Chapter 225
2013 -- H 5620 SUBSTITUTE A AS
AMENDED
Enacted 07/11/13
A N A C T
RELATING TO
PUBLIC FINANCE
Introduced By: Representatives Ackerman, Blazejewski, Ferri, Silva, and Tanzi
Date Introduced: February 27, 2013
It is enacted by the
General Assembly as follows:
SECTION 1. Title 35 of the General Laws entitled
"PUBLIC FINANCE" is hereby
amended by adding thereto the following chapter:
CHAPTER
10.3
DIVESTITURE
OF INVESTMENTS IN
35-10.3-1.
Legislative findings. -- It is hereby found by
the general assembly as follows:
(1) The United States
Department of State has determined that
international terrorism; and
(2) A resolution of
the United Nations Security Council imposes sanctions on
failure to suspend its uranium-enrichment activities; and
(3) The United
Nations Security Council voted unanimously 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
and institutions to bar new grants or loans to
purposes; and
(4) All United States
and foreign entities that have invested more than twenty million
dollars ($20,000,000) in
(5) The
2006; and
(6) The
Accountability, and Divestment Act of 2010, in light of diplomatic
efforts to address
nuclear efforts, unconventional and ballistic missile
development programs, and support for
international terrorism are more likely to be effective if the
president is empowered with explicit
authority to impose additional sanctions on the government of
States have feelings of friendship for the people of
decades have created impediments to that friendship; and
additional funding should be provided
to the secretary of state to document and disseminate
information about human rights abuses in
Furthermore, the law authorizes state and local
governments to divest public assets from, or
prohibit public investment in, certain investment activities
in
(7) It is a
fundamental responsibility of the state of
and by whom financial resources in its control should be
invested, taking into account numerous
pertinent factors; and
(8) It is the
judgment of the
effect only insofar as it continues to be consistent with,
and does not unduly interfere with, the
foreign policy of the
(9) While the Rhode
Island general assembly is sensitive to the welfare of the people of
Iran, divestiture may improve the human condition,
safety, and security of those currently living
in
rights to its people; and,
(10) It is the
judgment of this
of public funds from certain companies is a measure that
should be employed sparingly and
judiciously, and with the hope that these peaceful sanctions will
prevent the Iranian regime from
obtaining nuclear weapons and continuing the spread of terror.
35-10.3-2.
Definitions. -- As used in this chapter, the
following definitions shall apply:
(1) "Active
business operations" means all business operations that are not inactive
business operations.
(2) "Business
operations" means engaging in commerce in any form in
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.
(3)
"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 exist for profit-making purposes.
(4) "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.
(5) "
territory or marine area, including the exclusive economic zone
and continental shelf, over which
the government of
government of
economic activity in the area pursuant to international
arrangements.
(6) "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.
(7) "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 chapter.
(8) "Public
fund" means
commission in charge of the
(9) "Scrutinized
business operations" means any and all active business operations that
are subject or liable to sanctions under Public Law
104-172, as amended, the "
of 1996", and that involve the maintenance of a
company's existing assets or investments in
or the deployment of new investments to
($20,000,000) threshold referred to in Public Law
104-172, as amended, the "
of 1996". "Scrutinized operations" does
not include the retail sale of gasoline and related
products.
(10) “Scrutinized
company” means any company engaging in scrutinized business
operations.
(11)
"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
35-10.3-3.
Identification of companies. -- (a) Within ninety (90) days following the
effective date of this chapter, 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
information provided by nonprofit 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
(3) Contacting other
institutional investors that have divested from and/or engaged with
companies that have business operations in
(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 an annual basis based
on evolving information from, among other sources, those
listed in subsection (a).
35-10.3-4. Required actions. -- The public fund shall adhere
to the following procedures
for companies on the scrutinized companies list:
(1) Engagement:
(i)
The public fund shall immediately determine the companies on the scrutinized
companies list in which the public fund owns direct or indirect
holdings.
