Bill Text: MS HB319 | 2013 | Regular Session | Introduced
Bill Title: PERS; prohibit investments in companies that invest in the petroleum sector of Iran.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Failed) 2013-02-05 - Died In Committee [HB319 Detail]
Download: Mississippi-2013-HB319-Introduced.html
MISSISSIPPI LEGISLATURE
2013 Regular Session
To: Appropriations
By: Representative Frierson
House Bill 319
AN ACT TO CREATE NEW SECTION 25-11-122, MISSISSIPPI CODE OF 1972, TO REQUIRE THE BOARD OF TRUSTEES OF THE PUBLIC EMPLOYEES' RETIREMENT SYSTEM TO IDENTIFY ALL COMPANIES IN WHICH FUNDS OF THE SYSTEM ARE INVESTED THAT ARE MAKING INVESTMENTS THE PETROLEUM SECTOR OF IRAN; TO REQUIRE THE BOARD OF TRUSTEES TO CREATE AND MAINTAIN A SCRUTINIZED COMPANY LIST THAT NAMES ALL OF THOSE COMPANIES; TO REQUIRE THE BOARD OF TRUSTEES TO PERIODICALLY CONTACT ALL SCRUTINIZED COMPANIES AND ENCOURAGE THEM TO REFRAIN FROM ENGAGING IN CERTAIN TYPES OF INVESTMENTS IN IRAN; TO REQUIRE THE BOARD OF TRUSTEES TO INFORM SCRUTINIZED COMPANIES OF THEIR STATUS AS A SCRUTINIZED COMPANY AND TO ASK FOR CLARIFICATION AS TO THE NATURE OF EACH COMPANY'S BUSINESS ACTIVITIES; TO PROVIDE THAT A COMPANY MAY BE REMOVED FROM THE LIST UNDER CERTAIN CONDITIONS; TO PROVIDE THAT A COMPANY REMOVED FROM THE LIST MAY BE PLACED BACK ON THE LIST; TO PROVIDE FOR THE DIVESTMENT OF ALL DIRECTLY HELD, PUBLICLY-TRADED SECURITIES OF A SCRUTINIZED COMPANY UNDER CERTAIN CONDITIONS; TO PROHIBIT THE BOARD OF TRUSTEES FROM ACQUIRING SECURITIES OF SCRUTINIZED COMPANIES; TO PROVIDE AN EXCEPTION FROM THE DIVESTMENT REQUIREMENT AND THE INVESTMENT PROHIBITION TO CERTAIN INDIRECT HOLDINGS IN ACTIVELY MANAGED INVESTMENT FUNDS; TO REQUIRE THE BOARD OF TRUSTEES TO REQUEST THAT THE MANAGERS OF THOSE INVESTMENT FUNDS CONSIDER REMOVING SCRUTINIZED COMPANIES FROM THE FUND OR CREATING A SIMILAR FUND THAT EXCLUDES THOSE COMPANIES; TO REQUIRE THE BOARD OF TRUSTEES TO MAKE CERTAIN REPORTS TO THE GOVERNOR, THE PRESIDENT OF THE SENATE AND THE SPEAKER OF THE HOUSE; TO PROVIDE FOR TERMINATION OF THE PROHIBITIONS AND DIVESTMENT REQUIREMENTS OF THIS ACT UNDER CERTAIN CIRCUMSTANCES; TO PROVIDE FOR IMMUNITY FOR THE RETIREMENT SYSTEM AND ITS EMPLOYEES FOR GOOD FAITH OMISSIONS IN IDENTIFYING SCRUTINIZED COMPANIES; TO AMEND SECTIONS 25-11-121 AND 25-11-145, MISSISSIPPI CODE OF 1972, TO CONFORM TO THE PRECEDING PROVISIONS; AND FOR RELATED PURPOSES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:
SECTION 1. This act shall be known and may be cited as the "Protecting Mississippi's Retirement Investments Act."
