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Senate Bill 2142

Senate Bill sb2142c1

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    Florida Senate - 2007                           CS for SB 2142

    By the Committee on Governmental Operations; and Senators
    Deutch, Joyner, Rich, Gaetz, Wilson, Atwater, Margolis,
    Aronberg, Baker, Bullard, Storms and Hill



    585-2525-07

  1                      A bill to be entitled

  2         An act relating to investments of the State

  3         Board of Administration; creating s. 215.442,

  4         F.S.; providing reporting requirements for the

  5         executive director of the State Board of

  6         Administration; requiring the State Board of

  7         Administration to publish certain quarterly

  8         reports on its website; creating s. 215.473,

  9         F.S.; providing legislative findings; providing

10         definitions; requiring the State Board of

11         Administration to identify all companies in

12         which public moneys are invested that are doing

13         certain types of business in or with Sudan and

14         Iran; requiring the board to create and

15         maintain certain scrutinized companies lists

16         that name all such companies; requiring the

17         board to periodically contact all scrutinized

18         companies and encourage them to refrain from

19         engaging in certain types of business in or

20         with Sudan or Iran; requiring the board to

21         inform scrutinized companies of their status as

22         a scrutinized company and to ask for

23         clarification as to the nature of each

24         company's business activities; providing that a

25         company may be removed from the list under

26         certain conditions; providing for

27         reintroduction of a company onto the list;

28         requiring the board to divest of all publicly

29         traded securities of a scrutinized company

30         under certain conditions; providing exceptions

31         to the divestment requirement; prohibiting the

                                  1

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    Florida Senate - 2007                           CS for SB 2142
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 1         board from acquiring securities of scrutinized

 2         companies that have active business operations;

 3         providing exceptions to the investment

 4         prohibition; providing an additional exception

 5         from the divestment requirement and the

 6         investment prohibition to certain indirect

 7         holdings in actively managed investment funds;

 8         requiring the board to request that the

 9         managers of such investment funds consider

10         removing scrutinized companies from the fund or

11         create a similar fund that excludes such

12         companies; requiring the board to file a report

13         with the Governor, the Legislature, and

14         Attorney General within a specified period

15         after creation of each scrutinized companies

16         list; requiring the annual filing of an updated

17         report; requiring that all such reports be made

18         available to the public; requiring that the

19         report include certain information; providing

20         for the expiration of the act; exempting the

21         board from certain statutory or common law

22         obligations; authorizing the board to cease

23         divesting or to reinvest in certain scrutinized

24         companies if the value for all assets under

25         management by the board becomes equal to or

26         less than a specified amount; requiring the

27         board to provide a written report to the

28         Governor, the Legislature, and Attorney General

29         before such reinvestment; requiring that the

30         report contain certain information; requiring

31         semiannual updates to such reports when

                                  2

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 1         applicable; providing for severability;

 2         providing an effective date.

 3  

 4         WHEREAS, on July 23, 2004, the United States Congress

 5  declared that "the atrocities unfolding in Darfur, Sudan, are

 6  genocide," and

 7         WHEREAS, on December 7, 2004, the United States

 8  Congress noted that the genocidal policy in Darfur has led to

 9  reports of "systematic rape of thousands of women and girls,

10  the abduction of women and children, and the destruction of

11  hundreds of ethnically African villages, including the

12  poisoning of their wells and the plunder of their crops and

13  cattle upon which the people of such villages sustain

14  themselves," and

15         WHEREAS, on December 7, 2004, Congress found that "the

16  Government of Sudan has restricted access by humanitarian and

17  human rights workers to the Darfur area through intimidation

18  by military and security forces, and through bureaucratic and

19  administrative obstruction, in an attempt to inflict the most

20  devastating harm on those individuals displaced from their

21  villages and homes without any means of sustenance or

22  shelter," and

23         WHEREAS, on September 25, 2006, Congress reaffirmed

24  that "the genocide unfolding in the Darfur region of Sudan is

25  characterized by acts of terrorism and atrocities directed

26  against civilians, including mass murder, rape, and sexual

27  violence committed by the Janjaweed and associated militias

28  with the complicity and support of the National Congress

29  Party-led faction of the Government of Sudan," and

30         WHEREAS, on September 26, 2006, the United States House

31  of Representatives stated that "an estimated 300,000 to

                                  3

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 1  400,000 people have been killed by the Government of Sudan and

