Rep. Jaime M. Andrade, Jr.

Filed: 4/24/2017

 

 


 

 


 
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1
AMENDMENT TO HOUSE BILL 3419

2    AMENDMENT NO. ______. Amend House Bill 3419 by replacing
3everything after the enacting clause with the following:
 
4    "Section 5. The Illinois Procurement Code is amended by
5adding Sections 1-15.120 and 50-17 as follows:
 
6    (30 ILCS 500/1-15.120 new)
7    Sec. 1-15.120. Expatriated entity. "Expatriated entity"
8means a foreign incorporated entity which is treated as an
9inverted domestic corporation under subsection (b) of Section
10835 of the Homeland Security Act of 2002, 6 U.S.C. 395(b), or
11any subsidiary of such an entity. The federal regulations found
12at 26 CFR 1.7874-3 may be used to determine when 6 U.S.C.
13395(b)(3) applies.
 
14    (30 ILCS 500/50-17 new)
15    Sec. 50-17. Expatriated entities.

 

 

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1    (a) Except as provided in subsection (b) of this Section,
2no business or member of a unitary business group, as defined
3in the Illinois Income Tax Act, shall submit a bid for or enter
4into a contract with a State agency under this Code if that
5business or any member of the unitary business group is an
6expatriated entity.
7    (b) An expatriated entity or a member of a unitary business
8group with an expatriated entity as a member may submit a bid
9for or enter into a contract with a State agency under this
10Code if the appropriate chief procurement officer determines
11that either of the following apply:
12        (1) the contract is awarded as a sole source
13    procurement under Section 20-25 of this Code, provided that
14    the appropriate chief procurement officer (i) includes in
15    the notice of intent to enter into a sole source contract a
16    prominent statement that the intended sole source
17    contractor is an expatriated entity and (ii) holds a public
18    hearing at which the chief procurement officer and
19    purchasing agency present written justification for the
20    use of a sole source contract with an expatriated entity
21    and any member of the public may present testimony; or
22        (2) the purchase is of pharmaceutical products, drugs,
23    biologics, vaccines, medical supplies, or devices used to
24    provide medical and health care or treat disease or used in
25    medical or research diagnostic tests, and medical
26    nutritionals regulated by the Food and Drug Administration

 

 

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1    under the Federal Food, Drug, and Cosmetic Act.
 
2    Section 10. The Illinois Pension Code is amended by
3changing Section 1-110.16 as follows:
 
4    (40 ILCS 5/1-110.16)
5    Sec. 1-110.16. Transactions prohibited by retirement
6systems; companies that boycott Israel, Iran-restricted
7companies, and Sudan-restricted companies, and expatriated
8entities.
9    (a) As used in this Section:
10        "Boycott Israel" means engaging in actions that are
11    politically motivated and are intended to penalize,
12    inflict economic harm on, or otherwise limit commercial
13    relations with the State of Israel or companies based in
14    the State of Israel or in territories controlled by the
15    State of Israel.
16        "Company" means any sole proprietorship, organization,
17    association, corporation, partnership, joint venture,
18    limited partnership, limited liability partnership,
19    limited liability company, or other entity or business
20    association, including all wholly owned subsidiaries,
21    majority-owned subsidiaries, parent companies, or
22    affiliates of those entities or business associations,
23    that exist for the purpose of making profit.
24        "Illinois Investment Policy Board" means the board

 

 

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1    established under subsection (b) of this Section.
2        "Direct holdings" in a company means all publicly
3    traded securities of that company that are held directly by
4    the retirement system in an actively managed account or
5    fund in which the retirement system owns all shares or
6    interests.
7        "Expatriated entity" has the meaning ascribed to it in
8    Section 1-15.120 of the Illinois Procurement Code.
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, and expatriated entities.
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 and the State
16Treasurer.
17    By April 1, 2018, the Illinois Investment Policy Board
18shall make its best efforts to identify all expatriated
19entities and include those companies in the list of restricted
20companies distributed to each retirement system and the State
21Treasurer. These efforts shall include the following, as
22appropriate in the Illinois Investment Policy Board's
23judgment:
24        (1) reviewing and relying on publicly available
25    information regarding expatriated entities, including
26    information provided by nonprofit organizations, research

 

 

