Chapter
079
2007 -- S 0087
Enacted 06/22/07
A N A
C T
RELATING TO PUBLIC
FINANCE -- STATE INVESTMENT COMMISSION --
INVESTMENTS IN SUDAN
Introduced By: Senators
Perry, Metts, Miller, Pichardo, and Sosnowski
Date Introduced: January 23,
2007
It is
enacted by the General Assembly as follows:
SECTION
1. Legislative Findings. -- It is hereby found by the general assembly as
follows:
(a)
On July 23, 2004, the United States Congress declared that “the atrocities
unfolding in
Darfur,
Sudan, are genocide.”
(b)
On September 9, 2004, Secretary of State Colin L. Powell told the U.S. Senate
Foreign
Relations Committee that “genocide has occurred and may still be occurring in
Darfur”
and
“the Government of Sudan and the Janjaweed bear responsibility.”
(c)
On September 21, 2004, addressing the United Nations General Assembly,
President
George
W. Bush affirmed the Secretary of State's finding and stated, “At this hour,
the world is
witnessing
terrible suffering and horrible crimes in the Darfur region of Sudan, crimes my
government
has concluded are genocide.”
(d)
On December 7, 2004, the U.S. Congress noted that the genocidal policy in
Darfur
has led
to reports of “systematic rape of thousands of women and girls, the abduction
of women
and
children, and the destruction of hundreds of ethnically African villages,
including the
poisoning
of their wells and the plunder of their crops and cattle upon which the people
of such
villages
sustain themselves.”
(e)
Also on December 7, 2004, Congress found that “the Government of Sudan has
restricted
access by humanitarian and human rights workers to the Darfur area through
intimidation
by military and security forces, and through bureaucratic and administrative
obstruction,
in an attempt to inflict the most devastating harm on those individuals
displaced from
their
villages and homes without any means of sustenance or shelter.”
(f)
On September 25, 2006, Congress reaffirmed that “the genocide unfolding in the
Darfur
region of Sudan is characterized by acts of terrorism and atrocities directed
against
civilians,
including mass murder, rape, and sexual violence committed by the Janjaweed and
associated
militias with the complicity and support of the National Congress Party-led
faction of
the
Government of Sudan.”
(g)
On September 26, 2006, the U.S. House of Representatives stated that “an
estimated
300,000
to 400,000 people have been killed by the Government of Sudan and its Janjaweed
allies
since
the [Darfur] crisis began in 2003, more than 2,000,000 people have been
displaced from
their
homes, and more than 250,000 people from Darfur remain in refugee camps in
Chad.”
(h)
The Darfur crisis represents the first time the United States Government has
labeled
ongoing
atrocities a genocide.
(i)
The Federal Government has imposed sanctions against the Government of Sudan
since
1997. These sanctions are monitored through the U.S. Treasury Department’s
Office of
Foreign
Assets Control (OFAC).
(j)
According to a former chair of the U.S. Securities and Exchange Commission,
“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.”
(k)
Since 1993, the U.S. Secretary of State has determined that Sudan is a country
the
government
of which has repeatedly provided support for acts of international terrorism,
thereby
restricting
United States assistance, defense exports and sales, and financial and other
transactions
with
the Government of Sudan.
(l)
A 2006 U.S. House of Representatives report states that “a company's
association with
sponsors
of terrorism and human rights abuses, no matter how large or small, can have a
materially
adverse result on a public company's operations, financial condition, earnings,
and
stock
prices, all of which can negatively affect the value of an investment.”
(m)
In response to the financial risk posed by investments in companies doing
business
with
a terrorist-sponsoring state, the Securities and Exchange Commission
established its Office
of
Global Security Risk to provide for enhanced disclosure of material information
regarding
such
companies.
(n)
The current Sudan divestment movement encompasses nearly one hundred (100)
universities,
cities, states, and private pension plans.
(o)
Companies facing such widespread divestment present further material risk to
remaining
investors.
(p)
It is a fundamental responsibility of the state of Rhode Island to decide
where, how,
and
by whom financial resources in its control should be invested, taking into
account numerous
pertinent
factors.
