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7 LONG TITLE
8 General Description:
9 This bill modifies the Utah State Retirement and Insurance Benefit Act by requiring the
10 Utah State Retirement Office to restrict the investment of retirement funds in Iran's
11 petroleum sector.
12 Highlighted Provisions:
13 This bill:
14 . provides certain definitions;
15 . requires the office to send a written notice informing scrutinized companies:
16 . with inactive business operation to encourage the company to continue to refrain
17 from initiating active business operations in Iran; or
18 . with active business operations that they may be subject to divestment by the
19 public fund, that the company may clarify its Iran-related activities, and to
20 encourage the company to avoid qualifying for divestment by, within 180 days,
21 ceasing its scrutinized business operations, or converting to inactive business
23 . provides procedures for companies to be removed from the list of scrutinized
24 companies and to avoid divestment by the fund if they comply with certain
25 requirements, including ceasing active business operations in Iran;
26 . requires the office to divest from holdings in a scrutinized company over an
27 18-month period if the company continues active business operations after
29 . prohibits the fund from acquiring securities of companies on the list of scrutinized
30 companies if the companies have active business operations, with certain
32 . requires the Utah State Retirement Office to annually submit letters to the managers
33 of the investment funds containing companies with scrutinized active business
34 operations requesting that they consider removing the companies from the fund or
35 make alternative funds;
36 . requires the Utah State Retirement Office to submit a publicly available list of
37 scrutinized companies to the United States attorney general, the Retirement and
38 Independent Entities Committee, and the governor within 30 days after the list is
39 created and to make an annual report summarizing the divestment related activities
40 of the fund;
41 . provides that all actions taken in good faith compliance with this act are immune
42 from any liability;
43 . requires the Utah State Retirement Office to notify the governor and the Retirement
44 and Independent Entities Committee and to cease to implement the provisions of
45 this section if the United States Congress or president of the United States revokes
46 certain sanctions imposed against the government of Iran; and
47 . making technical changes.
48 Monies Appropriated in this Bill:
50 Other Special Clauses:
51 This bill takes effect on July 1, 2010.
52 Utah Code Sections Affected:
54 49-11-306, as enacted by Laws of Utah 2009, Chapter 54
56 Be it enacted by the Legislature of the state of Utah:
57 Section 1. Section 49-11-306 is amended to read:
58 49-11-306. Definitions -- Identification of Scrutinized Companies Investment --
59 Required actions -- Reporting -- Reinvestment -- Conditions for ceasing restrictions --
60 Reporting -- Exceptions.
61 (1) As used in this section:
62 (a) "Active business operations" means all business operations that are not inactive
63 business operations.
64 (b) (i) "Business operations" means investing, with actual knowledge on or after
65 August 5, 1996, in Iran's petroleum sector which investment directly and significantly
66 contributes to the enhancement of Iran's ability to develop the petroleum resources of Iran.
67 (ii) "Business operations" does not include the retail sale of gasoline and related
68 consumer products.
69 (c) "Company" means any foreign sole proprietorship, organization, association,
70 corporation, partnership, joint venture, limited partnership, limited liability partnership, limited
71 liability company, or any other foreign entity or business association, including all
72 wholly-owned subsidiaries, majority-owned subsidiaries or parent companies or affiliates of
73 these entities or business associations, that exists for the purpose of making a profit.
74 (d) "Direct holdings" means all publicly traded equity securities of a company that are
75 held directly by the public fund or in an account or fund in which the public fund owns all
76 shares or interests.
77 (e) "Inactive business operations" means the continued holding or renewal of rights to
78 property previously operated for the purpose of generating revenues but not presently deployed
79 for that purpose.
80 (f) (i) "Indirect holdings" means all investments held in an account or fund, including a
81 mutual fund, a real estate fund, a private equity fund, or a commingled fund, managed by one
82 or more persons who are not employed by the public fund, in which the public fund owns
83 shares or interests together with other investors who are not subject to this section.
