SB 1221
Initials VP/DD Page 1 Caucus & COW
ARIZONA HOUSE OF REPRESENTATIVES
Fifty-seventh Legislature
First Regular Session
Senate: FIN DP 6-0-1-0 | 3rd Read 24-5-1-0
House: WM DP 5-2-2-0
SB 1221: China; public funds; divestment
Sponsor: Senator Mesnard, LD 13
Caucus & COW
Overview
Prohibits a publicly managed fund from holding investment in the People's Republic of China
(China), the Chinese Communist Party, the Chinese military and any company owned by
China, domiciled, incorporated or headquartered within China, controlled by the government
of China or its military. Outlines requirements on publicly managed funds relating to
Chinese companies and investment.
History
The State Board of Investment consists of five members and is chaired by the State
Treasurer. The Board must hold regular monthly meetings and keep an accurate record of
its proceedings. Additionally, the Board is directed to review investments of treasury monies,
serve as trustee of any pension prefunding plan investment accounts and may order the State
Treasurer to sell any of their securities (A.R.S. § 35-311).
The State Board of Investment, the Arizona State Retirement System Board and the Board
of Trustees of the Public Safety Personnel Retirement System must each adopt a policy and
submit a copy of the policy to specified persons, regarding countries currently designated by
the United States Department of State as state sponsors of terrorism. The policy must
include:
1) the procedure to identify United States companies that are in violation of section 6(j)
of the Export Administration Act;
2) the process for communicating with the companies and appropriate federal officials,
including this state's congressional delegation, regarding its findings; and
3) the process for divestment from the companies that are identified (A.R.S. § 35-392).
Provisions
1. Stipulates a publicly managed fund may not hold an investment in:
a) China;
b) a company that is owned by China;
c) a company that is domiciled, incorporated or headquartered within China;
d) a company that is controlled by the government of China, the Chinese Communist
Party, the Chinese military or any instrumentality of the government of the People's
Republic of China, the Chinese Communist Party or the Chinese military; or
e) a company that is majority-owned by an entity controlled by the government of China,
the Chinese Communist Party, the Chinese military or any instrumentality of the
government of the People's Republic of China, the Chinese Communist Party or the
Chinese military. (Sec. 1)
☐ Prop 105 (45 votes) ☐ Prop 108 (40 votes) ☐ Emergency (40 votes) ☐ Fiscal Note SB 1221
Initials VP/DD Page 2 Caucus & COW
2. Exempts from the prohibition a company that solely has a subsidiary or affiliate with
China, the Chinese Communist Party or the Chinese military. (Sec. 1)
3. Requires, on the effective date, a publicly managed fund to immediately begin divestment
of any prohibited holdings or investments. (Sec. 1)
4. States a publicly managed fund must complete total divestment as soon as financially
prudent but not later than one year after the effective date. (Sec. 1)
5. Requires each publicly managed fund in order to identify the prohibited holdings or
investments, to do at least one of the following:
a) review publicly available information regarding the companies and investments,
including information provided by nonprofit organizations, research firms and
governmental entities;
b) contact asset managers and fund managers contracted by a publicly managed fund
that invest in companies and in funds that are owned by or are domiciled within China
or whose primary affairs are conducted within China;
c) contact institutional investors that have divested from or engaged with companies
that are owned by or are domiciled within China or whose primary affairs are
conducted within China; or
d) retain an independent research firm to identify companies that are direct or indirect
investment holdings of the publicly managed fund and that are owned by or are
domiciled within China or whose primary affairs are conducted within China. (Sec. 1)
6. States that a publicly managed fund is not required to divest holdings or prohibited
investments if less than 1% of the value of the total holdings or investments of the fund
are made up of investments in Chinese companies and the cost to the publicly managed
fund of divesting from the prohibited holdings or investments over the next five years is
more than 1% of the value of the total holdings or investments otherwise prohibited. (Sec.
1)
7. Stipulates that the prohibition on publicly managed funds does not inhibit, conflict with,
impede or otherwise interfere with any required financial safeguards, fiduciary
requirements or other sound investment criteria that a publicly managed fund is subject
to, including any obligations with respect to choice of asset managers, investment funds
or investments for fund investment portfolios. (Sec. 1)
8. Specifies each publicly managed fund and any person acting on behalf of the publicly
managed fund:
a) are exempt from any conflicting statutory or common law obligation or fiduciary
duties with respect to choice of asset managers, investment funds or investments;
b) are subject to actions against public entities or public employees regarding immunity
for acts and omissions; and
c) are indemnified and held harmless by this state from claims, demands, suits, actions,
damages, judgments, costs, charges and expenses, including attorney fees, and
against all liability, losses and damages because of a decision to sell, redeem, divest
or withdraw holdings of a restricted company. (Sec. 1)
9. Stipulates that if any requirement on publicly managed funds or its application to any
person or circumstance is held invalid, the invalidity does not affect any other
requirements or application that can be given effect without the invalid requirement or
application, and to this end the requirements of this section are severable. (Sec. 1) SB 1221
Initials VP/DD Page 3 Caucus & COW
10. Defines pertinent terms. (Sec. 1)
11. Contains a purpose statement. (Sec. 2)
12. Contains an applicability clause. (Sec. 3)