(q)
It is the prerogative and desire of the state of Rhode Island, in respect to
investment
resources
in its control and to the extent reasonable, with due consideration for, among
other
things,
return on investment, on behalf of itself and its investment beneficiaries, not
to participate
in an
ownership or capital-providing capacity with entities that provide significant
practical
support
for genocide, including certain non-United States companies presently doing
business in
Sudan.
(r)
It is the judgment of the Rhode Island general assembly that this act 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.
(s)
It is the judgment of this Rhode Island general assembly that mandatory
divestment of
public
funds from certain companies is a measure that should be employed sparingly and
judiciously.
A Congressional and Presidential declaration of genocide satisfies this high
threshold.
SECTION
2. Definitions. –
As
used in this act, the following definitions shall apply:
(a)
“Active business operations” means all business operations that are not
inactive
business
operations.
(b)
“Business operations” means engaging in commerce in any form in Sudan,
including
by
acquiring, developing, maintaining, owning, selling, possessing, leasing, or
operating
equipment,
facilities, personnel, products, services, personal property, real property, or
any other
apparatus
of business or commerce.
(c)
“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, including all wholly-owned
subsidiaries,
majority-owned
subsidiaries, parent companies, or affiliates of such entities or business
associations,
that exists for profit-making purposes.
(d)
“Complicit” means taking actions during any preceding twenty (20) month period
which
have directly supported or promoted the genocidal campaign in Darfur, including,
but not
limited
to, preventing Darfur’s victimized population from communicating with each
other,
encouraging
Sudanese citizens to speak out against an internationally approved security
force for
Darfur,
actively working to deny, cover up, or alter the record on human rights abuses
in Darfur,
or
other similar actions.
(e)
“Direct holdings” in a company means all securities of that company held
directly by
the
public fund or in an account or fund in which the public fund owns all shares
or interests.
(f)
“Government of Sudan” means the government in Khartoum, Sudan, which is led by
the
National Congress Party (formerly known as the National Islamic Front) or any
successor
government
formed on or after October 13, 2006 (including the coalition National Unity
Government
agreed upon in the Comprehensive Peace Agreement for Sudan) and does not
include
the regional government of southern Sudan.
(g)
“Inactive business operations” 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.
(h)
“Indirect holdings” in a company means all securities of that company 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 act.
(i)
“Marginalized populations Of Sudan” include, but are not limited to, the
portion of the
population
in the Darfur region that has been genocidally victimized; the portion of the
population
of southern Sudan victimized by Sudan’s North-South civil war; the Beja,
Rashidiya,
and
other similarly underserved groups of eastern Sudan; the Nubian and other
similarly
underserved
groups in Sudan’s Abyei, Southern Blue Nile, and Nuba Mountain regions; and the
Amri,
Hamadab, Manasir, and other similarly underserved groups of northern Sudan.
(j)
“Military equipment” means weapons, arms, military supplies, and equipment that
readily
may be used for military purposes, including, but not limited to, radar systems
or military-
grade
transport vehicles; or supplies or services sold or provided directly or
indirectly to any
force
actively participating in armed conflict in Sudan.
(k)
“Mineral extraction activities” include exploring, extracting, processing,
transporting,
or
wholesale selling or trading of elemental minerals or associated metal alloys
or oxides (ore),
including
gold, copper, chromium, chromite, diamonds, iron, iron ore, silver, tungsten,
uranium,
and
zinc, as well as facilitating such activities, including by providing supplies
or services in
support
of such activities.
(l)
“Oil-related activities” include, but are not limited to, owning rights to oil
blocks;
exporting,
extracting, producing, refining, processing, exploring for, transporting,
selling, or
trading
of oil; constructing, maintaining, or operating a pipeline, refinery, or other
oil-field
infrastructure;
and facilitating such activities, including by providing supplies or services
in
support
of such activities, provided that the mere retail sale of gasoline and related
consumer
products
shall not be considered oil-related activities.
