Full Text of SB1621 95th General Assembly
SB1621enr 95TH GENERAL ASSEMBLY
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LRB095 10598 JAM 30820 b |
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| AN ACT concerning finance.
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| WHEREAS, A resolution of the United Nations Security
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| Council imposes sanctions on Iran for its failure to suspend
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| its uranium-enrichment activities; and | 5 |
| WHEREAS, The United Nations Security Council voted
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| unanimously for an additional embargo on Iranian arms exports,
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| which is a freeze on assets abroad of an expanded list of
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| individuals and companies involved in Iran's nuclear and
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| ballistic missile programs and calls for nations and
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| institutions to bar new grants or loans to Iran except for
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| humanitarian and developmental purposes; and | 12 |
| WHEREAS, Iran's financial ability to pay its debts to
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| foreign entities involved in the petroleum-energy sector
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| amounting to more than $20 million is put at risk by the Iran
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| and Libya Sanctions Act embargo and sanctions; and | 16 |
| WHEREAS, Foreign entities have invested in Iran's
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| petroleum-energy sector despite United States and United
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| Nations sanctions against Iran; and | 19 |
| WHEREAS, All United States and foreign entities that
have | 20 |
| invested more than $20 million in Iran's energy sector
since | 21 |
| August 5, 1996, are subject to sanctions under United
States | 22 |
| law pursuant to the Iran and Libya Sanctions Act of
1996; and |
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| WHEREAS, The United States renewed the Iran and Libya
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| Sanctions Act of 1996 in 2001 and 2006; and | 3 |
| WHEREAS, While divestiture should be considered with
the | 4 |
| intent to improve investment performance and, by the rules
of | 5 |
| prudence, fiduciaries must take into account all relevant
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| substantive factors in arriving at an investment decision; and | 7 |
| WHEREAS, Divestiture from markets that are vulnerable
to | 8 |
| embargo, loan restrictions, and sanctions from the United
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| States and the international community, including the United
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| Nations Security Council, is in accordance with the rules of
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| prudence; and | 12 |
| WHEREAS, The State of Illinois is deeply concerned about
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| investments in publicly traded companies that have business
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| activities in and ties to Iran's petroleum-energy sector as a
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| financial risk to the shareholders; and | 16 |
| WHEREAS, By investing in publicly traded companies
having | 17 |
| ties to Iran's petroleum-energy sector, retirement systems are | 18 |
| putting the funds they oversee
at substantial financial risk; | 19 |
| and | 20 |
| WHEREAS, To protect Illinois' assets, it is in the best
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| interest of the State to enact a statutory prohibition
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| regarding investments in or with Iran's
petroleum-energy | 3 |
| sector; therefore | 4 |
| Be it enacted by the People of the State of Illinois,
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| represented in the General Assembly:
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| Section 5. The Illinois Procurement Code is amended by | 7 |
| adding Section 50-36 as follows: | 8 |
| (30 ILCS 500/50-36 new) | 9 |
| Sec. 50-36. Disclosure of business in Iran. | 10 |
| (a) As used in this Section:
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| "Business operations" means engaging in commerce
in any | 12 |
| form in Iran, including, but not limited to,
acquiring, | 13 |
| developing, maintaining, owning, selling,
possessing, leasing, | 14 |
| or operating equipment, facilities,
personnel, products, | 15 |
| services, personal property, real