 2  its Janjaweed allies since the crisis began in 2003, more than

 3  2,000,000 people have been displaced from their homes, and

 4  more than 250,000 people from Darfur remain in refugee camps

 5  in Chad," and

 6         WHEREAS, the Darfur crisis represents the first time

 7  the United States Government has labeled ongoing atrocities as

 8  genocide, and

 9         WHEREAS, the Federal Government has imposed sanctions

10  against the Government of Sudan since 1997. These sanctions

11  are monitored through the United States Treasury Department's

12  Office of Foreign Assets Control (OFAC), and

13         WHEREAS, according to a former chair of the United

14  States Securities and Exchange Commission, the fact that a

15  foreign company is doing material business with a country,

16  government, or entity on OFAC's sanctions list is, in the SEC

17  staff's view, substantially likely to be significant to a

18  reasonable investor's decision about whether to invest in that

19  company, and

20         WHEREAS, since 1993, the United States Secretary of

21  State has determined that Sudan is a country whose government

22  has repeatedly provided support for acts of international

23  terrorism, and, as a result, the United States has restricted

24  assistance, defense exports, defense sales, financial

25  transactions, and various other transactions with the

26  Government of Sudan, and

27         WHEREAS, a 2006 report by United States House of

28  Representatives states that "a company's association with

29  sponsors of terrorism and human rights abuses, no matter how

30  large or small, can have a materially adverse result on a

31  public company's operations, financial condition, earnings,

                                  4

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 1  and stock prices, all of which can negatively affect the value

 2  of an investment," and

 3         WHEREAS, in response to the financial risk posed by

 4  investments in companies doing business with a state that

 5  sponsors terrorists, the Securities and Exchange Commission

 6  established its Office of Global Security Risk to provide for

 7  enhanced disclosure of material information regarding such

 8  companies, and

 9         WHEREAS, the current Sudan divestment movement

10  encompasses nearly 100 universities, municipalities, states,

11  and private pension plans, and

12         WHEREAS, companies facing such widespread divestment

13  present further material risk to remaining investors, and

14         WHEREAS, it is a fundamental responsibility of the

15  State of Florida to decide where, how, and by whom financial

16  resources in its control should be invested, taking into

17  account numerous pertinent factors, and

18         WHEREAS, it is the prerogative and desire of the State

19  of Florida, with respect to investment resources in its

20  control and to the extent reasonable, with due consideration

21  for return on investment on behalf of the state and its

22  investment beneficiaries, not to participate in an ownership

23  or capital-providing capacity with entities that provide

24  significant practical support for genocide, including certain

25  non-United States companies presently doing business in Sudan,

26  and

27         WHEREAS, a resolution of the United Nations Security

28  Council imposes sanctions on Iran for its failure to suspend

29  its uranium-enrichment activities, and

30         WHEREAS, the United Nations Security Council voted

31  unanimously for an additional embargo on Iranian arms exports,

                                  5

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 1  which is a freeze on assets abroad of an expanded list of

 2  individuals and companies involved in Iran's nuclear and

 3  ballistic missile programs, and calls for nations and

 4  institutions to bar new grants or loans to Iran except for

 5  humanitarian and developmental purposes, and

 6         WHEREAS, Iran's financial ability to pay its debts to

 7  foreign entities involved in the petroleum-energy sector

 8  amounting to more than $20 million is put at risk by the Iran

 9  and Libya Sanctions Act embargo and sanctions, and

10         WHEREAS, foreign entities have invested in Iran's

11  petroleum-energy sector despite United States and United

12  Nations sanctions against Iran, and

13         WHEREAS, all United States and foreign entities that

14  have invested more than $20 million in Iran's energy sector

15  since August 5, 1996, are subject to sanctions under United

16  States law pursuant to the Iran and Libya Sanctions Act of

17  1996, and

18         WHEREAS, the United States renewed the Iran and Libya

19  Sanctions Act of 1996 in 2001 and 2006, and

20         WHEREAS, while divestiture should be considered with

21  the intent to improve investment performance and, by the rules

22  of prudence, fiduciaries must take into account all relevant

23  substantive factors in arriving at an investment decision, and

24         WHEREAS, the State of Florida is deeply concerned about

25  investments in publicly traded companies that have business

26  activities in and ties to Iran's petroleum-energy sector as a

27  financial risk to the shareholders, and

28         WHEREAS, by investing in publicly traded companies

29  having ties to Iran's petroleum-energy sector, the Florida

30  State Board of Administration is putting the funds it oversees

31  at substantial financial risk, and

                                  6

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 1         WHEREAS, divestiture from markets that are vulnerable