(m)
“Power production activities” means any business operation that involves a
project
commissioned
by the National Electricity Corporation (NEC) of Sudan or other similar
government
of Sudan entity whose purpose is to facilitate power generation and delivery,
including,
but not limited to, establishing power-generating plants or hydroelectric dams,
selling
or
installing components for the project, providing service contracts related to
the installation or
maintenance
of the project, as well as facilitating such activities, including by providing
supplies
or
services in support of such activities.
(n)
“Public fund” means Rhode Island state pension funds or the state investment
commission
in charge of the Rhode Island state pension funds.
(o)
“Scrutinized company" means any company that meets the criteria in
subparagraph
(1),
(2), or (3) below:
(1)
The company has business operations that involve contracts with and/or
provision of
supplies
or services to: (A) the government of Sudan; (B) companies in which the
government of
Sudan
has any direct or indirect equity share; (C) government of Sudan-commissioned
consortiums
or projects; or (D) companies involved in government of Sudan-commissioned
consortiums
or projects; and
(i)
More than ten percent (10%) of the company’s revenues or assets linked to Sudan
involve
oil-related activities or mineral extraction activities; less than seventy-five
percent (75%)
of
the company’s revenues or assets linked to Sudan involve contracts with and/or
provision of
oil-related
or mineral extracting products or services to the regional government of
southern
Sudan
or a project or consortium created exclusively by that regional government; and
the
company
has failed to take substantial action; or
(ii)
More than ten percent (10%) of the company’s revenues or assets linked to Sudan
involve
power production activities; less than seventy-five percent (75%) of the
company’s power
production
activities include projects whose intent is to provide power or electricity to
the
marginalized
populations of Sudan; and the company has failed to take substantial action.
(2)
The company is complicit in the Darfur genocide.
(3)
The company supplies military equipment within Sudan, unless it clearly shows
that
the
military equipment cannot be used to facilitate offensive military actions in
Sudan or the
company
implements rigorous and verifiable safeguards to prevent use of that equipment
by
forces
actively participating in armed conflict, for example, through post-sale
tracking of such
equipment
by the company, certification from a reputable and objective third-party that
such
equipment
is not being used by a party participating in armed conflict in Sudan, or sale
of such
equipment
solely to the regional government of southern Sudan or any internationally
recognized
peacekeeping
force or humanitarian organization.
Notwithstanding
anything herein to the contrary, a social development company which is
not
complicit in the Darfur genocide shall not be considered a scrutinized company.
(p)
“Social development company” means a company whose primary purpose in Sudan is
to
provide humanitarian goods or services, including medicine or medical
equipment, agricultural
supplies
or infrastructure, educational opportunities, journalism-related activities,
information or
information
materials, spiritual-related activities, services of a purely clerical or
reporting nature,
food,
clothing, or general consumer goods that are unrelated to oil-related
activities, mineral
extraction
activities, or power production activities.
(q)
“Substantial action” means adopting, publicizing, and implementing a formal
plan to
cease
scrutinized business operations within one year and to refrain from any such
new business
operations;
undertaking significant humanitarian efforts on behalf of one or more
marginalized
populations
of Sudan; or through engagement with the government of Sudan, materially
improving
conditions for the genocidally victimized population in Darfur.
Section
3. Identification of Companies. –
(a)
Within ninety (90) days following passage 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
or could possibly have such holdings in the future. Such efforts shall include,
as
appropriate:
(1)
Reviewing and relying, as appropriate in the public fund’s judgment, on
publicly
available
information regarding companies with business operations in Sudan, including
information
provided by non-profit organizations, research firms, international
organizations, and
government
entities; and/or
(2)
Contacting asset managers contracted by the public fund that invest in
companies
with
business operations in Sudan; and/or
(3)
Contacting other institutional investors that have divested from and/or engaged
with
companies
that have business operations in Sudan.
(b)
By the first meeting of the public fund following the ninety (90) day period
described
in
subsection (a), the public fund shall assemble all scrutinized companies
identified into a
“scrutinized
companies list.”
