SF 3928

as introduced - 92nd Legislature (2021 - 2022) Posted on 03/23/2022 10:40am

A bill for an act
relating to state government; requiring divestment from certain investments relating
to Russia; terminating contracts with Russian entities; requiring a report; proposing
coding for new law in Minnesota Statutes, chapters 11A; 16C.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

new text begin [11A.245] INVESTMENT IN RUSSIA.
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new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) For the purposes of this section, the following terms have
the meanings given.
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new text begin (b) "Active business operations" means all business operations that are not inactive
business operations.
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new text begin (c) "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, including all wholly owned subsidiaries,
majority-owned subsidiaries, parent companies, or affiliates of such entities or business
associations, that exists for profit-making purposes.
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new text begin (d) "Direct holdings" means all publicly traded debt and equity securities of a company
that are held directly by the State Board of Investment or held in an account or fund in which
the State Board of Investment owns all shares or interests.
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new text begin (e) "Government of Russia" means the government of the Russian Federation or its
instrumentalities or political subdivisions and companies owned or controlled by the Russian
Federation.
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new text begin (f) "Inactive business operations" means the continued holding or renewal of rights to
property previously operated for the purpose of generating revenues but not presently
deployed for such a purpose.
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new text begin (g) "Indirect holdings" means all investments held in an account or fund, including a
mutual fund, a real estate fund, a private equity fund, or a commingled fund, managed by
one or more persons who are not employed by the State Board of Investment, in which the
public funds own shares or interests together with other investors who are not subject to
this section.
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new text begin (h) "Scrutinized company" means any company engaging in scrutinized business
operations.
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new text begin (i) "Scrutinized business operations" means any and all active business operations that
are subject or liable to sanctions under applicable federal law. Scrutinized business operations
does not include the retail sale of gasoline and related products.
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new text begin (j) "Substantial action specific to Russia" means adopting, publicizing, and implementing
a formal plan to cease scrutinized business operations within one year and to refrain from
any such new business operations.
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new text begin Subd. 2. new text end

new text begin Identification of scrutinized companies. new text end

new text begin (a) No later than August 1, 2022,
the State Board of Investment shall make its best efforts to identify all scrutinized companies
in which it has direct holdings. These efforts shall include, as appropriate:
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new text begin (1) reviewing and relying on, as appropriate, publicly available information regarding
companies with business operations in Russia, including information provided by nonprofit
organizations, research firms, international organizations, and government entities;
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new text begin (2) contacting asset managers contracting with the State Board of Investment who invest
in companies with business operations in Russia; and
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new text begin (3) contacting other institutional investors that have divested from or engaged with
companies with business operations in Russia.
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new text begin (b) At the first meeting of the State Board of Investment after it has completed the
requirements of paragraph (a), the State Board of Investment shall assemble a list of
scrutinized companies in which it has direct holdings.
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new text begin (c) The State Board of Investment shall update the scrutinized companies list each quarter
based on continuing information, including but not limited to information from sources
identified in paragraph (a).
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new text begin Subd. 3. new text end

new text begin Engagement of scrutinized companies. new text end

new text begin The State Board of Investment shall
use the following procedures with respect to companies on the scrutinized companies list:
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new text begin (1) for each company newly identified in subdivision 2 with scrutinized business
operations, the State Board of Investment shall, within 90 days following its assembly of
the scrutinized companies list, send a written notice informing the company of its scrutinized
company status and that it may become subject to divestment by the State Board of
Investment. The notice shall offer the company the opportunity to clarify its scrutinized
business operations and shall encourage the company to cease, within 90 days of the date
of the notice, its scrutinized business operations, or convert them to inactive business
operations in order to avoid divestment by the State Board of Investment; and
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new text begin (2) if, within 90 days following the State Board of Investment's first engagement with
a company under clause (1), that company publicly announces its commitment to substantial
action specific to Russia, that company shall be removed from the scrutinized companies
list and the provisions of this section shall cease to apply to the company unless the company
resumes active business operations in Russia.
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new text begin Subd. 4. new text end

new text begin Divestment. new text end

new text begin (a) If, after 90 days following the State Board of Investment's first
engagement with a company under subdivision 3, clause (1), the company continues to have
scrutinized business operations, and only while the company continues to have scrutinized
business operations, the State Board of Investment shall sell, redeem, divest, or withdraw
all publicly traded securities of the company according to the following schedule:
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new text begin (1) at least 50 percent of the holdings in the company shall be removed from the State
Board of Investment's assets under management by nine months after the company's initial
appearance on the scrutinized companies list; and
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new text begin (2) 100 percent of the holdings in the company shall be removed from the State Board
of Investment's assets under management within 15 months after the company's initial
appearance on the scrutinized companies list.
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new text begin (b) If a company that ceased scrutinized business operations following engagement
under subdivision 3, clause (1), resumes such operations, paragraph (a) immediately applies
to the company and the State Board of Investment shall send a written notice to the company.
The company shall also be immediately reintroduced onto the scrutinized companies list.
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new text begin Subd. 5. new text end

