SF 131

1st Engrossment - 86th Legislature (2009 - 2010) Posted on 02/09/2010 02:10am

A bill for an act
relating to the State Board of Investment; requiring divestment from certain
investments relating to Iran; requiring a report; proposing coding for new law
in Minnesota Statutes, chapter 11A.

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

Section 1.

new text begin [11A.244] INVESTMENT IN IRAN.
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new text begin Subdivision 1. new text end

new text begin Definitions. new text end

new text begin For the purposes of this section, the following terms
have the meanings given them in this subdivision.
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new text begin (1) "Active business operations" means all business operations that are not inactive
business operations.
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new text begin (2) "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.
new text end

new text begin (3) "Direct holdings" means all publicly traded 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 (4) "Government of Iran" means the government of the Islamic Republic of Iran or
its instrumentalities or political subdivisions and companies owned or controlled by the
Islamic Republic of Iran.
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new text begin (5) "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 (6) "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 (7) "Scrutinized company" means any company engaging in scrutinized business
operations.
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new text begin (8) "Scrutinized business operations" means any and all active business operations
that are subject or liable to sanctions under Public Law 104-172, as amended, the Iran
Sanctions Act of 1996, and that involve the maintenance of a company's existing assets or
investments in Iran, or the deployment of new investments to Iran that meet or exceed
the $20,000,000 threshold referred to in Public Law 104-172, as amended, the Iran
Sanctions Act of 1996. "Scrutinized business operations" does not include the retail sale
of gasoline and related products.
new text end

new text begin (9) "Substantial action specific to Iran" 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) Within 90 days following
the effective date of this section, 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, as appropriate, on publicly available information regarding
companies with business operations in Iran, 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 Iran; 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 Iran.
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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 to 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 Iran, that company shall be removed from the scrutinized
companies list and the provisions of this section shall cease to apply to it unless it resumes
active business operations in Iran.
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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 (2), 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 (2), 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.
new text end

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 Iran, that company is exempt
from the divestment requirements and the investment prohibitions in this section.
new text end

new text begin Subd. 7. new text end

new text begin Exemptions. new text end

new text begin (a) If the State Board of Investment determines, in good faith,
that the action required by this section is inconsistent with the fiduciary responsibilities
of the board, the board is not required to make any divestment required by this section.
The board must report a determination under this subdivision in writing to the chair and
vice-chair of the Legislative Commission on Pensions and Retirement. The report must
include information with respect to each scrutinized company for which the board did not
take all actions prescribed under this section, and must also specify any and all other
actions that the board intends to take in compliance with this section. The report required
by this subdivision must be updated continually and submitted quarterly to the chair and
vice-chair of the Legislative Commission on Pensions and Retirement. Any report filed
under this subdivision does not eliminate the reporting requirements under subdivision 9.
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new text begin (b) 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 Iran;
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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 Iran; 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 Iran.
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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.
new text end

new text begin Subd. 9. new text end

new text begin Reporting. new text end

new text begin (a) Within 30 days after creating the scrutinized companies
list, the State Board of Investment shall submit the list to the chair and vice-chair of the
Legislative Commission on Pensions and Retirement.
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new text begin (b) By January 15 of each calendar year, the State Board of Investment shall submit
a report to the chairs 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 either of the following
apply:
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new text begin (1) Iran is removed from the United States Department of State's list of countries that
have been determined to repeatedly provide support for acts of international terrorism; or
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new text begin (2) 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.
new text end

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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