(c)
The public fund shall update the scrutinized companies list on a quarterly
basis based
on
evolving information from, among other sources, those listed in subsection (a).
Section
4. Required Actions. –
The
public fund shall adhere to the following procedures for companies on the
scrutinized
companies list:
(a)
Engagement:
(1)
The public fund shall immediately determine the companies on the scrutinized
companies
list in which the public fund owns direct or indirect holdings.
(2)
For each company identified in paragraph (1) with only inactive business
operations,
the
public fund shall send a written notice informing the company of this act and
encouraging it
to
continue to refrain from initiating active business operations in Sudan until
it is able to avoid
scrutinized
business operations. The public fund shall continue such correspondence on a
semi-
annual
basis.
(3)
For each company newly identified in paragraph (1) with active business
operations,
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
shall offer the
company
the opportunity to clarify its Sudan-related activities and shall encourage the
company,
within
ninety (90) days, to either cease its scrutinized business operations or
convert such
operations
to inactive business operations in order to avoid qualifying for divestment by
the
public
fund.
(4)
If, within ninety (90) days following the public fund’s first engagement with a
company
pursuant to paragraph (3), that company ceases scrutinized business operations,
the
company
shall be removed from the scrutinized companies list and the provisions of this
section
shall
cease to apply to it unless it resumes scrutinized business operations. If,
within ninety (90)
days
following the public fund’s first engagement, the company converts its
scrutinized active
business
operations to inactive business operations, the company shall be subject to all
provisions
relating
thereto.
(b)
Divestment:
(1)
If, after ninety (90) days following the public fund’s first engagement with a
company
pursuant
to subsection (a)(3), the company continues to have scrutinized active business
operations,
and only while such company continues to have scrutinized active business
operations,
the public fund shall sell, redeem, divest, or withdraw all publicly-traded
securities of
the
company, except as provided below, according to the following schedule:
(i)
At least fifty percent (50%) of such assets shall be removed from the public
fund’s
assets
under management by nine (9) months after the company’s most recent appearance
on the
scrutinized
companies list.
(ii)
One hundred percent (100%) of such assets shall be removed from the public
fund’s
assets
under management within fifteen (15) months after the company’s most recent
appearance
on
the scrutinized companies list.
(2)
If a company that ceased scrutinized active business operations following
engagement
pursuant
to subsection (a)(3) resumes such operations, paragraph (1) shall immediately
apply, and
the
public fund shall send a written notice to the company. the company shall also
be immediately
reintroduced
onto the scrutinized companies list.
(c)
Prohibition:
At
no time shall the public fund acquire securities of companies on the
scrutinized
companies
list that have active business operations, except as provided below.
(d)
Exemption:
No
company which the United States government affirmatively declares to be
excluded
from
its present or any future federal sanctions regime relating to Sudan shall be
subject to
divestment
or investment prohibition pursuant to subsections (b) and (c).
(e)
Excluded Securities:
Notwithstanding
anything herein to the contrary, subsections (b) and (c) shall not apply to
indirect
holdings in actively managed investment funds. The public fund shall, however,
submit
letters
to the managers of such investment funds containing companies with scrutinized
active
business
operations requesting that they consider removing such companies from the fund
or
create
a similar actively managed fund with indirect holdings devoid of such
companies. If the
manager
creates a similar fund, the public fund shall replace all applicable investments
with
investments
in the similar fund in an expedited timeframe consistent with prudent investing
standards.
For the purposes of this section, “private equity” funds shall be deemed to be
actively
managed
investment funds.
Section
5. Reporting.—
(a)
The public fund shall file a publicly-available report to the Rhode Island
general
assembly
and office of the attorney general that includes the scrutinized companies list
within
thirty
(30) days after the list is created.
(b)
Annually thereafter, the public fund shall file a publicly-available report to
the Rhode
Island
general assembly and the office of the attorney general and send a copy of that
report to the
United
States Presidential Special Envoy to Sudan (or an appropriate designee or
successor) that
includes:
(1)
A summary of correspondence with companies engaged by the public fund under
subdivisions
4(a)(2) and (a)(3);
(2)
All investments sold, redeemed, divested, or withdrawn in compliance with
subsection
4(b);
(3)
All prohibited investments under subsection 4(c); and
(4)
Any progress made under subsection 4(e).