84 (ii) "Indirect holdings" includes private funds if the private funds are in an actively
85 managed investment fund.
87 (h) "List" means the scrutinized companies with activities in the Iran petroleum energy
88 sector list that is established under Subsection (2).
91 Section 49-11-301 .
93 (i) are subject to or liable for sanctions under Public Law 104-172, the Iran Sanctions
94 Act of 1996, as amended; and
95 (ii) involve the maintenance of:
96 (A) the company's existing assets or investments in Iran; or
97 (B) the deployment of new investments to Iran that meet or exceed the threshold
98 referred to in Public Law 104-172, the Iran Sanctions Act of 1996, as amended.
101 (m) "Substantial action specific to Iran" means adopting, publicizing, and
102 implementing a formal plan to cease scrutinized business operations within one year and to
103 refrain from any new business operations.
104 (2) (a) The Utah State Retirement Office shall identify those scrutinized companies in
105 which the public fund has direct holdings. In making the determination, the board shall review
106 and rely on publicly available information regarding companies with business operations in
107 Iran, including information provided by nonprofit organizations, research firms, international
108 organizations, and government entities.
109 (b) The office shall assemble a list of all identified scrutinized companies.
110 (c) The office shall update the list, on an annual basis, with information provided and
111 received from those entities listed in Subsection (2)(a).
120 (3) (a) At least annually, the office shall do the following for companies on the list
121 required by Subsection (2):
122 (i) make reasonable efforts to identify those companies on the list in which the public
123 fund owns direct holdings;
124 (ii) for each company identified under Subsection (3)(a)(i) with only inactive business
125 operations, send a written notice informing the company of this section and encouraging the
126 company to continue to refrain from initiating active business operations in Iran until it is able
127 to avoid scrutinized business operations;
128 (iii) for each company that is newly identified under Subsection (3)(a)(i) as having
129 active business operations, send a written notice:
130 (A) informing the company of its scrutinized company status;
131 (B) that the company may become subject to divestment by the public fund;
132 (C) offering the company the opportunity to clarify its Iran-related activities; and
133 (D) encouraging the company to avoid qualifying for divestment by the public fund
134 within 180 days by:
135 (I) ceasing its active business operations; or
136 (II) converting the operations to inactive business operations;
137 (iv) (A) if, within 180 days following the office's first notice to a company under
138 Subsection (3)(a)(iii), the company ceases scrutinized business operations or publicly
139 announces its commitment to substantial action specific to Iran, the company shall be removed
140 from the list and this section shall cease to apply to the company unless the company resumes
141 scrutinized business operations; and
142 (B) if, within 180 days after the office's first notice to a company under Subsection
143 (3)(a)(iii), the company converts its scrutinized active business operations to inactive business
144 operations, the company is subject to the requirements of Subsection (3)(a)(ii); and
145 (v) (A) if, after 180 days following the office's first notice to a company under
146 Subsection (3)(a)(iii), the company continues to have active business operations, and only
147 while the company continues to have active business operations, the public fund shall sell,
148 redeem, divest, or withdraw all publicly traded securities of the company according to the
149 following schedule:
150 (I) at least 50% of assets shall be removed from the public fund's assets under
151 management within 12 months after the company's most recent appearance on the list; and
152 (II) 100% of assets shall be removed from the public fund's assets under management
153 within 18 months after the company's most recent appearance on the list; and
154 (B) if a company that ceased active business operations following notice under
155 Subsection (3)(a)(iii), resumes the active business operations:
156 (I) the office shall send a written notice to the company;
157 (II) the office shall immediately place the company on the list; and
158 (III) the provisions of Subsection (3)(a)(v)(A)(I) shall immediately apply
159 notwithstanding the 12-month provision, and the provisions of Subsection (3)(a)(v)(A)(II) shall
160 apply six months later.