property, or any other | 16 |
| apparatus of business or commerce. | 17 |
| "Company" means any sole proprietorship,
organization, | 18 |
| association, corporation, partnership, joint
venture, limited | 19 |
| partnership, limited liability partnership,
limited liability | 20 |
| company, or other entity or business
association, including all | 21 |
| wholly owned subsidiaries,
majority-owned subsidiaries, parent | 22 |
| companies, or affiliates
of those entities or business | 23 |
| associations, that exists for
the purpose of making profit. |
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| "Mineral-extraction activities" include exploring,
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| extracting, processing, transporting, or wholesale selling or
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| trading of elemental minerals or associated metal alloys or
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| oxides (ore), including gold, copper, chromium, chromite,
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| diamonds, iron, iron ore, silver, tungsten, uranium, and zinc. | 6 |
| "Oil-related activities" include, but are not
limited to, | 7 |
| owning rights to oil blocks; exporting,
extracting, producing, | 8 |
| refining, processing, exploring for,
transporting, selling, or | 9 |
| trading of oil; and constructing,
maintaining, or operating a | 10 |
| pipeline, refinery, or other
oil-field infrastructure. The | 11 |
| mere retail sale of gasoline and
related consumer products is | 12 |
| not considered an oil-related
activity. | 13 |
| "Petroleum resources" means petroleum, petroleum
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| byproducts, or natural gas. | 15 |
| "Substantial action" means adopting, publicizing,
and | 16 |
| implementing a formal plan to cease scrutinized business
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| operations within one year and to refrain from any such new
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| business operations. | 19 |
| (b) Each bid, offer, or proposal submitted for a State | 20 |
| contract, other than a small purchase defined in Section 20-20, | 21 |
| shall include a disclosure of whether or not the bidder, | 22 |
| offeror, or proposing entity, or any of its corporate parents | 23 |
| or subsidiaries, within the 24 months before submission of the | 24 |
| bid, offer, or proposal had
business operations that involved | 25 |
| contracts with or provision
of supplies or services to the | 26 |
| Government of Iran, companies
in which the Government of Iran |
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| has any direct or indirect
equity share, consortiums or | 2 |
| projects commissioned by the
Government of Iran, or companies | 3 |
| involved in consortiums or
projects commissioned by the | 4 |
| Government of Iran and: | 5 |
| (1) more than 10% of the company's revenues produced in | 6 |
| or assets located in Iran involve oil-related activities or
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| mineral-extraction activities; less than 75% of the
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| company's revenues produced in or assets located in Iran | 9 |
| involve contracts
with or provision of oil-related or | 10 |
| mineral-extraction
products or services to the Government | 11 |
| of Iran or a project or
consortium created exclusively by | 12 |
| that government; and the
company has failed to take | 13 |
| substantial action; or | 14 |
| (2) the company has, on or after
August 5, 1996, made | 15 |
| an investment of $20 million or more, or
any combination of | 16 |
| investments of at least $10 million each
that in the | 17 |
| aggregate equals or exceeds $20 million in any
12-month | 18 |
| period, that directly or significantly contributes
to the | 19 |
| enhancement of Iran's ability to develop petroleum
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| resources of Iran. | 21 |
| (c) A bid, offer, or proposal that does not include the | 22 |
| disclosure required by subsection (b) shall not be considered | 23 |
| responsive. A chief procurement officer may consider the | 24 |
| disclosure when evaluating the bid, offer, or proposal or | 25 |
| awarding the contract. | 26 |
| (d) Each chief procurement officer shall provide the State |
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| Comptroller with the name of each entity disclosed under | 2 |
| subsection (b) as doing business or having done business in | 3 |
| Iran. The State Comptroller shall post that information on his | 4 |
| or her official website. | 5 |
| Section 10. The Illinois Pension Code is amended by adding | 6 |
| Section 1-110.10 as follows: | 7 |
| (40 ILCS 5/1-110.10 new) | 8 |
| Sec. 1-110.10. Transactions prohibited by retirement | 9 |
| systems; Iran.