 2  to embargo, loan restrictions, and sanctions from the United

 3  States and the international community, including the United

 4  Nations Security Council, is in accordance with the rules of

 5  prudence, and

 6         WHEREAS, the Legislature finds that this act should

 7  remain in effect only insofar as it continues to be consistent

 8  with and does not unduly interfere with the foreign policy of

 9  the United States as determined by the Federal Government, and

10         WHEREAS, to protect Florida's assets, it is in the best

11  interest of the state to enact a statutory prohibition

12  regarding the investments managed by the State Board of

13  Administration doing business in Sudan or in Iran's

14  petroleum-energy sector, NOW, THEREFORE,

15  

16  Be It Enacted by the Legislature of the State of Florida:

17  

18         Section 1.  Section 215.442, Florida Statutes, is

19  created to read:

20         215.442  Executive director; reporting requirements;

21  public meeting.--

22         (1)  Beginning October 2007 and quarterly thereafter,

23  the executive director shall present to the Board of Trustees

24  of the State Board of Administration a quarterly report to

25  include the following:

26         (a)  The name of each equity in which the State Board

27  of Administration has invested for the quarter.

28         (b)  The industry category of each equity.

29         (2)  The executive director shall present each

30  quarterly report at a meeting of the board of trustees, which

31  shall be open and noticed to the public pursuant to the

                                  7

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 1  requirements of s. 286.011 and s. 24(b), Art. I of the State

 2  Constitution.

 3         (3)  The State Board of Administration shall publish a

 4  copy of each quarterly report on its website prior to

 5  presenting the report at each quarterly meeting of the board

 6  of trustees.

 7         Section 2.  Section 215.473, Florida Statutes, is

 8  created to read:

 9         215.473  Divestiture by the State Board of

10  Administration; Sudan; Iran.--

11         (1)  DEFINITIONS.--As used in this act, the term:

12         (a)  "Active business operations" means all business

13  operations that are not inactive business operations.

14         (b)  "Business operations" means engaging in commerce

15  in any form in Sudan or Iran, including, but not limited to,

16  acquiring, developing, maintaining, owning, selling,

17  possessing, leasing, or operating equipment, facilities,

18  personnel, products, services, personal property, real

19  property, or any other apparatus of business or commerce.

20         (c)  "Company" means any sole proprietorship,

21  organization, association, corporation, partnership, joint

22  venture, limited partnership, limited liability partnership,

23  limited liability company, or other entity or business

24  association, including all wholly owned subsidiaries,

25  majority-owned subsidiaries, parent companies, or affiliates

26  of such entities or business associations, that exists for the

27  purpose of making profit.

28         (d)  "Complicit" means taking actions during any

29  preceding 20-month period which have directly supported or

30  promoted the genocidal campaign in Darfur, including, but not

31  limited to, preventing Darfur's victimized population from

                                  8

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 1  communicating with each other, encouraging Sudanese citizens

 2  to speak out against an internationally approved security

 3  force for Darfur, actively working to deny, cover up, or alter

 4  the record on human rights abuses in Darfur, or other similar

 5  actions.

 6         (e)  "Direct holdings" in a company means all

 7  securities of that company that are held directly by the

 8  public fund or in an account or fund in which the public fund

 9  owns all shares or interests.

10         (f)  "Government of Iran" means the government of Iran,

11  its instrumentalities, and companies owned or controlled by

12  the government of Iran.

13         (g)  "Government of Sudan" means the government in

14  Khartoum, Sudan, that is led by the National Congress Party,

15  formerly known as the National Islamic Front, or any successor

16  government formed on or after October 13, 2006, including the

17  coalition National Unity Government agreed upon in the

18  Comprehensive Peace Agreement for Sudan, and does not include

19  the regional government of southern Sudan.

