Introduced Version
Senate Bill 397 History
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Key: Green = existing Code. Red = new code to be enacted
Senate Bill No. 397
(By Senators Unger, Kessler (Mr. President) and Beach)
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[Introduced February 28, 2013; referred to the Committee on
Government Organization; and then to the Committee on Finance .]
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A BILL to amend the Code of West Virginia, 1931, as amended, by
adding thereto a new article, designated §12-6D-1, §12-6D-2,
§12-6D-3, §12-6D-4, §12-6D-5, §12-6D-6, §12-6D-7, §12-6D-8 and
§12-6D-9, all relating to investments of the West Virginia
Investment Management Board; creating the Protecting West
Virginia's Investments Act; providing legislative findings;
providing definitions; requiring the West Virginia Investment
Management Board to identify all companies in which public
moneys are invested that are doing certain types of
investments in Iran; requiring the board to create and
maintain certain scrutinized company lists that name all such
companies; providing that a company may be removed from the
list under certain conditions; providing for reintroduction of
a company onto the list; requiring the board to divest of all
directly held, publicly traded securities of a scrutinized company under certain conditions; providing exceptions to the
divestment requirement; prohibiting the board from acquiring
securities of scrutinized companies that have certain active
investments; providing exceptions to the investment
prohibition; providing an additional exception from the
divestment requirement and the investment prohibition to
certain indirect holdings in actively managed investment
funds; requiring the board to file a report with each member
of the West Virginia Investment Management Board, the
President of the Senate and the Speaker of the House of
Delegates within a specified period after creation of each
scrutinized companies list; requiring the annual filing of an
updated report; requiring that the report contain certain
information; requiring annual updates to such reports when
applicable; requiring certain information to be included in
the investment policy statement; providing for severability;
and providing an effective date.
Be it enacted by the Legislature of West Virginia:
That the Code of West Virginia, 1931, as amended, be amended
by adding thereto a new article, designated §12-6D-1, §12-6D-2,
§12-6D-3, §12-6D-4, §12-6D-5, §12-6D-6, §12-6D-7, §12-6D-8 and
§12-6D-9, all to read as follows:
ARTICLE 6D. PROTECTING WEST VIRGINIA'S INVESTMENTS ACT.
§12-6D-1. Short Title.
This Act may be cited as the "Protecting West Virginia's
Investments Act."
§12-6D-2. Legislative Findings.
The West Virginia Legislature hereby makes the following
findings:
(a) That in 2001, the Securities and Exchange Commission (SEC)
determined that companies with business operations in
terrorist-sponsoring states are exposed to a special risk category
known as Global Security Risk: The risk to share value and
corporate reputation stemming from the intersection of a publicly
traded company's international business activities and
security-related concerns, such as terrorism and weapons
proliferation;
(b) That in response to the financial risk posed by
investments in companies doing business with a state that sponsors
terrorists, the Securities and Exchange Commission established its
Office of Global Security Risk to provide for enhanced disclosure
of material information regarding such companies;
(c) That according to the former chair of the United States
Securities and Exchange Commission Laura Unger, the fact that a
foreign company is doing material business with a country,
government, or entity on OFAC's sanctions list is, in the SEC
staff's view, substantially likely to be significant to a
reasonable investor's decision about whether to invest in that company;
(d) That Iran tops the United States. State department's list
of state sponsors of terrorism, funding such groups as Hamas,
Hizballah, Islamic Jihad, as well as fueling the insurgency in Iraq
via its Al-Quds force;
(e) That the United States imposed sanctions on Iran by
designating the Islamic Revolutionary Guard Corps (IRGC), its
al-Quds Force and three state-owned banks as weapons proliferators
and supporters of terrorism;
(f) That the United Nations Security Council has twice voted
unanimously to impose sanctions on Iran for its failure to suspend
its uranium-enrichment activities calling for an additional embargo
on Iranian arms exports, which is a freeze on assets abroad of an
expanded list of individuals and companies involved in Iran's
nuclear and ballistic missile programs, and calls for nations and
institutions to bar new grants or loans to Iran except for
humanitarian and developmental purposes;
(g) That foreign entities have invested in Iran's
petroleum-energy sector despite United States and United Nations
sanctions against Iran;
(h) That all entities that have invested more than $20 million
in any given year in Iran's petroleum sector since August 5, 1996
are subject to sanctions under United States law pursuant to the
Iran Sanctions Act of 1996;
(i) That the United States renewed the Iran Sanctions Act of
1996 in 2001 and 2006;
(j) That it is a fundamental responsibility of the State of
West Virginia to decide where, how, and by whom financial resources
in its control should be invested, taking into account numerous
pertinent factors;
(k) That divestiture should be considered with the intent to
improve investment performance and, by the rules of prudence,
fiduciaries must take into account all relevant substantive factors
in arriving at an investment decision;
(l) That the State of West Virginia is deeply concerned about
investments in publicly traded companies that have investments in
Iran's petroleum sector as a financial risk to the shareholders;
(m) That by investing in publicly traded companies having
investments in Iran's petroleum sector, the West Virginia
Investment Management Board is putting the funds it oversees at
substantial financial risk;
(n) That divestiture from markets that are vulnerable to
embargo, loan restrictions, and sanctions from the United States
and the international community, including the United Nations
Security Council, is in accordance with the rules of prudence;
(o) That this article should remain in effect only insofar as
it continues to be consistent with and does not unduly interfere
with the foreign policy of the United States as determined by the Federal Government; and
(p) That to protect West Virginia's assets, it is in the best
interest of the state to enact a statutory prohibition regarding
the investments managed by the West Virginia Investment Management
Board doing business in Iran's petroleum-energy sector.