161 (b) The public fund shall not acquire securities of companies on the list that have active
162 scrutinized business operations, except as provided under Subsections (3)(c) and (d).
163 (c) A company, for whom if the president of the United States exercises the president's
164 waiver of authority or the United States government affirmatively declares to be excluded from
165 its present or any future federal sanctions regime relating to Iran, is not subject to divestment or
166 investment prohibition under Subsections (3)(a)(v) and (3)(b).
167 (d) (i) Notwithstanding any other law, Subsections (3)(a)(v) and (3)(b) do not apply to
168 indirect holdings in actively or passively managed investment funds or direct holdings in
169 passively managed investment funds.
170 (ii) The office shall annually submit letters to the managers of the investment funds
171 containing companies with scrutinized active business operations requesting that they consider
172 removing the companies from the fund or create a similar actively or passively managed fund
173 devoid of the companies.
174 (iii) If the manager creates a similar fund, the use of which would not require increased
175 fees on the part of the public fund, the public fund shall replace all applicable investments with
176 investments in the similar fund in a reasonable time frame consistent with prudent investing
178 (4) (a) The office shall submit a publicly available list to the United States attorney
179 general, the Retirement and Independent Entities Committee, and the governor within 30 days
180 after the list is created.
181 (b) On or before January 31 of each year, the office shall submit a publicly available
182 report to the United States attorney general, the Retirement and Independent Entities
183 Committee of the Legislature, and the governor, that includes the following:
184 (i) a summary of correspondence with companies notified by the office under
185 Subsections (3)(a)(ii) and (iii);
186 (ii) investments sold, redeemed, divested, or withdrawn under Subsection (3)(a)(v);
187 (iii) prohibited investments under Subsection (3)(b);
188 (iv) any progress made under Subsection (3)(d);
189 (v) any cessation of divestment, reinvestment, or subsequent ongoing investment under
190 Subsection (6); and
191 (vi) investment costs associated with compliance with this section.
192 (5) With respect to all actions taken in good faith compliance with this section, a public
193 fund, its board of directors, and individual board members, agents, attorneys, trustees, officers,
194 employees, custodians, fiduciaries, research firms, and investment managers under contract
195 with the public fund are immune from any liability associated with the requirements of this
197 (6) Notwithstanding any other law, the public fund may cease divesting from certain
198 scrutinized companies under Subsection (3) or reinvest in certain scrutinized companies from
199 which it divested under Subsection (3) if a preponderance of the evidence shows that the value
200 of the assets of the affected account of the public fund becomes equal to or less than 99.5% of
201 the hypothetical value of the assets of the affected account of the public fund assuming no
202 divestment for any company had occurred under Subsection (3).
203 (7) The office shall notify the governor and the Retirement and Independent Entities
204 Committee of the Legislature and shall cease to implement the provisions of this section if any
205 of the following occur:
206 (a) the United States Congress or president of the United States affirmatively and
207 unambiguously states, by means including legislation, executive order, or written certification
208 from the president to Congress, that the government of Iran has ceased to pursue the
209 capabilities to develop nuclear weapons and support international terrorism;
210 (b) the United States revokes all sanctions imposed against the government of Iran;
211 (c) the United States Congress or president of the United States affirmatively and
212 unambiguously states, by means including legislation, executive order, or written certification
213 from the president to Congress, that divestment of the type provided for in this act interferes
214 with the conduct of United States' foreign policy; or
215 (d) the Iran Sanctions Act of 1996, Pub. L. No. 104-172, and its amendments are
218 (a) monies invested in a defined contribution plan as defined under Section 49-11-102 ;
220 (b) investments in a company that is primarily engaged in:
221 (i) supplying goods or services intended to relieve human suffering in Iran; or
222 (ii) promoting health, education, religious, welfare, or journalistic activities in Iran.
223 Section 2. Effective date.
224 This bill takes effect on July 1, 2010.
Legislative Review Note
as of 1-20-10 9:47 AM