20         (h)  "Inactive business operations" means the mere

21  continued holding or renewal of rights to property previously

22  operated for the purpose of generating revenues but not

23  presently deployed for such purpose.

24         (i)  "Indirect holdings" in a company means all

25  securities of that company that are held in an account or

26  fund, such as a mutual fund, managed by one or more persons

27  not employed by the public fund, in which the public fund owns

28  shares or interests together with other investors not subject

29  to the provisions of this act.

30         (j)  "Iran" means the Islamic Republic of Iran.

31  

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 1         (k)  "Marginalized populations of Sudan" include, but

 2  are not limited to, the portion of the population in the

 3  Darfur region that has been genocidally victimized; the

 4  portion of the population of southern Sudan victimized by

 5  Sudan's north-south civil war; the Beja, Rashidiya, and other

 6  similarly underserved groups of eastern Sudan; the Nubian and

 7  other similarly underserved groups in Sudan's Abyei, Southern

 8  Blue Nile, and Nuba Mountain regions; and the Amri, Hamadab,

 9  Manasir, and other similarly underserved groups of northern

10  Sudan.

11         (l)  "Military equipment" means weapons, arms, military

12  supplies, and equipment that may readily be used for military

13  purposes, including, but not limited to, radar systems,

14  military-grade transport vehicles, or supplies or services

15  sold or provided directly or indirectly to any force actively

16  participating in armed conflict in Sudan.

17         (m)  "Mineral-extraction activities" include the

18  exploring, extracting, processing, transporting, or wholesale

19  selling or trading of elemental minerals or associated metal

20  alloys or oxides (ore), including gold, copper, chromium,

21  chromite, diamonds, iron, iron ore, silver, tungsten, uranium,

22  and zinc, as well as facilitating such activities, including

23  providing supplies or services in support of such activities.

24         (n)  "Oil-related activities" include, but are not

25  limited to, owning rights to oil blocks; exporting,

26  extracting, producing, refining, processing, exploring for,

27  transporting, selling, or trading of oil; constructing,

28  maintaining, or operating a pipeline, refinery, or other

29  oil-field infrastructure; and facilitating such activities,

30  including providing supplies or services in support of such

31  activities, except that the mere retail sale of gasoline and

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 1  related consumer products is not considered an oil-related

 2  activity.

 3         (o)  "Petroleum resources" means petroleum, petroleum

 4  byproducts, or natural gas.

 5         (p)  "Power-production activities" means any business

 6  operation that involves a project commissioned by the National

 7  Electricity Corporation (NEC) of Sudan or other similar entity

 8  of the Government of Sudan whose purpose is to facilitate

 9  power generation and delivery, including, but not limited to,

10  establishing power-generating plants or hydroelectric dams,

11  selling or installing components for the project, providing

12  service contracts related to the installation or maintenance

13  of the project, as well as facilitating such activities,

14  including providing supplies or services in support of such

15  activities.

16         (q)  "Public fund" means all funds, assets, trustee,

17  and other designates under the State Board of Administration

18  pursuant to chapter 121.

19         (r)  "Scrutinized active business operations" means

20  active business operations that have resulted in a company

21  becoming a scrutinized company.

22         (s)  "Scrutinized business operations" means business

23  operations that have resulted in a company becoming a

24  scrutinized company.

25         (t)  "Scrutinized company" means any company that meets

26  any of the following criteria:

27         1.  The company has business operations that involve

28  contracts with or provision of supplies or services to the

29  Government of Sudan, companies in which the Government of

30  Sudan has any direct or indirect equity share, consortiums or

31  projects commissioned by the Government of Sudan, or companies

                                  11

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 1  involved in consortiums or projects commissioned by the

 2  Government of Sudan, and:

 3         a.  More than 10 percent of the company's revenues or

 4  assets linked to Sudan involve oil-related activities or

 5  mineral-extraction activities; less than 75 percent of the

 6  company's revenues or assets linked to Sudan involve contracts

 7  with or provision of oil-related or mineral-extracting

 8  products or services to the regional government of southern

 9  Sudan or a project or consortium created exclusively by that

10  regional government; and the company has failed to take

11  substantial action; or

12         b.  More than 10 percent of the company's revenues or

13  assets linked to Sudan involve power-production activities;

14  less than 75 percent of the company's power-production

15  activities include projects whose intent is to provide power

16  or electricity to the marginalized populations of Sudan; and

17  the company has failed to take substantial action.

