October 25, 2007, Introduced by Senators BROWN, HUNTER, KUIPERS, JACOBS, JANSEN, THOMAS, ANDERSON, BASHAM, BARCIA, OLSHOVE, SANBORN, GILBERT, GLEASON, PAPPAGEORGE, JELINEK, VAN WOERKOM, CLARKE, BRATER and SCHAUER and referred to the Committee on Homeland Security and Emerging Technologies.
A bill to prohibit the investment of certain state money or
other assets in companies with certain types of business operations
in countries designated as state sponsors of terror; to require
divestment of any current investments in those companies; and to
provide for the powers and duties of certain state and local
governmental officers and entities.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 1. This act shall be known and may be cited as the
"divestment from terror act".
Sec. 2. As used in this act:
(a) "Active business operations" means all business operations
that are not inactive business operations. Active business
operations do not include the activities of any business, legal, or
governmental entity or institution that provides humanitarian aid
to the people of any state sponsors of terror.
(b) "Business operations" means engaging in commerce in any
form with a state sponsor of terror, including by acquiring,
developing, maintaining, owning, selling, possessing, leasing, or
operating equipment, facilities, personnel, products, services,
personal property, real property, or any other apparatus of
business or commerce.
(c) "Company" means any sole proprietorship, organization,
association, corporation, partnership, joint venture, limited
partnership, limited liability partnership, limited liability
company, or other entity or business association, including all
wholly owned subsidiaries, majority-owned subsidiaries, parent
companies, or affiliates of those entities or business
associations, that exists for profit-making purposes.
(d) "Direct holdings" in a company means all securities of
that company held directly by the fiduciary or in an account or
fund in which the fiduciary owns all shares or interests.
(e) "Fiduciary" means any of the following:
(i) The Michigan legislative retirement system board of
trustees for the Tier 1 plan for the Michigan legislative
retirement system created by the Michigan legislative retirement
system act, 1957 PA 261, MCL 38.1001 to 38.1080.
(ii) The state treasurer for the retirement systems created
under all of the following acts:
(A) The state police retirement act of 1986, 1986 PA 182, MCL
38.1601 to 38.1648.
(B) The judge's retirement act of 1992, 1992 PA 234, MCL
38.2101 to 38.2670.
(C) The state employees retirement act, 1943 PA 240, MCL 38.1
to 38.69.
(D) The public school employees retirement act of 1979, 1980
PA 300, MCL 38.1301 to 38.1408.
(iii) The state treasurer in connection with his or her duties
under any of the following:
(A) 1946 (1st Ex Sess) PA 9, MCL 35.602 to 35.610.
(B) 1855 PA 105, MCL 21.141 to 21.147.
(C) Section 7 of the Michigan trust fund act, 2000 PA 489, MCL
12.257.
(D) Children's trust fund under 1982 PA 249, MCL 21.171 to
21.172.
(E) The McCauley-Traxler-Law-Bowman-McNeely lottery act, 1972
PA 239, MCL 432.1 to 432.47.
(F) Section 503b of the natural resources and environmental
protection act, 1994 PA 451, MCL 324.503b.
(iv) The board of trustees of a community college subject to
the community college act of 1966, 1966 PA 331, MCL 389.1 to
389.195.
(v) The board of directors of the Michigan education trust
described in section 10 of the Michigan education trust act, 1986
PA 316, MCL 390.1430.
(vi) The board of the Michigan strategic fund under the
Michigan strategic fund act, 1984 PA 270, MCL 125.2001 to 125.2094.
(f) "Inactive business operations" means the mere continued
holding or renewal of rights to property previously operated for
the purpose of generating revenues but not presently deployed for
that purpose.
(g) "Indirect holdings" in a company means all securities of
that company held in an account or fund, including a mutual fund or
other commingled fund, managed by 1 or more persons not employed by
the fiduciary, in which the fiduciary owns shares or interests
together with other investors not subject to the provisions of this
act.
(h) "Scrutinized company" means any company that has business
operations that involve contracts with or provision of supplies or
services to a state sponsor of terror; companies in which a state
sponsor of terror has any direct or indirect equity share,
consortiums, or projects commissioned by a state sponsor of terror;
or companies involved in consortiums and projects commissioned by a
state sponsor of terror and 1 or more of the following:
(i) More than 10% of the company's total revenues or assets are
directly or significantly contributed to a state sponsor of terror
and the company has failed to take substantial action.
(ii) The company has, with actual knowledge, on or after August
5, 1996, made an investment of $20,000,000.00 or more, or any
combination of investments of at least $10,000,000.00 each, which
in the aggregate equals or exceeds $20,000,000.00 in any 12-month
period, and which directly or significantly contributes to a state
sponsor of terror, and the company has failed to take substantial
action.
(i) "State sponsor of terror" means any country determined by
the United States secretary of state to have repeatedly provided
support for acts of international terrorism.