SECTION 2. The Legislature finds that:
(a) In 2001, the United States Securities and Exchange Commission determined that companies with business operations in terrorist-sponsored states are exposed to a special risk category known as global security risk, which is the risk to share value and corporate reputation stemming from the intersection of a publicly traded company's international business activities and security-related concerns, such as terrorism and weapons proliferation;
(b) In response to the financial risk posed by investments in companies doing business with a state that sponsors terrorists, the United States Securities and Exchange Commission established its Office of Global Security Risk to provide for enhanced disclosure of material information regarding those companies;
(c) According to the former chair of the United States Securities and Exchange Commission, Laura Unger, the fact that a foreign company is doing material business with a country, government or entity on the sanctions list of the Office of Foreign Assets Control (OFAC) is, in the view of the staff of the Securities and Exchange Commission, substantially likely to be significant to a reasonable investor's decision about whether to invest in that company;
(d) A 2006 report by the United States House of Representatives Committee on Appropriations states that "a company's association with sponsors of terrorism and human rights abuses, no matter how large or small, can have a materially adverse result on a public company's activities, financial condition, earnings, and stock prices, all of which can negatively affect the value of an investment";
(e) Iran tops the United States State Department's list of state sponsors of terrorism, funding groups such as Hamas, Hezbollah, and Islamic Jihad, as well as fueling the insurgency in Iraq via its Al-Quds force;
(f) The United States imposed sanctions on Iran by designating the Islamic Revolutionary Guard Corps, its Al-Quds Force, and three (3) state-owned banks as weapons proliferators and supporters of terrorism;
(g) The United Nations Security Council has twice voted unanimously to impose sanctions on Iran for its failure to suspend its uranium-enrichment activities, calling for an additional embargo on Iranian arms exports, which is a freeze on assets abroad of an expanded list of individuals and companies involved in Iran's nuclear and ballistic missile programs, and calling for nations and institutions to bar new grants or loans to Iran except for humanitarian and developmental purposes;
(h) Foreign entities have invested in Iran's petroleum energy sector despite United States and United Nations sanctions against Iran;
(i) All entities that have invested more than Twenty Million Dollars ($20,000,000.00) in any given year in Iran's petroleum sector since August 5, 1996, are subject to sanctions under United States law under the Iran Sanctions Act of 1996;
(j) The United States renewed the Iran Sanctions Act of 1996 in 2001 and 2006;
(k) It is a fundamental responsibility of the State of Mississippi to decide where, how, and by whom financial resources under its control should be invested, taking into account numerous pertinent factors;
(l) While divestiture should be considered with the intent to improve investment performance, by the rules of prudence, fiduciaries must take into account all relevant substantive factors in arriving at an investment decision;
(m) The State of Mississippi is deeply concerned about investments in publicly traded companies that have investments in Iran's petroleum sector as a financial risk to the shareholders;
(n) By investing in publicly traded companies having investments in Iran's petroleum sector, the Public Employees' Retirement System is putting its funds at substantial financial risk;
(o) Divestiture from markets that are vulnerable to embargo, loan restrictions, and sanctions from the United States and the international community, including the United Nations Security Council, is in accordance with the rules of prudence;
(p) This act should remain in effect only as long as it continues to be consistent with and does not unduly interfere with the foreign policy of the United States as determined by the federal government;
(q) To protect Mississippi's retirement assets, it is in the best interest of the state to enact a statutory prohibition regarding the investments managed by the Public Employees' Retirement System that are doing business in Iran's petroleum energy sector;
(r) Nevertheless, the members of this body have serious concerns regarding the efficacy of requiring the divestment of investments of the Public Employees' Retirement System in large companies with fiscally sound histories and enviable histories of returns, and whether any effect on world-wide business activities might be too insubstantial as to warrant the cost to the state and to public retirees of divestment;
(s) Further, the members of this body are concerned about the cost of compliance, both in terms of the necessity of employing additional administrative staff to ferret certain companies out of the investment pool, and in the potential for lost investment revenue caused by a possibly ineffective but costly investment policy; and
(t) The members of this body have faith that the Board of Trustees of the Public Employees' Retirement System and its investment managers are patriotic Americans who would not aid or assist terrorism in any manner, and that restrictive and potentially costly micro-managing by this body is unnecessary.
