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1 | AN ACT concerning finance.
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2 | Be it enacted by the People of the State of Illinois,
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3 | represented in the General Assembly:
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4 | Section 5. The Illinois Pension Code is amended by adding | ||||||
5 | Section 1-110.16 as follows: | ||||||
6 | (40 ILCS 5/1-110.16 new) | ||||||
7 | Sec. 1-110.16. Transactions prohibited by retirement | ||||||
8 | systems; companies that boycott Israel, Iran-restricted | ||||||
9 | companies, 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 | ||||||
5 | Policy Board. The Illinois Investment Policy Board shall | ||||||
6 | consist of 7 members. Each board of a pension fund or | ||||||
7 | investment board created under Article 15, 16, or 22A of this | ||||||
8 | Code shall appoint one member, and the Governor shall appoint 4 | ||||||
9 | members. | ||||||
10 | (c) Notwithstanding any provision of law to the contrary, | ||||||
11 | beginning January 1, 2016, Sections 110.15 and 1-110.6 of this | ||||||
12 | Code shall be administered in accordance with this Section. | ||||||
13 | (d) By April 1, 2016, the Illinois Investment Policy Board | ||||||
14 | shall make its best efforts to identify all Iran-restricted | ||||||
15 | companies, Sudan-restricted companies, and companies that | ||||||
16 | boycott Israel and assemble those identified companies into a | ||||||
17 | list of restricted companies, to be distributed to each | ||||||
18 | retirement system. | ||||||
19 | These efforts shall include the following, as appropriate | ||||||
20 | in 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 | ||||||
12 | of restricted companies on a quarterly basis based on evolving | ||||||
13 | information from, among other sources, those listed in this | ||||||
14 | subsection (d) and distribute any updates to the list of | ||||||
15 | restricted companies to the retirement systems. | ||||||
16 | (e) The Illinois Investment Policy Board shall adhere to | ||||||
17 | the following procedures for companies on the list of | ||||||
18 | restricted 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 | ||||||
8 | procedures 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 | ||||||
9 | system shall provide the Illinois Investment Policy Board with | ||||||
10 | information regarding investments sold, redeemed, divested, or | ||||||
11 | withdrawn in compliance with this Section. | ||||||
12 | (h) Notwithstanding any provision of this Section to the | ||||||
13 | contrary, a retirement system may cease divesting from | ||||||
14 | companies pursuant to subsection (f) if clear and convincing | ||||||
15 | evidence shows that the value of investments in such companies | ||||||
16 | becomes equal to or less than 0.5% of the market value of all | ||||||
17 | assets under management by the retirement system. For any | ||||||
18 | cessation of divestment authorized by this subsection (h), the | ||||||
19 | retirement system shall provide a written notice to the | ||||||
20 | Illinois Investment Policy Board in advance of the cessation of | ||||||
21 | divestment, setting forth the reasons and justification, | ||||||
22 | supported by clear and convincing evidence, for its decision to | ||||||
23 | cease divestment under subsection (f). | ||||||
24 | (i) The cost associated with the activities of the Illinois | ||||||
25 | Investment Policy Board shall be borne by the boards of each | ||||||
26 | pension fund or investment board created under Article 15, 16, |
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1 | or 22A of this Code. | ||||||
2 | (j) With respect to actions taken in compliance with this | ||||||
3 | Section, including all good-faith determinations regarding | ||||||
4 | companies as required by this Section, the retirement system | ||||||
5 | and Illinois Investment Policy Board are exempt from any | ||||||
6 | conflicting statutory or common law obligations, including any | ||||||
7 | fiduciary duties under this Article and any obligations with | ||||||
8 | respect to choice of asset managers, investment funds, or | ||||||
9 | investments for the retirement system's securities portfolios. | ||||||
10 | (k) It is not the intent of the General Assembly in | ||||||
11 | enacting this amendatory Act of the 99th General Assembly to | ||||||
12 | cause divestiture from any company based in the United States | ||||||
13 | of America. The Illinois Investment Policy Board shall consider | ||||||
14 | this intent when developing or reviewing the list of restricted | ||||||
15 | companies. | ||||||
16 | (l) If any provision of this amendatory Act of the 99th | ||||||
17 | General Assembly or its application to any person or | ||||||
18 | circumstance is held invalid, the invalidity of that provision | ||||||
19 | or application does not affect other provisions or applications | ||||||
20 | of this amendatory Act of the 99th General Assembly that can be | ||||||
21 | given effect without the invalid provision or application.
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22 | Section 99. Effective date. This Act takes effect upon | ||||||
23 | becoming law. |