§12-6D-3. Definitions.
As used in this article, the term:
(a) "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 that exists for
the purpose of making profit.
(b) "Direct holdings" in a company means all securities of
that company that are held directly by the public fund or in an
account or fund in which the public fund owns all shares or
interests.
(c) "Government of Iran" means the government of Iran, its
instrumentalities, and companies owned or controlled by the
government of Iran.
(d) "Inactive business Activities" means the mere continued
holding or renewal of rights to property previously operated for
the purpose of generating revenues but not presently deployed for
such purpose.
(e) "Indirect holdings" in a company means all securities of that company that are held in an account or fund, such as a mutual
fund, managed by one or more persons not employed by the public
fund, in which the public fund owns shares or interests together
with other investors not subject to the provisions of this article.
(f) "Iran" means the Islamic Republic of Iran.
(g) "Petroleum resources" means petroleum or natural gas.
(h) "Public fund" means all funds, assets, trustee, and other
designates controlled by article six of this chapter.
(i) "Scrutinized business Activities" means business
Activities that have resulted in a company becoming a scrutinized
company.
(j) "Scrutinized company" means any company that has, with
actual knowledge, on or after August 5, 1996, made an investment of
$20 million or more in Iran's petroleum sector which directly or
significantly contributes to the enhancement of Iran's ability to
develop the petroleum resources of Iran.
(k) "Substantial action specific to Iran" means adopting,
publicizing, and implementing a formal plan to cease scrutinized
business Activities within one year and to refrain from any such
new business Activities.
§12-6D-4. Identification of companies.
(a) Within forty five days after the effective date of this
Act, the public fund shall make its best efforts to identify all
scrutinized companies in which the public fund has direct or indirect holdings. Such efforts include: Reviewing and relying, as
appropriate in the public fund's judgment, on publicly available
information regarding companies that have invested more than $20
million in any given year since August 5, 1996 in Iran's petroleum
energy sector, including information provided by nonprofit
organizations, research firms, international organizations, and
government entities;
(b) By the first meeting of the public fund following the
forty-five day period described in paragraph (a), the public fund
shall assemble all scrutinized companies that fit criteria
specified in subsection (j), section three of this article into a
"Scrutinized Companies with Activities in the Iran Petroleum Energy
Sector List."
(c) The public fund shall update and make publicly available
annually from the effective date of this article the Scrutinized
Companies with Activities in the Iran Petroleum Energy Sector List
based on evolving information from, among other sources, those
listed in subsection (a).
§12-6D-5. Required Action.
The public fund shall adhere to the following procedure for
assembling companies on the Scrutinized Companies with Activities
in the Iran Petroleum Energy Sector List:
(a) Engagement.--
(1) For each company in which the public fund has direct holdings newly identified under subsection (b), section four of
this article, the public fund shall send a written notice informing
the company of its scrutinized company status and that it may
become subject to divestment by the public fund. The notice must
inform the company of the opportunity to clarify its Iran-related
Activities and encourage the company, within ninety days, to cease
its scrutinized business activities or convert such activities to
inactive business activities in order to avoid qualifying for
divestment by the public fund. Such notice shall be sent no later
than one hundred thirty-five days after the effective date of this
Act.
(2) If, within ninety days after the public fund's first
engagement with a company pursuant to this subsection, the company
announces by public disclosure substantial action specific to Iran,
the public fund may maintain its direct holdings, but the company
shall remain on the Scrutinized Companies with Activities in the
Iran Petroleum Energy Sector List pending completion of its
cessation of scrutinized business activities.
(b) Divestment.--
(1) If, after ninety days following the public fund's first
engagement with a company pursuant to subsection (a), the company
has not announced by public disclosure substantial action specific
to Iran, or the public fund determines or becomes aware that the
company continues to have scrutinized business activities, the public fund within eight months after the expiration of such ninety
day period shall sell, redeem, divest, or withdraw all publicly
traded securities of the company from the public fund's direct
holdings.
(2) If the public fund determines or becomes aware that a
company that ceased scrutinized business activities following
engagement pursuant to subsection (a) has resumed such activities,
the public fund shall send a written notice to the company under
subsection (a) and this subsection also applies. The company also
shall be immediately reintroduced onto the Scrutinized Companies
with Activities in the Iran Petroleum Energy Sector List.