new text begin Prohibition on new acquisitions. new text end

new text begin The State Board of Investment may not
acquire securities of companies on the scrutinized companies list that have scrutinized
business operations, except as provided in this section.
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new text begin Subd. 6. new text end

new text begin Relation to federal action. new text end

new text begin If the federal government excludes a company from
its present or any future federal sanctions relating to Russia, that company is exempt from
the divestment requirements and the investment prohibitions in this section.
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new text begin Subd. 7. new text end

new text begin Exemptions. new text end

new text begin Subdivisions 4 and 5 do not apply to any of the following:
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new text begin (1) investments in a company that is primarily engaged in supplying goods or services
intended to relieve human suffering in Russia;
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new text begin (2) investments in a company that is primarily engaged in promoting health; education;
or journalistic, religious, or welfare activities in Russia; and
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new text begin (3) investments in a United States company that is authorized by the federal government
to have active business operations in Russia.
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new text begin Subd. 8. new text end

new text begin Excluded securities. new text end

new text begin Subdivisions 4 and 5 do not apply to indirect holdings in
actively managed investment funds. The State Board of Investment shall submit letters to
the managers of investment funds containing companies with scrutinized active business
operations requesting the managers to consider removing such companies from the fund or
to create a similar actively managed fund with indirect holdings that do not include the
companies. If a manager creates a similar fund, the State Board of Investment shall promptly
replace all applicable investments with investments in the similar fund consistent with
prudent investing standards. For the purposes of this section, private equity funds shall be
deemed to be actively managed investment funds.
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new text begin Subd. 9. new text end

new text begin Reporting. new text end

new text begin By January 15 of each calendar year, the State Board of Investment
shall submit a report to the chairs and ranking minority members of the legislative committees
and divisions with jurisdiction over the State Board of Investment. The report must include:
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new text begin (1) a copy of the most recent list of scrutinized companies;
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new text begin (2) a summary of correspondence with companies engaged by the State Board of
Investment under subdivision 3;
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new text begin (3) a list of all investments sold, redeemed, divested, or withdrawn in compliance with
subdivision 4;
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new text begin (4) a list of all prohibited investments under subdivision 5; and
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new text begin (5) a description of any progress made under subdivision 8.
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new text begin Subd. 10. new text end

new text begin Expiration. new text end

new text begin This section ceases to be operative if the president of the United
States determines and certifies that state legislation similar to this section interferes with
the conduct of United States foreign policy.
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new text begin Subd. 11. new text end

new text begin Other legal obligations. new text end

new text begin The State Board of Investment is exempt from any
statutory or common law obligations that conflict with actions taken in compliance with
this section, including all good-faith determinations regarding companies as required by
this section, including any obligations regarding the choice of asset managers, investment
funds, or investments for the State Board of Investment's securities portfolios.
new text end

new text begin Subd. 12. new text end

new text begin Severability. new text end

new text begin The provisions of this section are severable. If any provision of
this section or its application is held invalid, that invalidity does not affect other provisions
or applications that can be given effect without the invalid provision or application.
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new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
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Sec. 2.

new text begin [16C.051] CONTRACTS WITH RUSSIA.
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new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin (a) For purposes of this section, the following terms have
the meanings given.
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new text begin (b) "Russian entity" means an institution or company that is headquartered in the Russian
Federation or has its principal place of business in the Russian Federation.
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new text begin (c) "State agencies" means the departments and agencies listed in section 15.06,
subdivision 1, as well as the Office of Higher Education and the Department of Military
Affairs.
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new text begin Subd. 2. new text end

new text begin Terminating contracts with Russia. new text end

new text begin (a) All state agencies must:
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new text begin (1) review existing contracts to determine if any existing contracts are with Russian
entities;
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new text begin (2) terminate existing contracts with Russian entities as practicable; and
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new text begin (3) refrain from entering into contracts with Russian entities unless the head of the state
agency determines that there is no suitable alternative.
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new text begin (b) State entities not defined in subdivision 1, must review existing contracts, terminate
contracts with Russian entities, and avoid future contracts with Russian entities.
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new text begin (c) Nothing in this section is intended to require or encourage state agencies to terminate
or avoid contracts with Minnesota companies or other domestic entities, or to relieve state
agencies of any obligations under applicable laws, rules, or regulations related to contracting
and procurement.
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new text begin Subd. 3. new text end

new text begin Severability. new text end

new text begin The provisions of this section are severable. If any provision of
this section or its application is held invalid, that invalidity does not affect other provisions
or applications that can be given effect without the invalid provision or application.
new text end