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| (a) As used in this Section: | 11 |
| "Active business operations" means all business
operations | 12 |
| that are not inactive business operations. | 13 |
| "Business operations" means engaging in commerce
in any | 14 |
| form in Iran, including, but not limited to,
acquiring, | 15 |
| developing, maintaining, owning, selling,
possessing, leasing, | 16 |
| or operating equipment, facilities,
personnel, products, | 17 |
| services, personal property, real
property, or any other | 18 |
| apparatus of business or commerce. | 19 |
| "Company" means any sole proprietorship,
organization, | 20 |
| association, corporation, partnership, joint
venture, limited | 21 |
| partnership, limited liability partnership,
limited liability | 22 |
| company, or other entity or business
association, including all | 23 |
| wholly owned subsidiaries,
majority-owned subsidiaries, parent | 24 |
| companies, or affiliates
of those entities or business |
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| associations, that exists for
the purpose of making profit. | 2 |
| "Direct holdings" in a company means all
securities of that | 3 |
| company that are held directly by the
retirement system or in | 4 |
| an account or fund in which the retirement system
owns all | 5 |
| shares or interests. | 6 |
| "Inactive business operations" means the mere
continued | 7 |
| holding or renewal of rights to property previously
operated | 8 |
| for the purpose of generating revenues but not
presently | 9 |
| deployed for that purpose. | 10 |
| "Indirect holdings" in a company means all
securities of | 11 |
| that company which are held in an account or
fund, such as a | 12 |
| mutual fund, managed by one or more persons
not employed by the | 13 |
| retirement system, in which the retirement system owns
shares | 14 |
| or interests together with other investors not subject
to the | 15 |
| provisions of this Section. | 16 |
| "Mineral-extraction activities" include exploring,
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| extracting, processing, transporting, or wholesale selling or
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| trading of elemental minerals or associated metal alloys or
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| oxides (ore), including gold, copper, chromium, chromite,
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| diamonds, iron, iron ore, silver, tungsten, uranium, and zinc. | 21 |
| "Oil-related activities" include, but are not
limited to, | 22 |
| owning rights to oil blocks; exporting,
extracting, producing, | 23 |
| refining, processing, exploring for,
transporting, selling, or | 24 |
| trading of oil; and constructing,
maintaining, or operating a | 25 |
| pipeline, refinery, or other
oil-field infrastructure. The | 26 |
| mere retail sale of gasoline and
related consumer products is |
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| not considered an oil-related
activity. | 2 |
| "Petroleum resources" means petroleum, petroleum
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| byproducts, or natural gas. | 4 |
| "Private market fund" means any private equity fund, | 5 |
| private equity fund of funds, venture capital fund, hedge fund, | 6 |
| hedge fund of funds, real estate fund, or other investment | 7 |
| vehicle that is not publicly traded.
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| "Retirement system" means the State Employees' Retirement | 9 |
| System of Illinois, the Judges Retirement System of Illinois, | 10 |
| the General Assembly Retirement System, the State Universities | 11 |
| Retirement System, and the Teachers' Retirement System of the | 12 |
| State of Illinois. | 13 |
| "Scrutinized business operations" means business | 14 |
| operations that have caused a company to become a scrutinized | 15 |
| company.
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| "Scrutinized company" means the company has
business | 17 |
| operations that involve contracts with or provision
of supplies | 18 |
| or services to the Government of Iran, companies
in which the | 19 |
| Government of Iran has any direct or indirect
equity share, | 20 |
| consortiums or projects commissioned by the
Government of Iran, | 21 |
| or companies involved in consortiums or
projects commissioned | 22 |
| by the Government of Iran and: | 23 |
| (1) more than 10% of the company's revenues produced in | 24 |
| or assets located in Iran involve oil-related activities or
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| mineral-extraction activities; less than 75% of the
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| company's revenues produced in or assets located in Iran |
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| involve contracts
with or provision of oil-related or | 2 |
| mineral-extraction
products or services to the Government | 3 |
| of Iran or a project or
consortium created exclusively by | 4 |
| that government; and the
company has failed to take | 5 |
| substantial action; or | 6 |
| (2) the company has, on or after
August 5, 1996, made | 7 |
| an investment of $20 million or more, or
any combination of | 8 |
| investments of at least $10 million each
that in the | 9 |
| aggregate equals or exceeds $20 million in any
12-month | 10 |
| period, that directly or significantly contributes
to the | 11 |
| enhancement of Iran's ability to develop petroleum
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| resources of Iran. | 13 |
| "Substantial action" means adopting, publicizing,
and | 14 |
| implementing a formal plan to cease scrutinized business
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| operations within one year and to refrain from any such new
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| business operations. | 17 |
| (b) Within 90 days after the effective date of this
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| Section, a retirement system shall make its best efforts to | 19 |
| identify all scrutinized companies in which the retirement | 20 |