SECTION 3. The following shall be codified as Section 25-11-122, Mississippi Code of 1972:
25-11-122. (1) As used in this section, the term:
(a) "Company" means any sole proprietorship, organization, association, corporation, partnership, joint venture, limited partnership, limited liability partnership, limited liability company, or other entity or business association that exists for the purpose of making profit.
(b) "Direct holdings" in a company means all securities of that company that are held directly by the retirement system or in an account or fund in which the retirement system owns all shares or interests.
(c) "Government of Iran" means the government of Iran, its instrumentalities, and companies owned or controlled by the government of Iran.
(d) "Inactive business activities" means the mere continued holding or renewal of rights to property previously operated for the purpose of generating revenues but not presently deployed for that purpose.
(e) "Indirect holdings" in a company means all securities of that company that are held in an account or fund, such as a mutual fund, managed by one or more persons not employed by the retirement system, in which the retirement system owns shares or interests together with other investors not subject to the provisions of this section.
(f) "Iran" means the Islamic Republic of Iran.
(g) "Petroleum resources" means petroleum or natural gas.
(h) "Retirement system" means the Public Employees' Retirement System.
(i) "Scrutinized business activities" means business activities that have resulted in a company becoming a scrutinized company.
(j) "Scrutinized company" means any company that has, with actual knowledge, on or after August 5, 1996, made an investment of Twenty Million Dollars ($20,000,000.00) or more in Iran's petroleum sector that directly or significantly contributes to the enhancement of Iran's ability to develop the petroleum resources of Iran.
(k) "Substantial action specific to Iran" means adopting, publicizing, and implementing a formal plan to cease scrutinized business activities within one (1) year and to refrain from any such new business activities.
(2) On or before January 1, 2014, the retirement system shall make its best efforts to identify all scrutinized companies in which the retirement system has direct or indirect holdings. Those efforts include reviewing and relying, as appropriate in the retirement system's judgment, on publicly available information regarding companies that have invested more than Twenty Million Dollars ($20,000,000.00) in any given year since August 5, 1996, in Iran's petroleum energy sector, including information provided by nonprofit organizations, research firms, international organizations, and government entities.
(3) By the first meeting of the board of trustees of the retirement system after January 1, 2014, the board of trustees shall place all scrutinized companies that fit the criteria specified in paragraph (j) of subsection (1) of this section on a "Scrutinized Companies with Activities in the Iran Petroleum Energy Sector List."
(4) The board of trustees shall update and make publicly available annually the Scrutinized Companies with Activities in the Iran Petroleum Energy Sector List based on evolving information from, among other sources, those listed in subsection (2) of this section.
(5) The retirement system shall adhere to the following procedure for placing companies on the Scrutinized Companies with Activities in the Iran Petroleum Energy Sector List:
(a) For each company in which the retirement system has direct holdings newly identified under subsection (3) of this section, the retirement system shall send a written notice not later than April 1, 2014, informing the company of its scrutinized company status and that it may become subject to divestment by the retirement system. The notice must inform the company of the opportunity to clarify its Iran-related activities and encourage the company, within ninety (90) days, to cease its scrutinized business activities or convert those activities to inactive business activities in order to avoid qualifying for divestment by the retirement system; and
(b) If, within ninety (90) days after the retirement system's first engagement with a company under this subsection, that company announces by public disclosure substantial action specific to Iran, the retirement system may maintain its direct holdings in that company, but the company shall remain on the Scrutinized Companies with Activities in Iran Petroleum Energy Sector List pending completion of its cessation of scrutinized business activities.
(6) (a) If, after ninety (90) days after the retirement system's first engagement with a company under subsection (5) of this section, the company has not announced by public disclosure substantial action specific to Iran, or the retirement system determines or becomes aware that the company continues to have scrutinized business activities, the retirement system, within eight (8) months after the expiration of the ninety-day period, shall sell, redeem, divest or withdraw all publicly traded securities of the company from the retirement system's direct holdings.
(b) If the retirement system determines or becomes aware that a company that ceased scrutinized business activities following engagement under subsection (5) of this section has resumed those activities, the retirement system shall send a written notice to the company in accordance with subsection (5) and this subsection, and shall immediately place the company back on the Scrutinized Companies with Activities in Iran Petroleum Energy Sector List.
