 9 public employee retirement funds, should not be invested in, 1 10 and public contracts should not be entered into with, companies 1 11 that refuse to engage in commerce with Israel and boycott 1 12 Israel or persons doing business in Israel or territories 1 13 controlled by Israel. 1 14 Sec. 2. NEW SECTION. 12J.2 Definitions. 1 15 As used in this chapter, unless the context otherwise 1 16 requires: 1 17 1. "Company" means any business or business entity that is 1 18 publicly traded and that is not based in the United States. 1 19 2. "Direct holdings" in a company means all publicly traded 1 20 securities of that company that are held directly by the public 1 21 fund in an actively managed account or fund in which the public 1 22 fund owns all shares or interests. 1 23 3. "Indirect holdings" in a company means all securities 1 24 of that company that are held in an account or fund managed 1 25 by one or more persons not employed by the public fund, in 1 26 which the public fund owns shares or interests together with 1 27 other investors not subject to the provisions of this chapter. 1 28 Indirect holdings include but are not limited to mutual funds, 1 29 fund of funds, index funds, private equity funds, hedge funds, 1 30 and real estate funds. 1 31 4. "Public entity" means the state, political subdivisions 1 32 of the state, public school corporations, and all public 1 33 officers, boards, commissions, departments, agencies, and 1 34 authorities empowered by law to enter into public contracts for 1 35 the expenditure of public funds, including the state board of 2 1 regents and institutions under the control of the state board 2 2 of regents. 2 3 5. "Public fund" means the treasurer of state, the state 2 4 board of regents, the public safety peace officers' retirement 2 5 system created in chapter 97A, the Iowa public employees' 2 6 retirement system created in chapter 97B, the statewide fire 2 7 and police retirement system created in chapter 411, or the 2 8 judicial retirement system created in chapter 602. 2 9 6. "Scrutinized company" means any company that publicly 2 10 states it is participating in a boycott of Israel. 2 11 Sec. 3. NEW SECTION. 12J.3 Identification of companies == 2 12 notice. 2 13 1. a. By March 1, 2017, the public fund shall make its 2 14 best efforts to identify or have identified all scrutinized 2 15 companies in which the public fund has direct or indirect 2 16 holdings or could possibly have such holdings in the future and 2 17 shall create and make available to the public a scrutinized 2 18 companies list for that public fund. The public fund shall 2 19 review on an annual basis and update, if necessary, the 2 20 scrutinized companies list. 2 21 b. In making its best efforts to identify or have 2 22 identified scrutinized companies, the public fund may review 2 23 and rely, in the best judgment of the public fund, on publicly 2 24 available information regarding companies, and including other 2 25 information that may be provided by nonprofit organizations, 2 26 research firms, international organizations, and government 2 27 entities. The public fund may also contact asset managers 2 28 and institutional investors for the public fund to identify 2 29 scrutinized companies based upon industry=recognized lists of 2 30 such companies that the public fund may have indirect holdings 2 31 in. 2 32 c. The Iowa public employees' retirement system, acting 2 33 on behalf of the system and other public funds subject to 2 34 this section, may develop and issue a request for proposals 2 35 for third=party services to complete the identification of 3 1 scrutinized companies and the compilation of a scrutinized 3 2 companies list. The Iowa public employees' retirement system 3 3 shall consult with all other public funds on the development of 3 4 the request for proposals. However, selection of a successful 3 5 proposal and the final scope of services to be provided shall 3 6 be determined only by those public funds that have agreed to 3 7 utilize the third=party services. If more than one public fund 3 8 decides to utilize the third=party services, the participating 3 9 public funds shall equally share the costs of such services. 3 10 2. a. For each company on the scrutinized companies list, 3 11 the public fund shall send or have sent a written notice 3 12 informing the company of its status as a scrutinized company 3 13 and that it may become subject to divestment and restrictions 3 14 on investment in the company by the public fund. The notice 3 15 shall offer the company the opportunity to clarify its 3 16 activities or to cease its activities causing its inclusion 3 17 on the scrutinized company list. The public fund or its 3 18 representative shall continue to provide such written notice on 3 19 an annual basis if the company remains a scrutinized company. 3 20 b. If, following notice as provided by this section, a 3 21 scrutinized company ceases activity that designates it as 3 22 a scrutinized company and submits a written statement to 3 23 the public fund that it has ceased engaging in activities 3 24 boycotting Israel, the company shall be removed from the 3 25 scrutinized companies list. 3 26 Sec. 4. NEW SECTION. 12J.4 Prohibited investments == 3 27 divestment. 3 28 1. The public fund shall not acquire publicly traded 3 29 securities of a company on the public fund's most recent 3 30 scrutinized companies list so long as such company remains on 3 31 the public fund's scrutinized companies list as provided in 3 32 this chapter. 3 33 2. a. The public fund shall sell, redeem, divest, or 3 34 withdraw all publicly traded securities of a company on the 3 35 public fund's list of scrutinized companies, so long as the 4 1 company remains on that list, within eighteen months following 4 2 the first written notice sent to the scrutinized company as 4 3 required by section 12J.3. 