HB406INTRODUCED
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H9ZB86-1
By Representatives Shaw, Brown, Colvin, Shirey, Lamb, Lomax,
Givens, Stadthagen, Kiel, DuBose, Carns, Oliver, Hurst,
Stringer, Woods
RFD: State Government
First Read: 27-Apr-23
2023 Regular Session
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SYNOPSIS:
This bill would require the State Treasurer and
the Boards of Control of the Retirement Systems of
Alabama and Judicial Retirement Fund to create and make
available to the public a list of prohibited companies,
which would be defined as businesses owned or
controlled by Chinese military or government services
and designated by the U.S. government as companies with
whom U.S. citizens are restricted from entering into
transactions.
This bill authorizes the respective retirement
systems to use a third-party service to complete the
identification of prohibited companies.
This bill prohibits the State Treasurer and the
Boards of Control of the Retirement Systems of Alabama
and Judicial Retirement Fund from acquiring direct
holdings in publicly traded securities of a prohibited
company, and requires them to sell, redeem, divest, or
withdraw all direct holdings in publicly traded
securities of a prohibited company within 180 days
after the company becomes a prohibited company.
This bill would also define terms.
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A BILL
TO BE ENTITLED
AN ACT
Relating to public investments; to require the State
Treasurer and the Boards of Control of the Retirement Systems
of Alabama and the Judicial Retirement Fund to establish and
maintain a list of certain companies owned or controlled by
Chinese military or government services and designated by the
U.S. government as companies with whom U.S. citizens are
restricted from entering into transactions; to make this list
available to the public; to prohibit the State Treasurer and
the Boards of Control of the Retirement Systems of Alabama and
the Judicial Retirement Fund from acquiring direct holdings in
publicly traded securities of a listed company, and requiring
the sale, redemption, divestment, or withdrawal of all direct
holdings in publicly traded securities of a listed company
within 180 days after the company becomes a listed company;
and to define terms.
BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
Section 1. As used in this act, the following terms
have the following meanings:
(1) COMPANY. Any business or business entity that is
publicly traded and that is not based in the United States.
(2) DIRECT HOLDINGS. All securities of a company held
directly by the public fund or in an account or fund in which
the public fund owns all shares or interests.
(3) INDIRECT HOLDINGS. All securities of a company held
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in an account or fund managed by one or more persons not
employed by the public fund, and in which the public fund owns
shares or interests together with other investors. Indirect
holdings include, but are not limited to, mutual funds,
private equity funds, hedge funds, and real estate funds.
(4) PROHIBITED COMPANY. A company that is owned or
controlled by Chinese military or government services and has
been designated by the United State government as a company
that citizens of the United States are restricted or
prohibited from entering into transactions with, including a
designation in any of the following lists:
a. The federal Bureau of Industry and Security's entity
list.
b. The federal Bureau of Industry and Security's
military end user list.
c. The Department of Defense's communist Chinese
military companies list.
d. The Office of Foreign Assets Control's foreign
sanctions evaders list.
e. The Office of Foreign Assets Control's list of
foreign financial institutions subject to correspondent
account or payable-through account sanctions.
f. The Office of Foreign Assets Control's Non-SDN Iran
sanctions list.
g. The Office of Foreign Assets Control's Non-SDN
Palestinian legislative council list.
h. The Office of Foreign Assets Control's sectoral
sanctions identifications list.
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i. The Office of Foreign Assets Control's specially
designated nationals and blocked persons list.
(5) PUBLIC FUND. The State Treasurer and the respective
Boards of Control of the Employees' Retirement System of
Alabama, the Teachers' Retirement System of Alabama, or the
Judicial Retirement Fund.
Section 2. (a)(1) By January 1, 2024, a public fund
shall identify or have identified all prohibited companies in
which the public fund has direct or indirect holdings and
shall create and make available to the public a prohibited
companies list for that public fund. The public fund shall
review and update, if necessary, the prohibited companies list
on a quarterly basis thereafter.
(2) In identifying or having identified prohibited
companies, the public fund may review and rely, in the best
judgment of the public fund, on publicly available information
and other information that may be provided by nonprofit
organizations, research firms, international organizations,
and governmental entities. The public fund may also contract
asset managers and institutional investors for the public fund
to identify prohibited companies based upon
industry-recognized lists of such companies that the public
fund may have indirect holdings in.
(3) A Board of Control of the respective Retirement
System of Alabama, acting on behalf of the retirement system
and other public funds subject to this section, may develop
and issue a request for proposals for third-party services to
complete the identification of prohibited companies and the
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compilation of a prohibited companies list. The request for
proposals may request bids for optional services related to
this purpose, including, but not limited to, provision of
notice of such prohibited companies as required in subsection
(b). The respective board of control shall consult with all
other public funds regarding the development of the request
for proposals, however, selection of a successful proposal and
the final scope of services to be provided shall be determined
only by those public funds that have agreed to utilize the
third-party services. If more than one public fund decides to
utilize the third-party services, the participating public
funds shall equally share the costs of such services.
(b) For each company on the prohibited companies list
in which a public fund has direct or indirect holdings, the
public fund shall send or have sent a written notice informing
the company of the requirements of this act. The public fund
or its representative shall continue to provide such written
notice on an annual basis if the company remains a prohibited
company.
(c) If a public fund determines that a company may be
subject to inclusion on the prohibited companies list, the
public fund shall scrutinize and engage the company for a
period of not more than 12 months and shall include the
company on the prohibited companies list if the public fund
determines that the company is a prohibited company.
Section 3. (a) A public fund shall not acquire any
direct holdings in publicly traded securities of a prohibited
company.
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(b)(1) A public fund shall sell, redeem, divest, or
withdraw all direct holdings in publicly traded securities of
a prohibited company no later than 180 days following the date
the company is included on the prohibited companies list.
(2) This subsection shall not be construed to require
the premature or otherwise imprudent sale, redemption,
divestment, or withdrawal of an investment, but such sale,
redemption, divestment, or withdrawal shall be completed as
provided by this subsection.
Section 4. (a) Each public fund shall, within 30 days
after the prohibited companies list is created or updated as
required by Section 2, make the list available to the public.
(b) By October 1, 2024, and each October 1 thereafter,
each public fund shall make available to the public, and file
with the Legislature, an annual report covering the prior
fiscal year that includes all of the following:
(1) The prohibited companies list as of the end of the
fiscal year.
(2) A summary of all written notices sent as required
by Section 2 during the fiscal year.
(3) All investments sold, redeemed, divested, or
withdrawn as provided in Section 3 during the fiscal year.
(4) A list of indirect holdings of the public fund in
publicly traded securities of prohibited companies and the
percentage of the total portfolio of the public fund the
indirect holdings of securities in prohibited companies
represent.
Section 5. With respect to actions taken in compliance
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with this act, including all good-faith determinations
regarding companies as required by this act, the public fund
shall be 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.
Section 6. The requirements of this act shall not apply
if the United States Congress or President of the United
States, through legislation or executive order, declares that
mandatory divestment of the type provided for in this chapter
interferes with the conduct of United States foreign policy.
Section 7. This act shall become effective on the first
day of the third month following its passage and approval by
the Governor, or its otherwise becoming law.
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