(c) The retirement system shall monitor the scrutinized company that has announced by public disclosure substantial action specific to Iran and, if, after one (1) year, the retirement system determines or becomes aware that the company has not implemented such a plan, within three (3) months after the expiration of that one-year period shall sell, redeem, divest or withdraw all publicly traded securities of the company from the retirement system's direct holdings, and shall immediately place the company back on the Scrutinized Companies with Activities in Iran Petroleum Energy Sector List.
(7) The retirement system shall not acquire securities of companies on the Scrutinized Companies with Activities in Iran Petroleum Energy Sector List.
(8) Subsections (6) and (7) of this section shall not apply to the retirement system's indirect holdings. However, the retirement system shall submit letters to the managers of those investment funds containing companies on the Scrutinized Companies with Activities in Iran Petroleum Energy Sector List requesting that they consider removing those companies from the fund or create a similar actively managed fund having indirect holdings devoid of those companies. If the manager creates a similar fund devoid of those securities or if those funds are created elsewhere, the board of trustees of the retirement system shall determine within six (6) months whether to replace all applicable investments with investments in the similar fund in an expedited time frame consistent with prudent investing standards. For the purposes of this subsection, a private equity fund is deemed to be an actively managed investment fund.
(9) The board of trustees of the retirement system shall file a report with the Governor, the President of the Senate, and the Speaker of the House of Representatives that includes the Scrutinized Companies with Activities in Iran Petroleum Energy Sector List within thirty (30) days after the list is created. This report shall be made available to the public. Annually thereafter, the board of trustees shall file a report, which shall be made available to the public and to the Governor, the President of the Senate, and the Speaker of the House of Representatives, which includes:
(a) A summary of correspondence with companies engaged by the retirement system under this section;
(b) All investments sold, redeemed, divested or withdrawn in compliance with this section;
(c) All prohibited investments under this section;
(d) Any progress made under subsection (8) of this section; and
(e) A list of all publicly traded securities held directly by the retirement system.
(10) If any of the following occur, this section shall be of no further force or effect:
(a) The Congress or President of the United States affirmatively and unambiguously states, by means including, but not limited to, legislation, executive order, or written certification from the President to Congress, that the government of Iran has ceased to pursue the capabilities to develop nuclear weapons and support international terrorism;
(b) The United States revokes all sanctions imposed against the government of Iran; or
(c) The Congress or President of the United States affirmatively and unambiguously declares, by means including, but not limited to, legislation, executive order, or written certification from the President to Congress, that mandatory divestment of the type provided for in this section interferes with the conduct of United States foreign policy.
(11) With respect to actions taken in compliance with this section, including all good faith determinations regarding companies as required by this section, the retirement system shall be 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 retirement system's securities portfolios.
(12) Neither the retirement system nor any employee of the retirement system shall be liable for a good faith omission in identifying a scrutinized company.