| system has direct or indirect holdings. | 21 |
| These efforts shall include the following, as appropriate | 22 |
| in the retirement system's judgment: | 23 |
| (1) reviewing and relying on publicly available | 24 |
| information regarding
companies having business operations | 25 |
| in Iran, including
information provided by nonprofit | 26 |
| organizations, research
firms, international |
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| organizations, and government entities; | 2 |
| (2) contacting asset managers contracted by the | 3 |
| retirement system that invest in companies having business | 4 |
| operations in
Iran; and | 5 |
| (3) Contacting other institutional investors that have
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| divested from or engaged with companies that have business
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| operations in Iran. | 8 |
| The retirement system may retain an independent research | 9 |
| firm to identify scrutinized companies in which the retirement | 10 |
| system has direct or indirect holdings. By the first meeting of | 11 |
| the retirement system following
the 90-day period described in | 12 |
| this subsection (b), the retirement system
shall assemble all | 13 |
| scrutinized companies identified into a
scrutinized companies | 14 |
| list. | 15 |
| The retirement system shall update the scrutinized
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| companies list annually based on evolving information from,
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| among other sources, those listed in this subsection (b). | 18 |
| (c) The retirement system shall adhere to
the following | 19 |
| procedures for companies on the scrutinized
companies list: | 20 |
| (1) The retirement system shall determine the
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| companies on the scrutinized companies list in which the
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| retirement system owns direct or indirect holdings. | 23 |
| (2) For each company identified in item (1) of this | 24 |
| subsection (c) that
has only inactive business operations, | 25 |
| the retirement system shall
send a written notice informing | 26 |
| the company of this Section and
encouraging it to continue |
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| to refrain from initiating active
business operations in | 2 |
| Iran until it is able to avoid
scrutinized business | 3 |
| operations. The retirement system shall
continue such | 4 |
| correspondence semiannually. | 5 |
| (3) For each company newly identified in item (1) of | 6 |
| this subsection (c) that has active business operations, | 7 |
| the retirement system shall send a written notice informing | 8 |
| the company of its
scrutinized company status and that it | 9 |
| may become subject to
divestment by the retirement system. | 10 |
| The notice must inform the
company of the opportunity to | 11 |
| clarify its Iran-related
activities and encourage the | 12 |
| company, within 90 days, to cease
its scrutinized business | 13 |
| operations or convert such operations
to inactive business | 14 |
| operations in order to avoid qualifying
for divestment by | 15 |
| the retirement system. | 16 |
| (4) If, within 90 days after the retirement system's | 17 |
| first
engagement with a company pursuant to this subsection | 18 |
| (c), that
company ceases scrutinized business operations, | 19 |
| the company
shall be removed from the scrutinized companies | 20 |
| list and the
provisions of this Section shall cease to | 21 |
| apply to it unless it
resumes scrutinized business | 22 |
| operations. If, within 90 days
after the retirement | 23 |
| system's first engagement, the company converts
its | 24 |
| scrutinized active business operations to inactive
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| business operations, the company is subject to all | 26 |
| provisions
relating thereto. |
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| (d) If, after 90 days following the retirement system's | 2 |
| first
engagement with a company pursuant to subsection (c), the
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| company continues to have scrutinized active business
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| operations, and only while such company continues to have
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| scrutinized active business operations, the retirement system | 6 |
| shall
sell, redeem, divest, or withdraw all publicly traded
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| securities of the company, except as provided in paragraph
(f), | 8 |
| from the retirement system's assets under management within 12
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| months after the company's most recent appearance on the
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| scrutinized companies list. | 11 |
| If a company that ceased scrutinized active
business | 12 |
| operations following engagement pursuant to subsection (c) | 13 |
| resumes such operations, this subsection (d) immediately
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| applies, and the retirement system shall send a written notice | 15 |
| to
the company. The company shall also be immediately
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| reintroduced onto the scrutinized companies list. | 17 |
| (e) The retirement system may not acquire
securities of | 18 |
| companies on the scrutinized companies list
that have active | 19 |
| business operations, except as provided in
subsection (f). | 20 |
| (f) A company that the United States
Government | 21 |
| affirmatively declares to be excluded from its
present or any | 22 |
| future federal sanctions regime relating to
Iran is not subject | 23 |
| to divestment or the investment
prohibition pursuant to | 24 |
| subsections (d) and (e). | 25 |
| (g) Notwithstanding the
provisions of this Section, | 26 |
| paragraphs (d) and (e) do not apply to
indirect holdings in a |
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| private market fund.