18         2.  The company is complicit in the Darfur genocide.

19         3.  The company supplies military equipment within

20  Sudan, unless it clearly shows that the military equipment

21  cannot be used to facilitate offensive military actions in

22  Sudan or the company implements rigorous and verifiable

23  safeguards to prevent use of that equipment by forces actively

24  participating in armed conflict. Examples of safeguards

25  include post-sale tracking of such equipment by the company,

26  certification from a reputable and objective third party that

27  such equipment is not being used by a party participating in

28  armed conflict in Sudan, or sale of such equipment solely to

29  the regional government of southern Sudan or any

30  internationally recognized peacekeeping force or humanitarian

31  organization.

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 1         4.  The company has business operations that involve

 2  contracts with or provision of supplies or services to the

 3  Government of Iran, companies in which the Government of Iran

 4  has any direct or indirect equity share, consortiums, or

 5  projects commissioned by the Government of Iran, or companies

 6  involved in consortiums or projects commissioned by the

 7  Government of Iran and:

 8         a.  More than 10 percent of the company's total

 9  revenues or assets are linked to Iran and involve oil-related

10  activities or mineral-extraction activities; and the company

11  has failed to take substantial action; or

12         b.  The company has, with actual knowledge, on or after

13  August 5, 1996, made an investment of $20 million or more, or

14  any combination of investments of at least $10 million each,

15  which in the aggregate equals or exceeds $20 million in any

16  12-month period, and which directly or significantly

17  contributes to the enhancement of Iran's ability to develop

18  the petroleum resources of Iran.

19         (u)  "Social-development company" means a company whose

20  primary purpose in Sudan is to provide humanitarian goods or

21  services, including medicine or medical equipment;

22  agricultural supplies or infrastructure; educational

23  opportunities; journalism-related activities; information or

24  information materials; spiritual-related activities; services

25  of a purely clerical or reporting nature; food, clothing, or

26  general consumer goods that are unrelated to oil-related

27  activities; mineral-extraction activities; or power-production

28  activities.

29         (v)  "Substantial action specific to Iran" means

30  adopting, publicizing, and implementing a formal plan to cease

31  

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 1  scrutinized business operations within 1 year and to refrain

 2  from any such new business operations.

 3         (w)  "Substantial action specific to Sudan" means

 4  adopting, publicizing, and implementing a formal plan to cease

 5  scrutinized business operations within 1 year and to refrain

 6  from any such new business operations; undertaking

 7  humanitarian efforts in conjunction with an international

 8  organization, the government of Sudan, the regional government

 9  of Southern Sudan, or a nonprofit entity evaluated and

10  certified by an independent third party to be substantially in

11  a relationship to the company's Sudan business operations and

12  of benefit to one or more marginalized populations of Sudan;

13  or, through engagement with the Government of Sudan,

14  materially improving conditions for the genocidally victimized

15  population in Darfur.

16         (2)  IDENTIFICATION OF COMPANIES.--

17         (a)  Within 90 days after the effective date of this

18  act, the public fund shall make its best efforts to identify

19  all scrutinized companies in which the public fund has direct

20  or indirect holdings or could possibly have such holdings in

21  the future. Such efforts include:

22         1.  Reviewing and relying, as appropriate in the public

23  fund's judgment, on publicly available information regarding

24  companies having business operations in Sudan, including

25  information provided by nonprofit organizations, research

26  firms, international organizations, and government entities;

27         2.  Contacting asset managers contracted by the public

28  fund that invest in companies having business operations in

29  Sudan; or

30  

31  

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 1         3.  Contacting other institutional investors that have

 2  divested from or engaged with companies that have business

 3  operations in Sudan.

 4         4.  Laws of the United States regarding the levels of

 5  business activity that would cause application of sanctions

 6  for companies conducting business or investing in countries

 7  that are designated state sponsors of terror.