SECTION 4. Section 25-11-121, Mississippi Code of 1972, is amended as follows:
25-11-121. (1) The board
shall, from time to time, determine the current requirements for benefit
payments and administrative expense * * * that will be maintained as a
cash working balance, except that * * * the cash working balance shall not
exceed at any time an amount necessary to meet the current obligations of the
system for a period of ninety (90) days. Any amounts in excess of * * * the cash working balance shall be
invested, as follows, at such periodic intervals as the board may determine;
however, all purchases shall be made from competitive offerings except short-term
obligations referred to in paragraph (d) of this subsection (1):
(a) Bonds, notes, certificates
and other valid general obligations of the State of Mississippi, or of any
county, or of any city, or of any supervisors district of any county of the
State of Mississippi, or of any school district bonds of the State of
Mississippi; notes or certificates of indebtedness issued by the Veterans' Home
Purchase Board of Mississippi, provided * * * that the notes or certificates of
indebtedness are secured by the pledge of collateral equal to two hundred
percent (200%) of the amount of the loan, which collateral is also guaranteed
at least for fifty percent (50%) of the face value by the United States
government, and provided that not more than five percent (5%) of the total
investment holdings of the system shall be in Veterans' Home Purchase Board
notes or certificates at any time; real estate mortgage loans one hundred
percent (100%) insured by the Federal Housing Administration on single family
homes located in the State of Mississippi, where monthly collections and all
servicing matters are handled by Federal Housing Administration approved
mortgagees authorized to make such loans in the State of Mississippi;
(b) State of Mississippi highway bonds;
(c) Funds may be deposited in any institution insured by the Federal Deposit Insurance Corporation that maintains a facility that takes deposits in the State of Mississippi or a custodial bank;
(d) Corporate bonds and taxable municipal bonds rated by a United States Securities and Exchange Commission designated Nationally Recognized Statistical Rating Organization; or corporate short-term obligations of corporations or of wholly owned subsidiaries of corporations, whose short-term obligations are rated A-2 or better by Standard and Poor's, rated P-2 or better by Moody's Investment Service, F-2 or better by Fitch Ratings, Ltd., or the equivalent of these ratings if assigned by another United States Securities and Exchange Commission designated Nationally Recognized Statistical Rating Organization;
(e) Bonds of the Tennessee Valley Authority;
(f) Bonds, notes, certificates and other valid obligations of the United States, and other valid obligations of any federal instrumentality that issues securities under authority of an act of Congress and are exempt from registration with the Securities and Exchange Commission;
(g) Bonds, notes, debentures and other securities issued by any federal instrumentality and fully guaranteed by the United States;
(h) Interest-bearing
bonds or notes * * *
that are general obligations of any other state in the United States or
of any city or county * * *
in the state, provided * * * that the city or county had a
population as shown by the federal census next preceding * * * the investment of not less than
twenty-five thousand (25,000) inhabitants and provided that * * * the state, city or county has not
defaulted for a period longer than thirty (30) days in the payment of principal
or interest on any of its general obligation indebtedness during a period of
ten (10) calendar years immediately preceding * * * the investment;
(i) Bonds of established non-United States companies and foreign government securities rated by a recognized rating agency. The board may take requisite action to effectuate or hedge transactions through foreign banks, including the purchase and sale, transfer, exchange, or otherwise disposal of, and generally deal in foreign exchange through the use of foreign currency, interbank forward contracts, futures contracts, options contracts, swaps and other related derivative instruments, notwithstanding any other provisions of this article to the contrary;
(j) Shares of stocks, common and/or preferred, of corporations created by or existing under the laws of the United States or any state, district or territory thereof and shares of stocks and convertible securities of non-United States companies; provided that:
(i) The maximum investments in stocks shall not exceed eighty percent (80%) of the total book value of the total investment fund of the system;
(ii) The stock of * * * the corporation shall:
1. Be listed on a national stock exchange; or
2. Be traded
in the over-the-counter market, provided that price quotations for * * * those over-the-counter stocks are
quoted by the National Association of Securities Dealers Automated Quotation
System (NASDAQ);
(iii) The
outstanding shares of * * *
the corporation shall have a total market value of not less than Fifty
Million Dollars ($50,000,000.00);
(iv) The amount of investment in any one (1) corporation shall not exceed three percent (3%) of the book value of the assets of the system;
(v) The shares of any one (1) corporation owned by the system shall not exceed five percent (5%) of that corporation's outstanding stock.