(j) "Substantial action" means adopting, publicizing, and
implementing a formal plan to cease scrutinized business operations
within 1 year and to refrain from any new business operations.
Sec. 3. Within 90 days after the effective date of this act,
the fiduciary shall make its best efforts to identify all
scrutinized companies in which the fiduciary has direct or indirect
holdings or could possibly have such holdings in the future. The
efforts may include 1 or more of the following:
(a) Reviewing and relying, as appropriate in the fiduciary's
judgment, on publicly available information regarding companies
with business operations in a state sponsor of terror, including
information provided by nonprofit organizations, research firms,
international organizations, and government entities.
(b) Contacting asset managers contracted by the fiduciary that
invest in companies with business operations in a state sponsor of
terror.
(c) Contacting other institutional investors that have
divested from or engaged with companies that have business
operations in a state sponsor of terror.
(d) Reviewing the laws of the United States regarding the
levels of business activity that would cause application of
sanctions against companies conducting business or investing in
countries that are designated state sponsors of terror.
Sec. 4. (1) At the end of the 90-day period or by the first
meeting of the fiduciary following the 90-day period described in
section 3, the fiduciary shall assemble all scrutinized companies
identified into a scrutinized companies list.
(2) The fiduciary shall update the scrutinized companies list
described in subsection (1) on a quarterly basis based on evolving
information from, among other sources, those sources listed in
section 3.
(3) The fiduciary shall adhere to the following procedure for
companies on the scrutinized companies list described in subsection
(1):
(a) The fiduciary shall immediately determine the companies on
the scrutinized companies list in which the fiduciary oversees
pursuant to its responsibilities as described in section 2(e).
(b) If, within 90 days following the fiduciary's first
engagement with a company, that company ceases scrutinized business
operations, the company shall be removed from the scrutinized
companies list and this act shall cease to apply to it unless it
resumes scrutinized business operations. If, within 90 days
following the fiduciary's first engagement, the company converts
its scrutinized active business operations to inactive business
operations, the company shall be subject to this act.
(c) If, after 90 days following the fiduciary's first
engagement with a company, the company continues to have
scrutinized active business operations, and only while the company
continues to have scrutinized active business operations, the
fiduciary shall sell, redeem, divest, or withdraw all publicly
traded securities of the company, according to the following
schedule:
(i) At least 50% of the assets shall be removed from the
fiduciary's assets under management within 9 months after the
company's most recent appearance on the scrutinized companies list.
(ii) 100% of the assets shall be removed from the fiduciary's
assets under management within 15 months after the company's most
recent appearance on the scrutinized companies list.
(d) Except as provided in subdivision (e), at no time shall
the fiduciary acquire securities of companies on the scrutinized
companies list that have active business operations.
(e) Subdivisions (c) and (d) shall not apply to indirect
holdings in actively managed investment funds. For purposes of this
section, actively managed investment funds include private equity
funds and publicly traded funds. Before the fiduciary invests in a
new private equity fund that is not in the fiduciary's portfolio as
of the effective date of this act, the fiduciary shall perform due
diligence to prevent investment in any private equity fund where
the offering memorandum or prospectus identifies the purpose of the
private equity fund as investing in scrutinized companies with
active business operations in a state sponsor of terror. The
fiduciary is not required to identify holdings in private equity
funds or submit engagement letters to those funds. If the manager
of a publicly traded, actively managed fund that is in the
fiduciary's portfolio on the effective date of this act creates a
similar publicly traded, actively managed fund with indirect
holdings devoid of identified scrutinized companies with
scrutinized active business operations as defined in this act, the
fiduciary shall replace all applicable investments with investments
in the similar fund in an expedited time frame consistent with
prudent investment standards.
Sec. 5. The department of treasury shall collect and publish
the following information on the department's internet website no
later than 1 year after the effective date of this act and shall
periodically update the information at reasonable intervals:
(a) All investments sold, redeemed, divested, or withdrawn in
compliance with this section.
(b) All prohibited investments made under this section.
(c) Any progress made under section 4(3)(e).
Sec. 6. (1) With respect to actions taken in compliance with
this act, including all good faith determinations regarding
companies as required by this act, the fiduciary shall be exempt
from any conflicting statutory or common law obligations, including
any obligations in respect to choice of asset managers, investment
funds, or investments for the fiduciary's securities portfolios.
(2) The fiduciary, members of an investment advisory
committee, and any person with decision-making authority with
regard to investments of the fiduciary shall not be held liable for
any action undertaken for the purpose of complying with or
executing the mandates required under this act.
Sec. 7. If any provision, section, subsection, sentence,
clause, phrase, or word of this act or its application to any
person or circumstance is found to be invalid, illegal,
unenforceable, or unconstitutional, the same is hereby declared to
be severable and the balance of this legislation shall remain
effective and functional notwithstanding such invalidity,
illegality, unenforceability, or unconstitutionality.