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1    firms, and government entities;
2        (2) contacting asset managers contracted by the
3    retirement systems that invest in expatriated entities;
4        (3) contacting other institutional investors that have
5    divested from or engaged with expatriated entities; and
6        (4) retaining an independent research firm to identify
7    expatriated entities.
8    (e) The Illinois Investment Policy Board shall adhere to
9the following procedures for companies on the list of
10restricted companies:
11        (1) For each company newly identified in subsection
12    (d), the Illinois Investment Policy Board shall send a
13    written notice informing the company of its status and that
14    it may become subject to divestment or shareholder activism
15    by the retirement systems.
16        (2) If, following the Illinois Investment Policy
17    Board's engagement pursuant to this subsection (e) with a
18    restricted company, that company ceases activity that
19    designates the company to be an Iran-restricted company, a
20    Sudan-restricted company, or a company that boycotts
21    Israel, or an expatriated entity, the company shall be
22    removed from the list of restricted companies and the
23    provisions of this Section shall cease to apply to it
24    unless it resumes such activities.
25    (f) Except as provided in subsection (f-1) of this Section
26the The retirement system shall adhere to the following

 

 

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1procedures for companies on the list of restricted companies:
2        (1) The retirement system shall identify those
3    companies on the list of restricted companies in which the
4    retirement system owns direct holdings and indirect
5    holdings.
6        (2) The retirement system shall instruct its
7    investment advisors to sell, redeem, divest, or withdraw
8    all direct holdings of restricted companies from the
9    retirement system's assets under management in an orderly
10    and fiduciarily responsible manner within 12 months after
11    the company's most recent appearance on the list of
12    restricted companies.
13        (3) The retirement system may not acquire securities of
14    restricted companies.
15        (4) The provisions of this subsection (f) do not apply
16    to the retirement system's indirect holdings or private
17    market funds. The Illinois Investment Policy Board shall
18    submit letters to the managers of those investment funds
19    containing restricted companies requesting that they
20    consider removing the companies from the fund or create a
21    similar actively managed fund having indirect holdings
22    devoid of the companies. If the manager creates a similar
23    fund, the retirement system shall replace all applicable
24    investments with investments in the similar fund in an
25    expedited timeframe consistent with prudent investing
26    standards.

 

 

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1    (f-1) The retirement system shall adhere to the following
2procedures for restricted companies that are expatriated
3entities:
4        (1) To the extent that the retirement system believes
5    that shareholder activism would be more impactful than
6    divestment, the retirement system shall have the authority
7    to engage with a restricted company prior to divesting.
8        (2) Subject to any applicable State or federal laws,
9    methods of shareholder activism utilized by the retirement
10    system may include, but are not limited to, bringing
11    shareholder resolutions and proxy voting on shareholder
12    resolutions.
13        (3) The retirement system shall report on its
14    shareholder activism and the outcome of such efforts to the
15    Illinois Investment Policy Board by April 1 of each year.
16        (4) If the engagement efforts of the retirement system
17    are unsuccessful, then it shall adhere to the procedures
18    under subsection (f) of this Section.
19    (g) Upon request, and by April 1 of each year at least
20annually, each retirement system shall provide the Illinois
21Investment Policy Board with information regarding investments
22sold, redeemed, divested, or withdrawn in compliance with this
23Section.
24    (h) Notwithstanding any provision of this Section to the
25contrary, a retirement system may cease divesting from
26companies pursuant to subsection (f) if clear and convincing

 

 

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1evidence shows that the value of investments in such companies
2becomes equal to or less than 0.5% of the market value of all
3assets under management by the retirement system. For any
4cessation of divestment authorized by this subsection (h), the
5retirement system shall provide a written notice to the
6Illinois Investment Policy Board in advance of the cessation of
7divestment, setting forth the reasons and justification,
8supported by clear and convincing evidence, for its decision to
9cease divestment under subsection (f).
10    (i) The cost associated with the activities of the Illinois
11Investment Policy Board shall be borne by the boards of each
12pension fund or investment board created under Article 15, 16,
13or 22A of this Code.
14    (j) With respect to actions taken in compliance with this
15Section, including all good-faith determinations regarding
16companies as required by this Section, the retirement system
17and Illinois Investment Policy Board are exempt from any
18conflicting statutory or common law obligations, including any
19fiduciary duties under this Article and any obligations with
20respect to choice of asset managers, investment funds, or
21investments for the retirement system's securities portfolios.
22    (k) It is not the intent of the General Assembly in
23enacting this amendatory Act of the 99th General Assembly to
24cause divestiture from any company based in the United States
25of America. The Illinois Investment Policy Board shall consider
26this intent when developing or reviewing the list of restricted

 

 

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1companies.
2    (l) If any provision of this amendatory Act of the 99th
3General Assembly or its application to any person or
4circumstance is held invalid, the invalidity of that provision
5or application does not affect other provisions or applications
6of this amendatory Act of the 99th General Assembly that can be
7given effect without the invalid provision or application.
8    (m) If any provision of this amendatory Act of the 100th
9General Assembly or its application to any person or
10circumstance is held invalid, the invalidity of that provision
11or application does not affect other provisions or applications
12of this amendatory Act of the 100th General Assembly that can
13be given effect without the invalid provision or application.
14(Source: P.A. 99-128, eff. 7-23-15.)".