4 4 b. This subsection shall not be construed to require the 4 5 premature or otherwise imprudent sale, redemption, divestment, 4 6 or withdrawal of an investment, but such sale, redemption, 4 7 divestment, or withdrawal shall be completed as provided by 4 8 this subsection. 4 9 3. The requirements of this section shall not apply to 4 10 indirect holdings of a scrutinized company. The public 4 11 fund shall, however, submit letters to the managers of such 4 12 investment funds containing scrutinized companies requesting 4 13 that they consider removing such companies from the fund 4 14 or create a similar fund with indirect holdings devoid of 4 15 such companies. If the manager creates a similar fund with 4 16 indirect holdings devoid of such companies, the public fund 4 17 is encouraged to replace all applicable investments with 4 18 investments in the similar fund consistent with prudent 4 19 investing standards. 4 20 Sec. 5. NEW SECTION. 12J.5 Reports. 4 21 1. Scrutinized companies list. Each public fund shall, 4 22 within thirty days after the scrutinized companies list is 4 23 created or updated as required by section 12J.3, make the list 4 24 available to the public. 4 25 2. Annual report. On October 1, 2017, and each October 4 26 1 thereafter, each public fund shall make available to the 4 27 public, and file with the general assembly, an annual report 4 28 covering the prior fiscal year that includes the following: 4 29 a. The scrutinized companies list as of the end of the 4 30 fiscal year. 4 31 b. A summary of all written notices sent as required by 4 32 section 12J.3 during the fiscal year. 4 33 c. All investments sold, redeemed, divested, or withdrawn as 4 34 provided in section 12J.4 during the fiscal year. 4 35 Sec. 6. NEW SECTION. 12J.6 Public entities == contract 5 1 requirements. 5 2 A public entity shall not enter into a contract of one 5 3 thousand dollars or more with a scrutinized company included on 5 4 a scrutinized company list created by a public fund pursuant 5 5 to section 12J.3 to acquire or dispose of services, supplies, 5 6 information technology, or construction. 5 7 Sec. 7. NEW SECTION. 12J.7 Legal obligations == immunity. 5 8 With respect to actions taken in compliance with this 5 9 chapter, including all good=faith determinations regarding 5 10 companies as required by this chapter, the public fund shall 5 11 be immune from any liability and exempt from any conflicting 5 12 statutory or common law obligations, including any such 5 13 obligations in respect to choice of asset managers, investment 5 14 funds, or investments for the public fund's securities 5 15 portfolios. 5 16 EXPLANATION 5 17 The inclusion of this explanation does not constitute agreement with 5 18 the explanation's substance by the members of the general assembly. 5 19 This bill creates new Code chapter 12J, which restricts the 5 20 treasurer of state, the state board of regents, the Iowa public 5 21 employees' retirement system (IPERS), the public safety peace 5 22 officers' retirement system, the statewide fire and police 5 23 retirement system, and the judicial retirement system, defined 5 24 as "public funds", from directly investing in certain companies 5 25 engaged in a boycott of Israel. The bill also requires all 5 26 public entities, including the state and political subdivisions 5 27 of the state, not to enter into a contract of $1,000 or more 5 28 with a scrutinized company included on a scrutinized company 5 29 list created by a public fund. 5 30 Concerning public funds, the bill requires each public 5 31 fund to develop and maintain a list of scrutinized companies 5 32 that the fund has direct or indirect holdings in or in which 5 33 the fund may invest in the future. Each public fund shall 5 34 determine this list by March 1, 2017, and update it on an 5 35 annual basis. The bill defines "scrutinized companies" as 6 1 those companies that publicly state they are participating 6 2 in a boycott of Israel. The bill defines a "company" as any 6 3 business that is publicly traded and not based in the United 6 4 States. Once a company is listed on the scrutinized companies 6 5 list of a public fund, the bill requires the public fund to 6 6 send a notice to that company relative to the requirements of 6 7 the bill, to include notice that the company may qualify for 6 8 divestment and other investment restrictions by the public 6 9 fund. 6 10 New Code section 12J.4 requires that a public fund not invest 6 11 in, and shall divest from, holdings in a scrutinized company. 6 12 If the public fund has direct holdings in the company, the 6 13 public fund shall proceed to divest all assets with that 6 14 company in 18 months so long as the company continues active 6 15 business operations in Israel. The bill provides that a public 6 16 fund shall not be required to divest or refrain from investing 6 17 in a company if the public fund has indirect holdings, and not 6 18 direct holdings, in that company. However, public funds are 6 19 encouraged to move their indirect holdings to funds that do 6 20 not include scrutinized companies. The bill defines indirect 6 21 holdings to include shares in an account or fund managed by 6 22 persons not employed by the public fund, including mutual 6 23 funds, private equity funds, and other similar funds. 6 24 The bill further requires each public fund to prepare 6 25 and make available to the public, and file with the general 6 26 assembly, an annual report, beginning October 1, 2017, 6 27 concerning actions taken by the public fund relative to the 6 28 requirements of new Code chapter 12J in the previous fiscal 6 29 year. 6 30 The bill further provides that with respect to actions 6 31 taken in compliance with this bill, including all good=faith 6 32 determinations regarding companies as required, the public 6 33 fund shall be immune from any liability and exempt from any 6 34 conflicting statutory or common law obligations, including 6 35 any such obligations in respect to choice of asset managers, 7 1 investment funds, or investments for the public fund. LSB 5462SV (2) 86 ec/sc