(ii) For each company
identified in paragraph (1)(i)
with only inactive business
operations, the public fund shall send a written notice
informing the company of this chapter and
encouraging it to continue to refrain from initiating active
business operations in
able to avoid scrutinized business operations. The public
fund shall continue such correspondence
on a semi-annual basis.
(iii) For each
company newly identified in paragraph (1)(i) 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
Iran-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.
(iv)
If, within ninety (90) days following the public fund's first
engagement with a
company pursuant to paragraph (1)(iii), 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.
(2) Divestment:
(i)
If, after ninety (90) days following the public fund's first engagement with a
company
pursuant to paragraph (1)(iii) of this section, 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:
(A) 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.
(B) 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.
(ii) If a company
that ceased scrutinized active business operations following engagement
pursuant to paragraph (1)(iii) of this section resumes such
operations, paragraph (2)(i) 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.
(3) 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.
(4) Exemption:
No company which the
from its present or any future federal sanctions regime
relating to
divestment or investment prohibition pursuant to subdivisions
(2) and (3), nor any company
which is primarily engaged in supplying goods or services
intended to relieve human suffering in
Iran or that is primarily engaged in promoting health,
education, or journalistic, religious, or
welfare activities in
(5) Excluded
Securities:
Notwithstanding
anything herein to the contrary, subdivisions (2) and (3) 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.
35-10.3-5. Required actions--Reporting. -- (a) The public fund shall file a publicly
available report to the
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
includes:
(1) A summary of correspondence
with companies engaged by the public fund under
paragraphs 35-10.3-4(1)(ii) and 35-10.3-4(1)(iii);
(2) All investments
sold, redeemed, divested, or withdrawn in compliance with
subdivision 35-10.3-4(2);
(3) All prohibited
investments under subdivision 35-10.3-4(3); and
(4) Any progress made
under subdivision 35-10.3-4(5).
35-10.3-6.
Provisions for repeal of chapter. -- This chapter shall be repealed
upon
affirmative action of the general assembly. Provided, that in determining
whether to repeal this
chapter, 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 chapter:
(1)
have been determined to repeatedly provide support for
acts of international terrorism; or
(2) The President of
the
similar to this section interferes with the conduct of
35-10.3-7. Other legal obligations. -- With respect to
actions taken in compliance with
this chapter, including all good faith determinations
regarding companies as required by this
chapter, 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.
35-10.3-8.
Reinvestment in certain companies with scrutinized active business
operations. -- (a)
Notwithstanding anything herein to the contrary, the
public fund shall be
permitted to cease divesting from certain scrutinized companies
pursuant to section 35-10.3-4
and/or reinvest in certain scrutinized companies from which
it divested pursuant to section 35-
10.3-4 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
subdivision 35-10.3-4(2).
(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 subsection (a). 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
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.
(c) This section has
no application to reinvestment in companies on the ground that they
have ceased to be a scrutinized company engaged in active business
operations.
35-10.3-9.
Enforcement. -- The attorney general is charged
with enforcing the provisions
of this chapter and, through any lawful designee, may
bring such actions in court as are necessary
to do so.
35-10.3-10.
Severability. -- If any one or more provision,
section, subsection, sentence,
clause, phrase, or word of this chapter 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 chapter shall remain
effective and functional notwithstanding
such invalidity, illegality, unenforceability or
unconstitutionality. The
assembly hereby declares that it would have passed this
chapter, 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 chapter.
SECTION 2. Title 37 of the General Laws entitled
"PUBLIC PROPERTY AND
WORKS" is hereby amended
by adding thereto the following chapter:
CHAPTER
2.5
PROHIBITION
ON CONTRACTING WITH
37-2.5-1.
Legislative findings. -- It is hereby found by
the general assembly as follows:
(1) In imposing
sanctions on
United States have determined that the illicit nuclear
activities of Iran, combined with its
development of unconventional weapons and ballistic missiles, and
its support of international
terrorism, represent a serious threat to the security of the
world.