The board may take requisite action to effectuate or hedge transactions for shares of stocks and convertible securities of non-United States companies through foreign banks, including the purchase and sale, transfer, exchange, or otherwise disposal of, and generally deal in foreign exchange through the use of foreign currency, interbank forward contracts, futures contracts, options contracts, swaps and other related derivative instruments, notwithstanding any other provisions of this article to the contrary;
(k) Covered call and put options on securities traded on one or more of the regulated exchanges;
(l) Pooled or
commingled funds managed by a corporate trustee or by a Securities and Exchange
Commission registered investment advisory firm retained as an investment
manager by the board of trustees, and shares of investment companies and unit
investment trusts registered under the Investment Company Act of 1940, where * * * the pooled or commingled funds or
shares are comprised of common or preferred stocks, bonds, money market
instruments or other investments authorized under this section. * * * The investment in commingled funds
or shares shall be held in trust * * *. The total book value of
investments under this paragraph shall at no time exceed five percent (5%) of
the total book value of all investments of the system. Any investment manager
approved by the board of trustees shall invest * * * the commingled funds or shares as a
fiduciary;
(m) Pooled or
commingled real estate funds or real estate securities managed by a corporate
trustee or by a Securities and Exchange Commission registered investment
advisory firm retained as an investment manager by the board of trustees. * * * The investment in commingled funds
or shares shall be held in trust * * *. The total book value of
investments under this paragraph shall at no time exceed ten percent (10%) of
the total book value of all investments of the system. Any investment manager
approved by the board of trustees shall invest * * * the commingled funds or shares as a
fiduciary. The ten percent (10%) limitation in this paragraph shall not be
subject to the five percent (5%) limitation in paragraph (l) of this
subsection;
(n) Types of investments not specifically authorized by this subsection if the investments are in the form of a separate account managed by a Securities and Exchange Commission registered investment advisory firm retained as an investment manager by the board; or a limited partnership or commingled fund approved by the board; provided that the total book value of investments under this paragraph shall at no time exceed ten percent (10%) of the total book value of all investments of the system. Any person or entity who exercises any discretionary authority or discretionary control respecting management of the separate account, limited partnership or commingled fund, or who exercises any authority or control respecting management or disposition of the assets of the separate account, limited partnership or commingled fund, shall exercise such authority or control as a fiduciary.
(2) All investments shall
be acquired by the board at prices not exceeding the prevailing market values
for * * * the
securities.
(3) Any limitations * * * set forth in this section shall
be applicable only at the time of purchase and shall not require the
liquidation of any investment at any time, except as may be required to meet
any divestment requirements of Section 25-11-122. All investments shall be
clearly marked to indicate ownership by the system and to the extent possible
shall be registered in the name of the system.
(4) Subject to the above
terms, conditions, limitations and restrictions, the board shall have power to
sell, assign, transfer and dispose of any of the securities and investments of
the system, provided that * * *said the sale, assignment or transfer has the majority
approval of the entire board. The board may employ or contract with investment
managers, evaluation services or other such services as determined by the board
to be necessary for the effective and efficient operation of the system.
(5) Except as otherwise
provided * * *
in this section, no trustee and no employee of the board shall have any
direct or indirect interest in the income, gains or profits of any investment
made by the board, nor shall any such person receive any pay or emolument for
his services in connection with any investment made by the board. No trustee
or employee of the board shall become an endorser or surety, or in any manner
an obligor for money loaned by or borrowed from the system.
(6) All interest derived from investments and any gains from the sale or exchange of investments shall be credited by the board to the account of the system.
(7) The board of trustees
annually shall credit regular interest on the mean amount for the preceding
year in each of the reserves maintained by the board, with the exception of the
expense account. This credit shall be made annually from interest and other
earnings on the invested assets of the system. Any additional amount required
to meet the regular interest on the funds of the system shall be charged to the
employer's accumulation account, and any excess of earnings over * * * the regular interest required shall
be credited to the employer's accumulation account. Regular interest shall
mean such per centum rate to be compounded annually as * * * determined by the board of trustees.
(8) The board of trustees
shall be the custodian of the funds of the system. All expense vouchers and
retirement allowance payrolls shall be certified by the executive * * * director who shall furnish the
board a surety bond in a company authorized to do business in Mississippi in
such an amount as * * * required by the board, the premium to be paid by the board from
the expense account.
(9) For the purpose of
meeting disbursements for retirement allowances, annuities and other payments,
cash may be kept available, not exceeding the requirements of the system for a
period of ninety (90) days, on deposit in one or more banks or trust companies
organized under the laws of the State of Mississippi or the laws of the United
States, provided that the sum on deposit in any one (1) bank or trust company
shall not exceed thirty-five percent (35%) of the paid-up capital and regular
surplus of * * *
the bank or trust company.