Section
6. Provisions for repeal of act. –
This
act shall be repealed upon affirmative action of the general assembly. Provided,
that
in
determining whether to repeal this act, by way of suggestion and guidance only
and without
binding
or in any way inhibiting the discretion of future sessions of the general
assembly, it is
submitted
that the occurrence of any of the following should be construed and deemed to
be a
basis
for repealing this act:
(a)
The Congress or President of the United States declares that the Darfur
genocide has
been
halted for at least twelve (12) months; or
(b)
The United States revokes all sanctions imposed against the government of
Sudan; or
(c)
The Congress or President of the United States declares that the government of
Sudan
has
honored its commitments to cease attacks on civilians, demobilize and demilitarize
the
Janjaweed
and associated militias, grant free and unfettered access for deliveries of
humanitarian
assistance,
and allow for the safe and voluntary return of refugees and internally
displaced
persons;
or
(d)
The Congress or President of the United States, through legislation or
executive order,
declares
that mandatory divestment of the type provided for in this act interferes with
the conduct
of
United States foreign policy; or
(e)
Such other circumstances as the general assembly determines to warrant the
discontinuance
of the provisions of this chapter.
Section
7. Other Legal Obligations. –
With
respect to actions taken in compliance 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
in respect to
choice
of asset managers, investment funds, or investments for the public fund’s
securities
portfolios.
Section
8. Reinvestment in Certain Companies with Scrutinized Active Business
Operations.
–
Notwithstanding
anything herein to the contrary, the public fund shall be permitted to
cease
divesting from certain scrutinized companies pursuant to subsection 4(b) and/or
reinvest in
certain
scrutinized companies from which it divested pursuant to subsection 4(b) if
clear and
convincing
evidence shows that the value for all assets under management by the public
fund
becomes
equal to or less than ninety-nine and one-half percent (99.50%) or fifty (50)
basis points
of
the hypothetical value of all assets under management by the public fund
assuming no
divestment
for any company had occurred under subsection 4(b). Cessation of divestment,
reinvestment,
and/or any subsequent ongoing investment authorized by this section shall be
strictly
limited to the minimum steps necessary to avoid the contingency set forth in
the preceding
sentence.
For any cessation of divestment, reinvestment, and/or subsequent ongoing
investment
authorized
by this section, the public fund shall provide a written report to the Rhode
Island
general
assembly and the office of the attorney general in advance of initial reinvestment,
updated
semi-annually
thereafter as applicable, setting forth the reasons and justification,
supported by
clear
and convincing evidence, for its decisions to cease divestment, reinvest,
and/or remain
invested
in companies with scrutinized active business operations. This section has no
application
to
reinvestment in companies on the ground that they have ceased to have
scrutinized active
business
operations.
Section
9. Enforcement. –
The
attorney general is charged with enforcing the provisions of this act and,
through any
lawful
designee, may bring such actions in court as are necessary to do so.
Section
10. Severability. –
If
any one or more provision, section, subsection, sentence, clause, phrase, or
word of this
legislation
or the application thereof to any person or circumstance is found to be
invalid, illegal,
unenforceable
or unconstitutional, the same is hereby declared to be severable and the
balance of
this
legislation shall remain effective and functional notwithstanding such
invalidity, illegality,
unenforceability
or unconstitutionality. The Rhode Island general assembly hereby declares that
it
would have passed this legislation, and each provision, section, subsection,
sentence, clause,
phrase
or word thereof, irrespective of the fact that any one or more provision,
section,
subsection,
sentence, clause, phrase, or word be declared invalid, illegal, unenforceable
or
unconstitutional,
including, but not limited to, each of the engagement, divestment, and
prohibition
provisions of this legislation.
SECTION
11. This act shall take effect upon passage.
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LC00370
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