(2) The International
Atomic Energy Agency has repeatedly called attention to
unlawful nuclear activities, and as a result, the United
Nations Security Council has adopted four
(4) rounds of sanctions
designed to compel the government of
comply with its obligations under the Treaty on the
Non-Proliferation of Nuclear Weapons,
commonly known as the Nuclear Non-Proliferation Treaty.
(3) The human rights
situation in
elections of 2009, as evidenced by the brutal repression,
torture, murder and arbitrary detention of
peaceful protestors, dissidents and minorities.
(4) On July 1, 2010,
President Obama signed into law the Comprehensive
Accountability, and Divestment Act of 2010, which
expressly authorizes state and local
governments to prevent investment in, including prohibiting entry
into or renewing contracts
with, companies operating in
business in
(5) It is the
intention of the general assembly to implement this authority granted under
Section 202 of the Comprehensive
(6) There are moral
and reputational reasons for state and local governments to not
engage in business with foreign companies that have business
activities benefiting foreign states,
such as
of human rights.
(7) Short-term
economic profits cannot be a justification to circumvent even in spirit
those international sanctions designed to thwart
(8) The concerns of
this general assembly regarding
actions of the government of
people.
37-2.5-2.
Definitions. -- (a) As
used in this act, the following definitions shall apply:
(1) "Energy
sector" of
transfer, purchase or sell petroleum, gasoline, or other
refined petroleum products, or natural gas,
liquefied natural gas resources or nuclear power in
(2) "Financial
institution" means the term as used in Section 14 of the
of 1996, Section 14 of Pub.L.104-172 (50 U.S.C. 1701
note), as amended.
(3) "
territory or marine area, including the exclusive economic zone
and continental shelf, over which
the government of
government of
economic activity in the area pursuant to international
arrangements.
(4) "Person or
entity" means any of the following:
(i)
A natural person, corporation, company, limited partnership, limited liability
partnership, limited liability company, business association,
sole proprietorship, joint venture,
partnership, society, trust, or any other nongovernmental entity,
organization, or group;
(ii) Any governmental
entity or instrumentality of a government, including a multilateral
development institution, as defined in Section 1701(c)(3) of the
International Financial
Institutions Act, 22 U.S.C. 262r(c)(3),
as amended; or
(iii) Any parent,
successor, subunit, direct or indirect subsidiary, or any entity under
common ownership or control with, any entity described in
paragraph (i) or (ii).
(5) "State"
means the state of
public agencies, including, but not limited to, any
commission, council, board, bureau,
committee, institution, or other governmental entity of the
executive or judicial branch of this
state and the general assembly and any office, board,
bureau or commission within or created by
the legislative branch.
(6)
"Treasurer" means the general treasurer or the department of
treasury.
(b) For the purposes
of this act, a person engages in investment activities in
(1) The person
provides goods or services of twenty million dollars ($20,000,000) or
more in the energy sector of
tankers, or products used to construct or maintain pipelines
used to transport oil or liquefied
natural gas, for the energy sector of
(2) The person is a
financial institution that extends twenty million dollars ($20,000,000)
or more in credit to another person, for forty five (45)
days or more, if that person will use the
credit to provide goods or services in the energy sector in
pursuant to subsection 37-2.5-3(b) as a person engaging in
investment activities in
described in subsection 37-2.5-3(a).
(c) The treasurer
shall adopt regulations that reduce the amounts provided for in this
subsection if the treasurer determines that such change is
permitted or required under Section 202
of the Comprehensive
37-2.5-3. Certain persons, entities prohibited from bidding on certain
public
contracts, maintenance of list. -- (a) A person or entity that, at the time of bid or
proposal for a
new contract or renewal of an existing contract, is
identified on a list created pursuant to
subsection (b) as a person or entity engaging in investment
activities in
subsection 37-2.5-2(b), shall be ineligible to, and shall not,
bid on, submit a proposal for, or enter
into or renew, a contract with the state for goods or
services.