 8         (b)  By the first meeting of the public fund following

 9  the 90-day period described in paragraph (a), the public fund

10  shall assemble all scrutinized companies that fit criteria

11  specified in subparagraphs (1)(t)1., 2., and 3. into a

12  "Scrutinized Companies with Activities in Sudan List" and

13  shall assemble all scrutinized companies that fit criteria

14  specified in subparagraph (1)(t)4. into a "Scrutinized

15  Companies with Activities in the Iran Petroleum Energy Sector

16  List."

17         (c)  The public fund shall update and make publicly

18  available quarterly the Scrutinized Companies with Activities

19  in Sudan List and the Scrutinized Companies with Activities in

20  the Iran Petroleum Energy Sector List based on evolving

21  information from, among other sources, those listed in

22  paragraph (a).

23         (d)  Notwithstanding the provisions of this act, a

24  social-development company that is not complicit in the Darfur

25  genocide is not considered a scrutinized company under

26  subparagraph (1)(t)1., subparagraph (1)(t)2., subparagraph

27  (1)(t)3., or subparagraph (1)(t)4.

28         (3)  REQUIRED ACTIONS.--The public fund shall adhere to

29  the following procedure for assembling companies on the

30  Scrutinized Companies with Activities in Sudan List and the

31  

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 1  Scrutinized Companies with Activities in the Iran Petroleum

 2  Energy Sector List:

 3         (a)  Engagement.--

 4         1.  The public fund shall immediately determine the

 5  companies on the Scrutinized Companies with Activities in

 6  Sudan List and the Scrutinized Companies 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 paragraph that

10  has only inactive business operations, the public fund shall

11  send a written notice informing the company 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 avoid

14  scrutinized business operations. The public fund shall

15  continue such correspondence semiannually.

16         3.  For each company newly identified under this

17  paragraph that has active business operations, the public fund

18  shall send a written notice informing the company of its

19  scrutinized company status and that it may become subject to

20  divestment by the public fund. The notice must inform the

21  company of the opportunity to clarify its Sudan-related or

22  Iran-related activities and encourage the company, within 90

23  days, to cease its scrutinized business operations or convert

24  such operations to inactive business operations in order to

25  avoid qualifying for divestment by the public fund.

26         4.  If, within 90 days after the public fund's first

27  engagement with a company pursuant to this paragraph, that

28  company ceases scrutinized business operations, the company

29  shall be removed from the Scrutinized Companies with

30  Activities in Sudan List and the Scrutinized Companies with

31  Activities in the Iran Petroleum Energy Sector List, and the

                                  16

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 1  provisions of this act shall cease to apply to that company

 2  unless that company resumes scrutinized business operations.

 3  If, within 90 days after the public fund's first engagement,

 4  the company converts its scrutinized active business

 5  operations to inactive business operations, the company is

 6  subject to all provisions relating to inactive business

 7  operations. A company may be removed from one list but remain

 8  on the other list, in which case the company shall be subject

 9  to the provisions applicable to the list on which the company

10  remains.

11         (b)  Divestment.--

12         1.  If, after 90 days following the public fund's first

13  engagement with a company pursuant to paragraph (a), the

14  company continues to have scrutinized active business

15  operations, and only while such company continues to have

16  scrutinized active business operations, the public fund shall

17  sell, redeem, divest, or withdraw all publicly 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 company's most recent appearance on the

21  Scrutinized Companies with Activities in Sudan List or on the

22  Scrutinized Companies with Activities in the Iran Petroleum

23  Energy Sector List.

24         2.  If a company that ceased scrutinized active

25  business operations following engagement pursuant to paragraph

26  (a) resumes such operations, this paragraph immediately

27  applies, and the public fund shall send a written notice to

28  the company. The company shall also be immediately

29  reintroduced onto the Scrutinized Companies with Activities in

30  Sudan List or on the Scrutinized Companies with Activities in

31  the Iran Petroleum Energy Sector List, as applicable.

                                  17

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    Florida Senate - 2007                           CS for SB 2142
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 1         (c)  Prohibition.--The public fund may not acquire

 2  securities of companies on the Scrutinized Companies with

 3  Activities in Sudan List or the Scrutinized Companies with

 4  Activities in the Iran Petroleum Energy Sector List that have

 5  active business operations, except as provided in paragraph

 6  (d).