(10) Except as otherwise
provided, the monies or properties of the * * * system * * * that are deposited in any
bank or banks of the United States shall, where possible, be safeguarded and
guaranteed by the posting as security by the depository of bonds, notes and
other securities purchasable by the system, as provided elsewhere in this
section. The bonds, notes and other securities offered as security shall be
posted to the credit of the system by the depository with the board or with an
unaffiliated bank or trust company domiciled within the United States or the
State of Mississippi acceptable to both the board and to the fiscal agent bank.
* * *
If the board and the fiscal agent bank cannot reach an agreement, the
bonds, notes and other securities shall be deposited in a bank or trust company
designated by the State Commissioner of Banking and Consumer Finance. * * * However, * * * bonds or notes of the United States
government owned by the system may be deposited for safekeeping in any federal
reserve bank.
(11) The board of trustees shall determine the degree of collateralization necessary for both foreign and domestic demand deposit accounts in addition to that which is guaranteed by the Federal Deposit Insurance Corporation or such other federal insurance program as may be in effect.
(12) The board, the
executive * * *
director and employees shall discharge their duties with respect to the
investments of the system solely for the interest of the system with the care,
skill, prudence and diligence under the circumstances then prevailing that a
prudent investor acting in a like capacity and familiar with * * * those matters would use in the
conduct of an enterprise of a like character and with like aims, including
diversifying the investments of the system so as to minimize the risk of large
losses, unless under the circumstances it is clearly prudent not to do so. The
board, the executive director and employees are not liable for breach of their
fiduciary duty to the system by reason of any decision to restrict, reduce, or
eliminate investments in scrutinized companies in accordance with the
requirements of Section 25-11-122.
(13) Documentary material
or data made or received by the system * * * that consists of trade secrets or
commercial or financial information that relates to the investments of the
system shall be exempt from the Mississippi Public Records Act of 1983 if the
disclosure of the material or data is likely to impair the system's ability to
obtain such information in the future, or is likely to cause substantial harm
to the competitive position of the person or entity from whom the information
was obtained.
SECTION 5. Section 25-11-145, Mississippi Code of 1972, is amended as follows:
25-11-145. (1) The provisions of this section shall become effective from and after July 1 of the year in which Section 25-11-143 becomes effective as provided in subsection (1) of Section 25-11-143.
(2) In managing the funds received for the insurance program established in Section 25-11-143, the board from time to time shall determine the current requirements for payments and administrative expense that will be maintained as a cash working balance, except that the cash working balance shall not exceed at any time an amount necessary to meet the current obligations of the fund for a period of ninety (90) days. Any amounts in excess of the cash working balance shall be invested, as follows, at such periodic intervals as the board may determine:
(a) Funds may be deposited in federally insured institutions;
(b) Corporate and taxable municipal bonds of investment grade as rated by Standard and Poor's or by Moody's Investment Service, with bonds rated BAA/BBB not to exceed five percent (5%) of the book value of the total fixed income investments, or corporate short-term obligations of corporations or of
wholly owned subsidiaries of corporations, whose short-term obligations are rated A-3 or better by Standard and Poor's or rated P-3 or better by Moody's Investment Service;
(c) Bonds of the Tennessee Valley Authority; bonds, notes, certificates and other valid obligations of the United States, and other valid obligations of any federal instrumentality that issues securities under authority of an act of Congress and are exempt from registration with the Securities and Exchange Commission; bonds, notes, debentures and other securities issued by any federal instrumentality and fully guaranteed by the United States;
(d) Interest-bearing bonds or notes that are general obligations of any other state in the United States or of any city or county in that state, provided that the state, city or county has not defaulted for a period longer than thirty (30) days in the payment of principal or interest on any of its general obligation indebtedness during a period of ten (10) calendar years immediately preceding the investment;
(e) Shares of stocks, common and/or preferred, of corporations created by, or existing under, the laws of the United States or any state, district or territory thereof, provided that:
(i) The maximum investments in stocks shall not exceed fifty percent (50%) of the book value of the total investment fund;
(ii) The stock of * * * the corporation shall be listed on
a national stock exchange, or be traded in the over-the-counter market;
(iii) The outstanding shares of the corporation shall have a total market value of not less than Fifty Million Dollars ($50,000,000.00);
(iv) The amount of investment in any one (1) corporation shall not exceed three percent (3%) of the book value of the total investment fund; and