(3) The public fund shall monitor the scrutinized company that
has announced by public disclosure substantial action specific to
Iran and, if after one year the public fund determines or becomes
aware that the company has not implemented such plan, within three
months after the expiration of such one year period shall sell,
redeem, divest, or withdraw all publicly traded securities of the
company from the public fund's direct holdings, and the company
also shall be immediately reintroduced onto the Scrutinized
Companies with Activities in the Iran Petroleum Energy Sector List.
(c) Prohibition.--The public fund may not acquire securities
of companies on the Scrutinized Companies with Activities in the
Iran Petroleum Energy Sector List.
(d) Excluded securities.-- Notwithstanding the provisions of this article, subsections (b) and (e) do not apply to the public
fund's indirect holdings. However, the public fund shall submit
letters to the managers of any managed investment funds containing
companies on the Scrutinized Companies with Activities in the Iran
Petroleum Energy Sector List that they consider removing such
companies from the fund or create a similar actively managed fund
having indirect holdings devoid of such companies. If the manager
creates a similar fund devoid of such securities or if such funds
are created elsewhere, the board shall determine within six months
whether to replace all applicable investments with investments in
the similar fund in an expedited time frame consistent with prudent
investing standards. For the purposes of this section, a private
equity fund is deemed to be an actively managed investment fund.
(e) Further exclusions.--Notwithstanding any other provision
of this article, the public fund, when discharging its
responsibility for operation of a defined contribution plan, shall
engage the manager of the investment offerings in such plans
requesting that they consider removing scrutinized companies from
the investment offerings or create an alternative investment
offering devoid of scrutinized companies. If the manager creates
an alternative investment offering or if such funds are created
elsewhere and is deemed by the public fund to be consistent with
prudent investor standards, the public fund shall, within three or
six months, consider including such investment offering in the plan.
§12-6D-6. Reporting.
(a) The public fund shall file a report with each member of the
West Virginia Investment Management Board, the Governor, the
President of the Senate, and the Speaker of the House of
Representatives that includes the Scrutinized Companies with
Activities in the Iran Petroleum Energy Sector List within thirty
days after the list is created. This report shall be made available
to the public.
(b) Annual meeting of the Board of Trustees thereafter, the
public fund shall file a report, which shall be made available to
the public and to each member of the West Virginia Investment
Management Board, the Governor, the President of the Senate and the
Speaker of the House of Representatives which includes:
(1) A summary of correspondence with companies engaged by the
public fund under subsection (a), section five of this article;
(2) All investments sold, redeemed, divested, or withdrawn in
compliance with subsection (b), section five of this article;
(3) All prohibited investments under subsection (c), section
five of this article;
(4) Any progress made under subsection (d), section five of
this article; and
(5) A list of all publicly traded securities held directly by
this state.
§12-6D-7. Expiration.
This article expires upon the occurrence of any of the
following:
(a) The Congress or President of the United States
affirmatively and unambiguously states, by means including, but not
limited to, legislation, executive order, or written certification
from the President to Congress, that the government of Iran has
ceased to pursue the capabilities to develop nuclear weapons and
support international terrorism;
(b) The United States revokes all sanctions imposed against the
government of Iran; or
(c) The Congress or President of the United States
affirmatively and unambiguously declares, by means including, but
not limited to, legislation, executive order, or written
certification from the President to Congress, that mandatory
divestment of the type provided for in this article interferes with
the conduct of United States foreign policy.
§12-6D-8. Investment policy statement obligations.
With respect to Actions taken in compliance with this article,
including all good faith determinations regarding companies as
required by this article, the public fund is exempt from any
conflicting statutory or common law obligations, including any such
obligations with respect to choice of asset managers, investment
funds, or investments for the public fund's securities portfolios.
§12-6D-9. Severability.
If any provision of this article or its application to any
person or circumstance is held invalid, the invalidity does not
affect other provisions or applications of the article that can be
given effect without the invalid provision or application, and to
this end the provisions of this article are severable. The
Legislature hereby declares that it would have passed this article
and each provision of this article, irrespective of the fact that
any one or more provisions of this article might be declared
invalid, illegal, unenforceable or unconstitutional, including, but
not limited to, each of the engagement, divestment, and prohibition
provisions of this article.
NOTE: The purpose of this bill
is to require the West Virginia
Investment Management Board to identify all companies in which
public moneys are invested that are doing certain types of
investments in Iran; to require the board to create and maintain
certain scrutinized company lists that name all such companies; to
require the board to divest of all directly-held, publicly traded
securities of a scrutinized company under certain conditions; to
require the board to file a report with each member of the West
Virginia Investment Management Board, the President of the Senate,
and the Speaker of the House of Representatives within a specified
period after creation of each scrutinized companies list; and to
require the annual filing of an updated report.
This article is new; therefore, strike-throughs and
underscoring have been omitted.
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