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Full Text of SB1761  99th General Assembly

SB1761enr 99TH GENERAL ASSEMBLY

  
  
  

 


 
SB1761 EnrolledLRB099 10953 RPS 31300 b

1    AN ACT concerning finance.
 
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 adding
5Section 1-110.16 as follows:
 
6    (40 ILCS 5/1-110.16 new)
7    Sec. 1-110.16. Transactions prohibited by retirement
8systems; companies that boycott Israel, Iran-restricted
9companies, and Sudan-restricted companies.
10    (a) As used in this Section:
11        "Boycott Israel" means engaging in actions that are
12    politically motivated and are intended to penalize,
13    inflict economic harm on, or otherwise limit commercial
14    relations with the State of Israel or companies based in
15    the State of Israel or in territories controlled by the
16    State of Israel.
17        "Company" means any sole proprietorship, organization,
18    association, corporation, partnership, joint venture,
19    limited partnership, limited liability partnership,
20    limited liability company, or other entity or business
21    association, including all wholly owned subsidiaries,
22    majority-owned subsidiaries, parent companies, or
23    affiliates of those entities or business associations,

 

 

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

 

 

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

 

 

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1    retirement systems that invest in Iran-restricted
2    companies, Sudan-restricted companies, and companies that
3    boycott Israel;
4        (3) contacting other institutional investors that have
5    divested from or engaged with Iran-restricted companies,
6    Sudan-restricted companies, and companies that boycott
7    Israel; and
8        (4) retaining an independent research firm to identify
9    Iran-restricted companies, Sudan-restricted companies, and
10    companies that boycott Israel.
11    The Illinois Investment Policy Board shall review the list
12of restricted companies on a quarterly basis based on evolving
13information from, among other sources, those listed in this
14subsection (d) and distribute any updates to the list of
15restricted companies to the retirement systems.
16    (e) The Illinois Investment Policy Board shall adhere to
17the following procedures for companies on the list of
18restricted companies:
19        (1) For each company newly identified in subsection
20    (d), the Illinois Investment Policy Board shall send a
21    written notice informing the company of its status and that
22    it may become subject to divestment by the retirement
23    systems.
24        (2) If, following the Illinois Investment Policy
25    Board's engagement pursuant to this subsection (e) with a
26    restricted company, that company ceases activity that

 

 

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1    designates the company to be an Iran-restricted company, a
2    Sudan-restricted company, or a company that boycotts
3    Israel, the company shall be removed from the list of
4    restricted companies and the provisions of this Section
5    shall cease to apply to it unless it resumes such
6    activities.
7    (f) The retirement system shall adhere to the following
8procedures for companies on the list of restricted companies:
9        (1) The retirement system shall identify those
10    companies on the list of restricted companies in which the
11    retirement system owns direct holdings and indirect
12    holdings.
13        (2) The retirement system shall instruct its
14    investment advisors to sell, redeem, divest, or withdraw
15    all direct holdings of restricted companies from the
16    retirement system's assets under management in an orderly
17    and fiduciarily responsible manner within 12 months after
18    the company's most recent appearance on the list of
19    restricted companies.
20        (3) The retirement system may not acquire securities of
21    restricted companies.
22        (4) The provisions of this subsection (f) do not apply
23    to the retirement system's indirect holdings or private
24    market funds. The Illinois Investment Policy Board shall
25    submit letters to the managers of those investment funds
26    containing restricted companies requesting that they

 

 

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1    consider removing the companies from the fund or create a
2    similar actively managed fund having indirect holdings
3    devoid of the companies. If the manager creates a similar
4    fund, the retirement system shall replace all applicable
5    investments with investments in the similar fund in an
6    expedited timeframe consistent with prudent investing
7    standards.
8    (g) Upon request, and at least annually, each retirement
9system shall provide the Illinois Investment Policy Board with
10information regarding investments sold, redeemed, divested, or
11withdrawn in compliance with this Section.
12    (h) Notwithstanding any provision of this Section to the
13contrary, a retirement system may cease divesting from
14companies pursuant to subsection (f) if clear and convincing
15evidence shows that the value of investments in such companies
16becomes equal to or less than 0.5% of the market value of all
17assets under management by the retirement system. For any
18cessation of divestment authorized by this subsection (h), the
19retirement system shall provide a written notice to the
20Illinois Investment Policy Board in advance of the cessation of
21divestment, setting forth the reasons and justification,
22supported by clear and convincing evidence, for its decision to
23cease divestment under subsection (f).
24    (i) The cost associated with the activities of the Illinois
25Investment Policy Board shall be borne by the boards of each
26pension fund or investment board created under Article 15, 16,

 

 

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