101ST GENERAL ASSEMBLY
State of Illinois
2019 and 2020
HB0199

 

Introduced , by Rep. Mary E. Flowers

 

SYNOPSIS AS INTRODUCED:
 
40 ILCS 5/1-110.16

    Amends the General Provisions Article of the Illinois Pension Code. Provides that Ford Motor Company and its subsidiaries are restricted companies. Requires the Illinois Investment Policy Board to make its best efforts to identify all subsidiaries of Ford Motor Company and include those companies in the list of restricted companies distributed to each retirement system and the Illinois State Board of Investment.


LRB101 04705 RPS 49714 b

FISCAL NOTE ACT MAY APPLY
PENSION IMPACT NOTE ACT MAY APPLY

 

 

A BILL FOR

 

HB0199LRB101 04705 RPS 49714 b

1    AN ACT concerning public employee benefits.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Illinois Pension Code is amended by changing
5Section 1-110.16 as follows:
 
6    (40 ILCS 5/1-110.16)
7    Sec. 1-110.16. Transactions prohibited by retirement
8systems; companies that boycott Israel, Iran-restricted
9companies, Sudan-restricted companies, and expatriated
10entities, and Ford Motor Company.
11    (a) As used in this Section:
12        "Boycott Israel" means engaging in actions that are
13    politically motivated and are intended to penalize,
14    inflict economic harm on, or otherwise limit commercial
15    relations with the State of Israel or companies based in
16    the State of Israel or in territories controlled by the
17    State of Israel.
18        "Company" means any sole proprietorship, organization,
19    association, corporation, partnership, joint venture,
20    limited partnership, limited liability partnership,
21    limited liability company, or other entity or business
22    association, including all wholly owned subsidiaries,
23    majority-owned subsidiaries, parent companies, or

 

 

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1    affiliates of those entities or business associations,
2    that exist for the purpose of making profit.
3        "Illinois Investment Policy Board" means the board
4    established under subsection (b) of this Section.
5        "Direct holdings" in a company means all publicly
6    traded securities of that company that are held directly by
7    the retirement system in an actively managed account or
8    fund in which the retirement system owns all shares or
9    interests.
10        "Expatriated entity" has the meaning ascribed to it in
11    Section 1-15.120 of the Illinois Procurement Code.
12        "Ford Motor Company" means Ford Motor Company and its
13    subsidiaries.
14        "Indirect holdings" in a company means all securities
15    of that company that are held in an account or fund, such
16    as a mutual fund, managed by one or more persons not
17    employed by the retirement system, in which the retirement
18    system owns shares or interests together with other
19    investors not subject to the provisions of this Section or
20    that are held in an index fund.
21        "Iran-restricted company" means a company that meets
22    the qualifications under Section 1-110.15 of this Code.
23        "Private market fund" means any private equity fund,
24    private equity funds of funds, venture capital fund, hedge
25    fund, hedge fund of funds, real estate fund, or other
26    investment vehicle that is not publicly traded.

 

 

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1        "Restricted companies" means companies that boycott
2    Israel, Iran-restricted companies, Sudan-restricted
3    companies, and expatriated entities, and Ford Motor
4    Company.
5        "Retirement system" means a retirement system
6    established under Article 2, 14, 15, 16, or 18 of this Code
7    or the Illinois State Board of Investment.
8        "Sudan-restricted company" means a company that meets
9    the qualifications under Section 1-110.6 of this Code.
10    (b) There shall be established an Illinois Investment
11Policy Board. The Illinois Investment Policy Board shall
12consist of 7 members. Each board of a pension fund or
13investment board created under Article 15, 16, or 22A of this
14Code shall appoint one member, and the Governor shall appoint 4
15members.
16    (c) Notwithstanding any provision of law to the contrary,
17beginning January 1, 2016, Sections 110.15 and 1-110.6 of this
18Code shall be administered in accordance with this Section.
19    (d) By April 1, 2016, the Illinois Investment Policy Board
20shall make its best efforts to identify all Iran-restricted
21companies, Sudan-restricted companies, and companies that
22boycott Israel and assemble those identified companies into a
23list of restricted companies, to be distributed to each
24retirement system.
25    These efforts shall include the following, as appropriate
26in the Illinois Investment Policy Board's judgment:

 

 

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1        (1) reviewing and relying on publicly available
2    information regarding Iran-restricted companies,
3    Sudan-restricted companies, and companies that boycott
4    Israel, including information provided by nonprofit
5    organizations, research firms, and government entities;
6        (2) contacting asset managers contracted by the
7    retirement systems that invest in Iran-restricted
8    companies, Sudan-restricted companies, and companies that
9    boycott Israel;
10        (3) contacting other institutional investors that have
11    divested from or engaged with Iran-restricted companies,
12    Sudan-restricted companies, and companies that boycott
13    Israel; and
14        (4) retaining an independent research firm to identify
15    Iran-restricted companies, Sudan-restricted companies, and
16    companies that boycott Israel.
17    The Illinois Investment Policy Board shall review the list
18of restricted companies on a quarterly basis based on evolving
19information from, among other sources, those listed in this
20subsection (d) and distribute any updates to the list of
21restricted companies to the retirement systems and the State
22Treasurer.
23    By April 1, 2018, the Illinois Investment Policy Board
24shall make its best efforts to identify all expatriated
25entities and include those companies in the list of restricted
26companies distributed to each retirement system and the State

 

 

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1Treasurer. These efforts shall include the following, as
2appropriate in the Illinois Investment Policy Board's
3judgment:
4        (1) reviewing and relying on publicly available
5    information regarding expatriated entities, including
6    information provided by nonprofit organizations, research
7    firms, and government entities;
8        (2) contacting asset managers contracted by the
9    retirement systems that invest in expatriated entities;
10        (3) contacting other institutional investors that have
11    divested from or engaged with expatriated entities; and
12        (4) retaining an independent research firm to identify
13    expatriated entities.
14    By July 1, 2020, the Illinois Investment Policy Board shall
15make its best efforts to identify all subsidiaries of Ford
16Motor Company and include those companies in the list of
17restricted companies distributed to each retirement system.
18These efforts shall include the following, as appropriate in
19the Illinois Investment Policy Board's judgment:
20        (1) reviewing and relying on publicly available
21    information;
22        (2) contacting asset managers contracted by the
23    retirement systems that invest in Ford Motor Company; and
24        (3) contacting other institutional investors that have
25    divested from or engaged with Ford Motor Company.
26    (e) The Illinois Investment Policy Board shall adhere to

 

 

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1the following procedures for companies on the list of
2restricted companies:
3        (1) For each company newly identified in subsection
4    (d), the Illinois Investment Policy Board shall send a
5    written notice informing the company of its status and that
6    it may become subject to divestment or shareholder activism
7    by the retirement systems.
8        (2) If, following the Illinois Investment Policy
9    Board's engagement pursuant to this subsection (e) with a
10    restricted company, that company ceases activity that
11    designates the company to be an Iran-restricted company, a
12    Sudan-restricted company, a company that boycotts Israel,
13    or an expatriated entity, the company shall be removed from
14    the list of restricted companies and the provisions of this
15    Section shall cease to apply to it unless it resumes such
16    activities.
17    (f) Except as provided in subsection (f-1) of this Section
18the retirement system shall adhere to the following procedures
19for companies on the list of restricted companies:
20        (1) The retirement system shall identify those
21    companies on the list of restricted companies in which the
22    retirement system owns direct holdings and indirect
23    holdings.
24        (2) The retirement system shall instruct its
25    investment advisors to sell, redeem, divest, or withdraw
26    all direct holdings of restricted companies from the

 

 