 7         (d)  Exemption.--A company that the United States

 8  Government affirmatively declares to be excluded from its

 9  present or any future federal sanctions regime relating to

10  Sudan or Iran is not subject to divestment or the investment

11  prohibition pursuant to paragraphs (b) and (c).

12         (e)  Excluded securities.--Notwithstanding the

13  provisions of this act, paragraphs (b) and (c) do not apply to

14  indirect holdings in actively managed investment funds.

15  However, the public fund shall submit letters to the managers

16  of such investment funds containing companies that have

17  scrutinized active business operations requesting that they

18  consider removing such companies from the fund or create a

19  similar actively managed fund having indirect holdings devoid

20  of such companies. If the manager creates a similar fund, the

21  public fund shall replace all applicable investments with

22  investments in the similar fund in an expedited timeframe

23  consistent with prudent investing standards. For the purposes

24  of this section, a private equity fund is deemed to be an

25  actively managed investment fund.

26         (f)  Further exclusions.--Notwithstanding any other

27  provision of this act, the public fund, when discharging its

28  responsibility for operation of a defined contribution plan,

29  shall engage the manager of the investment offerings in such

30  plans requesting that they consider removing scrutinized

31  companies from the investment offerings or create an

                                  18

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    Florida Senate - 2007                           CS for SB 2142
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 1  alternative investment offering devoid of scrutinized

 2  companies. If the manager creates an alternative investment

 3  offering and the offering is deemed by the public fund to be

 4  consistent with prudent investor standards, the public fund

 5  shall consider including such investment offering in the plan.

 6         (4)  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, and the Speaker

10  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 Energy Sector

13  List within 30 days after the list is created. This report

14  shall be made available to the public.

15         (b)  At each quarterly meeting of the Board of Trustees

16  thereafter, the public fund shall file a report, which shall

17  be made available to the public and to each member of the

18  Board of Trustees of the State Board of Administration, the

19  President of the Senate, and the Speaker of the House of

20  Representatives, and send a copy of that report to the United

21  States Presidential Special Envoy to Sudan and the United

22  States Presidential Special Envoy to Iran, or an appropriate

23  designee or successor, which includes:

24         1.  A summary of correspondence with companies engaged

25  by the public fund under subparagraphs (3)(a)2. and 3.;

26         2.  All investments sold, redeemed, divested, or

27  withdrawn in compliance with paragraph (3)(b);

28         3.  All prohibited investments under paragraph (3)(c);

29         4.  Any progress made under paragraph (3)(e); and

30         5.  A list of all publicly traded securities held

31  directly by this state.

                                  19

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 1         (5)  EXPIRATION.--This act expires upon the occurrence

 2  of all of the following:

 3         (a)  If any of the following occur, the public fund

 4  shall no longer scrutinize companies according to

 5  subparagraphs (1)(t)1., 2., and 3. and shall no longer

 6  assemble the Scrutinized Companies with Activities in Sudan

 7  List, shall cease engagement and divestment of such companies,

 8  and may reinvest in such companies as long as such companies

 9  do not satisfy the criteria for inclusion in the Scrutinized

10  Companies with Activities in the Iran Petroleum Energy Sector

11  List:

12         1.  The Congress or President of the United States,

13  affirmatively and unambiguously states, by means including,

14  but not limited to, legislation, executive order, or written

15  certification from the President to Congress, that the Darfur

16  genocide has been halted for at least 12 months;

17         2.  The United States revokes all sanctions imposed

18  against the Government of Sudan;

19         3.  The Congress or President of the United States

20  affirmatively and unambiguously states, by means including,

21  but not limited to, legislation, executive order, or written

22  certification from the President to Congress, that the

23  government of Sudan has honored its commitments to cease

24  attacks on civilians, demobilize and demilitarize the

25  Janjaweed and associated militias, grant free and unfettered

26  access for deliveries of humanitarian assistance, and allow

27  for the safe and voluntary return of refugees and internally

28  displaced persons; or

29         4.  The Congress or President of the United States

30  affirmatively and unambiguously states, by means including,

31  but not limited to, legislation, executive order, or written

                                  20

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    Florida Senate - 2007                           CS for SB 2142
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 1  certification from the President to Congress, that mandatory

 2  divestment of the type provided for in this act interferes

 3  with the conduct of United States foreign policy.