However, the retirement system shall | 2 |
| submit letters to the managers
of those investment funds | 3 |
| containing companies that have
scrutinized active business | 4 |
| operations requesting that they
consider removing the | 5 |
| companies from the fund or create a
similar actively managed | 6 |
| fund having indirect holdings devoid
of the companies. If the | 7 |
| manager creates a similar fund, the
retirement system shall | 8 |
| replace all applicable investments with
investments in the | 9 |
| similar fund in an expedited timeframe
consistent with prudent | 10 |
| investing standards. | 11 |
| (h) The retirement system shall file a report with the | 12 |
| Public Pension Division of the Department of Financial and | 13 |
| Professional Regulation that includes the scrutinized | 14 |
| companies list
within 30 days after the list is created. This | 15 |
| report shall be
made available to the public. | 16 |
| The retirement system shall file an annual report with the | 17 |
| Public Pension Division, which shall be made available to the | 18 |
| public, that includes all of the following: | 19 |
| (1) A summary of correspondence with companies engaged
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| by the retirement system under items (2) and (3) of | 21 |
| subsection (c). | 22 |
| (2) All investments sold, redeemed, divested, or
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| withdrawn in compliance with subsection (d). | 24 |
| (3) All prohibited investments under subsection (e). | 25 |
| (4) A summary of correspondence with private market | 26 |
| funds notified under subsection (g). |
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| (i) This Section expires upon the occurrence
of any of the | 2 |
| following: | 3 |
| (1) The United States revokes all sanctions imposed
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| against the Government of Iran. | 5 |
| (2) The Congress or President of the United States
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| declares that the Government of Iran has ceased to acquire
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| weapons of mass destruction and to support international
| 8 |
| terrorism. | 9 |
| (3) The Congress or President of the United States,
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| through legislation or executive order, declares that
| 11 |
| mandatory divestment of the type provided for in this | 12 |
| Section
interferes with the conduct of United States | 13 |
| foreign policy. | 14 |
| (j) With respect to actions
taken in compliance with this | 15 |
| Act, including all good-faith
determinations regarding | 16 |
| companies as required by this Act,
the retirement system is | 17 |
| exempt from any conflicting statutory or
common law | 18 |
| obligations, including any fiduciary duties under this Article | 19 |
| and any obligations with
respect to choice of asset managers, | 20 |
| investment funds, or
investments for the retirement system's | 21 |
| securities portfolios. | 22 |
| (k) Notwithstanding any
other provision of this Section to | 23 |
| the contrary, the retirement system
may cease divesting from | 24 |
| scrutinized companies
pursuant to subsection (d) or reinvest in
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| scrutinized companies from which it divested pursuant to
| 26 |
| subsection (d) if clear and convincing evidence shows that the |
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| value of investments in scrutinized companies with active | 2 |
| scrutinized business operations becomes equal to or less than | 3 |
| 0.5% of the market value of all assets under management by the | 4 |
| retirement system. Cessation of
divestment, reinvestment, or | 5 |
| any subsequent ongoing investment
authorized by this Section is | 6 |
| limited to the minimum steps
necessary to avoid the contingency | 7 |
| set forth in this
subsection (k). For any cessation of | 8 |
| divestment, reinvestment, or
subsequent ongoing investment | 9 |
| authorized by this Section, the
retirement system shall provide | 10 |
| a written report to the Public Pension Division in advance of | 11 |
| initial reinvestment, updated
semiannually thereafter as | 12 |
| applicable, setting forth the
reasons and justification, | 13 |
| supported by clear and convincing
evidence, for its decisions | 14 |
| to cease divestment, reinvest, or
remain invested in companies | 15 |
| having scrutinized active
business operations. This Section | 16 |
| does not apply to reinvestment
in companies on the grounds that | 17 |
| they have ceased to have
scrutinized active business | 18 |
| operations. | 19 |
| (l) If any provision of this Section or its
application to | 20 |
| any person or circumstance is held invalid, the
invalidity does | 21 |
| not affect other provisions or applications of
the Act which | 22 |
| can be given effect without the invalid
provision or | 23 |
| application, and to this end the provisions of
this Section are | 24 |
| severable.
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| Section 99. Effective date. This Act takes effect on | 26 |
| January 1, 2008.
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