(b) Within ninety
(90) days of the effective date of this act, the treasurer shall, using
credible information available to the public, develop a list
of persons or entities it determines
engage in investment activities in
(c) The treasurer
shall update the list annually.
(d) Before finalizing
an initial list pursuant to subsection (b) or an updated list pursuant to
subsection (c) of this section, the treasurer shall do the
following before a person or entity is
included on the list:
(1) Provide ninety
(90) days written notice of its intent to include the person or entity on
the list. The notice shall inform the person or entity
that inclusion on the list would make the
person or entity ineligible to bid on, submit a proposal
for, or enter into or renew, a contract for
goods or services with the state; and
(2) Provide a person
or entity with an opportunity to comment in writing that it is not
engaged in investment activities in
the person or entity is not engaged in investment
activities in
2.5-2(b), the person or entity shall not be included
on the list, unless the person or entity is
otherwise ineligible to bid on a contract as described in
subdivision 37-2.5-5(a)(3).
(3) The treasurer
shall make every effort to avoid erroneously including a person or entity
on the list.
37-2.5-4.
Certification required. -- (a) The state
shall require a person or entity that
submits a bid or proposal or otherwise proposes to enter into
or renew a contract to certify, at the
time the bid is submitted or the contract is renewed, that
the person or entity is not identified on a
list created pursuant to subsection 37-2.5-3(b) as a
person or entity engaging in investment
activities in
(b) The certification
required shall be executed on behalf of the applicable person or
entity, by an authorized officer or representative of the
person or entity.
(c) In the event that
a person or entity is unable to make the certification required because
it or one of its parents, subsidiaries, or affiliates,
as defined in subdivision 37-2.5-2(a)(4), has
engaged in one or more of the activities specified in
subsection 37-2.5-2(b), the person or entity
shall provide to the state, prior to the deadline for delivery
of such certification, a detailed and
precise description of such activities, such description to
be provided under penalty of perjury.
(d) The
certifications provided under subsection (a) of this section and disclosures
provided under subsection (c) of this section shall be
disclosed to the public.
37-2.5-5. False certification; Penalties. -- (a) If the
treasurer determines, using credible
information available to the public and after providing ninety
(90) days written notice and an
opportunity to comment in writing for the person or entity to
demonstrate that it is not engaged in
investment activities in
to section 37-2.5-4, and the person or entity fails to
demonstrate to the treasurer that the person or
entity has ceased its engagement in the investment
activities in
the determination of a false certification, the following
shall apply:
(1) Pursuant to an
action under subsection (b) of this section, a civil penalty in an amount
that is equal to the greater of one million dollars
($1,000,000) or twice the amount of the contract
for which the false certification was made;
(2) Termination of an
existing contract with the state as deemed appropriate by the state;
and
(3) Ineligibility to
bid on a contract for a period of three (3) years from the date of the
determination that the person or entity submitted the false
certification.
(b) The treasurer
shall report to the attorney general the name of the person or entity that
the state determines has submitted a false certification
under section 37-2.5-4, together with its
information as to the false certification, and the attorney
general shall determine whether to bring
a civil action against the person or entity to collect
the penalty described in subdivision (a)(1).
Only one civil action against the person or entity to
collect the penalty described in subdivision
(a)(1) may be brought for a
false certification on a contract. A civil action to collect such penalty
shall commence within three (3) years from the date the
certification is made.
37-2.5-6. Written notice to Attorney General. -- The governor
shall submit to the
attorney general of the
after its effective date.
SECTION
3. Section 1 of this act shall take effect upon passage and it shall
expire on
July 1, 2018. Section 2 of the act shall take effect
upon passage, but shall apply to contracts
awarded or renewed commencing thirty (30) days after the
effective date of this act
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LC01156/SUB A/2
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