(v) The shares of any one (1) corporation owned by the fund shall not exceed five percent (5%) of that corporation's outstanding stock;
(f) Bonds rated Single A or better, stocks and convertible securities of established non-United States companies, and in foreign government securities rated Single A or better by a recognized rating agency, provided that the total book value of investments under this paragraph at no time shall exceed thirty percent (30%) of the total book value of the total investment fund. The board may take requisite action to effectuate or hedge those transactions through foreign or domestic banks, including the purchase and sale, transfer, exchange, or otherwise disposal of, and generally deal in foreign exchange through the use of foreign currency, interbank forward contracts, futures contracts, options contracts, swaps and other related derivative instruments;
(g) Covered call and put options on securities traded on one or more of the regulated exchanges;
(h) Pooled or commingled funds managed by a corporate trustee or by a Securities and Exchange Commission registered investment advisory firm retained as an investment manager by the board of trustees, and shares of investment companies and unit investment trusts registered under the Investment Company Act of 1940, where the pooled or commingled funds or shares are comprised of common or preferred stocks, bonds, money market instruments or other investments authorized under this section. The investment in commingled funds or shares shall be held in trust. Any investment manager approved by the board of trustees shall invest the commingled funds or shares as a fiduciary;
(i) Pooled or commingled real estate funds or real estate securities managed by a corporate trustee or by a Securities and Exchange Commission registered investment advisory firm retained as an investment manager by the board of trustees, provided that the total book value of investments under this paragraph at no time shall exceed five percent (5%) of the total book value of all investments of the total investment fund. The investment in commingled funds or shares shall be held in trust. Any investment manager approved by the board of trustees shall invest the commingled funds or shares as a fiduciary.
(3) All investments shall be acquired at prices not exceeding the prevailing market values for the securities.
(4) Any limitations set forth in this section shall be applicable only at the time of purchase and shall not require the liquidation of any investment at any time, except as may be required to meet any divestment requirements of Section 25-11-122. All investments shall be clearly marked to indicate ownership by the fund and to the extent possible shall be registered in the name of the fund.
(5) Subject to the preceding terms, conditions, limitations and restrictions, the board shall have power to sell, assign, transfer and dispose of any of the securities and investments of the fund, provided that the sale, assignment or transfer has the majority approval of the entire board. The board may employ or contract with investment managers, evaluation services or other such services as determined by the board to be necessary for the effective and efficient operation of the fund.
(6) Except as otherwise provided in this section, no trustee and no employee of the board shall have any direct or indirect interest in the income, gains or profits of any investment made by the board, nor shall any such person receive any pay or emolument for his services in connection with any investment made by the board. No trustee or employee of the board shall become an endorser or surety, or in any manner an obligor for money loaned by or borrowed from the fund.
(7) All interest derived from investments and any gains from the sale or exchange of investments shall be credited by the board to the account of the fund.
(8) The board of trustees shall be the custodian and fiduciary of the fund.
(9) For the purpose of meeting disbursements, cash may be kept available, not exceeding the requirements of the fund for a period of ninety (90) days, on deposit in one or more banks or trust companies organized under the laws of the State of Mississippi or the laws of the United States, provided that the sum on deposit in any one (1) bank or trust company shall not exceed thirty-five percent (35%) of the paid-up capital and regular surplus of the bank or trust company.
(10) The board of trustees shall determine the degree of collateralization necessary for both foreign and domestic demand deposit accounts in addition to that which is guaranteed by the Federal Deposit Insurance Corporation or such other federal insurance program as may be in effect.
(11) The board, the executive director and employees shall discharge their duties with respect to the investments of the system solely for the interest of the fund with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent investor acting in a like capacity and familiar with those matters would use in the conduct of an enterprise of a like character and with like aims, including diversifying the investments of the system so as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so. The board, the executive director and employees are not liable for breach of their fiduciary duty to the system by reason of any decision to restrict, reduce, or eliminate investments in scrutinized companies in accordance with the requirements of Section 25-11-122.
(12) Investment management fees and costs shall be paid from the fund.
SECTION 6. This act shall take effect and be in force from and after July 1, 2013.