 4         (b)  If any of the following 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 with Activities in

12  Sudan List:

13         1.  The Congress or President of the United States

14  affirmatively and unambiguously states, by means including,

15  but not limited to, legislation, executive order, or written

16  certification from the President to Congress, that the

17  government of Iran has ceased to acquire weapons of mass

18  destruction and support international terrorism;

19         2.  The United States revokes all sanctions imposed

20  against the government of Iran; or

21         3.  The Congress or President of the United States

22  affirmatively and unambiguously declares, by means including,

23  but not limited to, legislation, executive order, or written

24  certification from the President to Congress, that mandatory

25  divestment of the type provided for in this act interferes

26  with the conduct of United States foreign policy.

27         (6)  OTHER LEGAL OBLIGATIONS.--With respect to actions

28  taken in compliance with this act, including all good faith

29  determinations regarding companies as required by this act,

30  the public fund is exempt from any conflicting statutory or

31  common law obligations, including any such obligations with

                                  21

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    Florida Senate - 2007                           CS for SB 2142
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 1  respect to choice of asset managers, investment funds, or

 2  investments for the public fund's securities portfolios.

 3         (7)  REINVESTMENT IN CERTAIN COMPANIES HAVING

 4  SCRUTINIZED ACTIVE BUSINESS OPERATIONS.--Notwithstanding any

 5  other provision of this act to the contrary, the public fund

 6  may cease divesting from certain scrutinized companies

 7  pursuant to paragraph (3)(b) or reinvest in certain

 8  scrutinized companies from which it divested pursuant to

 9  paragraph (3)(b) if clear and convincing evidence shows that

10  the value of all assets under management by the public fund

11  becomes equal to or less than 99.50 percent, or 50 basis

12  points, of the hypothetical value of all assets under

13  management by the public fund assuming no divestment for any

14  company had occurred under paragraph (3)(b). Cessation of

15  divestment, reinvestment, or any subsequent ongoing investment

16  authorized by this act is limited to the minimum steps

17  necessary to avoid the contingency set forth in this

18  subsection or that no divestment of any company is required

19  for less than fair value. For any cessation of divestment,

20  reinvestment, or subsequent ongoing investment authorized by

21  this act, the public fund shall provide a written report to

22  each member of the Board of Trustees of the State Board of

23  Administration, the President of the Senate, and the Speaker

24  of the House of Representatives in advance of initial

25  reinvestment, updated semiannually thereafter as applicable,

26  setting forth the reasons and justification, supported by

27  clear and convincing evidence, for its decisions to cease

28  divestment, reinvest, or remain invested in companies having

29  scrutinized active business operations. This act does not

30  apply to reinvestment in companies on the grounds that they

31  have ceased to have scrutinized active business operations.

                                  22

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    Florida Senate - 2007                           CS for SB 2142
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 1         Section 3.  If any provision of this act or its

 2  application to any person or circumstance is held invalid, the

 3  invalidity does not affect other provisions or applications of

 4  the act that can be given effect without the invalid provision

 5  or application, and to this end the provisions of this act are

 6  severable. The Legislature hereby declares that it would have

 7  passed this act and each provision of this act, irrespective

 8  of the fact that any one or more provisions of this act might

 9  be declared invalid, illegal, unenforceable or

10  unconstitutional, including, but not limited to, each of the

11  engagement, divestment, and prohibition provisions of this

12  act.

13         Section 4.  This act shall take effect upon becoming a

14  law.

15  

16          STATEMENT OF SUBSTANTIAL CHANGES CONTAINED IN
                       COMMITTEE SUBSTITUTE FOR
17                             SB 2142

18                                 

19  The Committee Substitute provides recognition of more specific
    actions by federal authorities for a determination of the
20  expiration of the act. It exempts all funds managed by the
    Board of Administration other than those involving the defined
21  benefit plan of the Florida Retirement System, and it
    restricts divestment actions to only direct securities, thus
22  exempting private equity funds, and other indirect holdings.
    The bill eliminates an original provision giving the Attorney
23  General specific enforcement powers.

24  

25  

26  

27  

28  

29  

30  

31  

                                  23

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