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1    retirement system's assets under management in an orderly
2    and fiduciarily responsible manner within 12 months after
3    the company's most recent appearance on the list of
4    restricted companies.
5        (3) The retirement system may not acquire securities of
6    restricted companies.
7        (4) The provisions of this subsection (f) do not apply
8    to the retirement system's indirect holdings or private
9    market funds. The Illinois Investment Policy Board shall
10    submit letters to the managers of those investment funds
11    containing restricted companies requesting that they
12    consider removing the companies from the fund or create a
13    similar actively managed fund having indirect holdings
14    devoid of the companies. If the manager creates a similar
15    fund, the retirement system shall replace all applicable
16    investments with investments in the similar fund in an
17    expedited timeframe consistent with prudent investing
18    standards.
19    (f-1) The retirement system shall adhere to the following
20procedures for restricted companies that are expatriated
21entities:
22        (1) To the extent that the retirement system believes
23    that shareholder activism would be more impactful than
24    divestment, the retirement system shall have the authority
25    to engage with a restricted company prior to divesting.
26        (2) Subject to any applicable State or Federal laws,

 

 

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1    methods of shareholder activism utilized by the retirement
2    system may include, but are not limited to, bringing
3    shareholder resolutions and proxy voting on shareholder
4    resolutions.
5        (3) The retirement system shall report on its
6    shareholder activism and the outcome of such efforts to the
7    Illinois Investment Policy Board by April 1 of each year.
8        (4) If the engagement efforts of the retirement system
9    are unsuccessful, then it shall adhere to the procedures
10    under subsection (f) of this Section.
11    (g) Upon request, and by April 1 of each year, each
12retirement system shall provide the Illinois Investment Policy
13Board with information regarding investments sold, redeemed,
14divested, or withdrawn in compliance with this Section.
15    (h) Notwithstanding any provision of this Section to the
16contrary, a retirement system may cease divesting from
17companies pursuant to subsection (f) if clear and convincing
18evidence shows that the value of investments in such companies
19becomes equal to or less than 0.5% of the market value of all
20assets under management by the retirement system. For any
21cessation of divestment authorized by this subsection (h), the
22retirement system shall provide a written notice to the
23Illinois Investment Policy Board in advance of the cessation of
24divestment, setting forth the reasons and justification,
25supported by clear and convincing evidence, for its decision to
26cease divestment under subsection (f).

 

 

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1    (i) The cost associated with the activities of the Illinois
2Investment Policy Board shall be borne by the boards of each
3pension fund or investment board created under Article 15, 16,
4or 22A of this Code.
5    (j) With respect to actions taken in compliance with this
6Section, including all good-faith determinations regarding
7companies as required by this Section, the retirement system
8and Illinois Investment Policy Board are exempt from any
9conflicting statutory or common law obligations, including any
10fiduciary duties under this Article and any obligations with
11respect to choice of asset managers, investment funds, or
12investments for the retirement system's securities portfolios.
13    (k) It is not the intent of the General Assembly in
14enacting this amendatory Act of the 99th General Assembly to
15cause divestiture from any company based in the United States
16of America. The Illinois Investment Policy Board shall consider
17this intent when developing or reviewing the list of restricted
18companies.
19    (l) If any provision of this amendatory Act of the 99th
20General Assembly or its application to any person or
21circumstance is held invalid, the invalidity of that provision
22or application does not affect other provisions or applications
23of this amendatory Act of the 99th General Assembly that can be
24given effect without the invalid provision or application.
25    (m) If any provision of this amendatory Act of the 100th
26General Assembly or its application to any person or

 

 

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1circumstance is held invalid, the invalidity of that provision
2or application does not affect other provisions or applications
3of this amendatory Act of the 100th General Assembly that can
4be given effect without the invalid provision or application.
5    (n) If any provision of this amendatory Act of the 101st
6General Assembly or its application to any person or
7circumstance is held invalid, the invalidity of that provision
8or application does not affect other provisions or applications
9of this amendatory Act of the 101st General Assembly that can
10be given effect without the invalid provision or application.
11(Source: P.A. 99-128, eff. 7-23-15; 100-551, eff. 1-1-18.)