BILL NUMBER: AB 2337 INTRODUCED
BILL TEXT
INTRODUCED BY Assembly Member Ammiano
FEBRUARY 19, 2010
An act to add Section 7513.75 to the Government Code, relating to
investments.
LEGISLATIVE COUNSEL'S DIGEST
AB 2337, as introduced, Ammiano. Public retirement system:
investments: predatory investment practices.
The California Constitution provides that the Legislature may by
statute prohibit retirement board investments if it is in the public
interest to do so, and providing that the prohibition satisfies
specified fiduciary standards.
Existing law prohibits the Public Employees' Retirement System and
the State Teachers' Retirement System from investing public employee
retirement funds in a company with active business operations in
Sudan and Iran, as specified. Existing law also requires these
retirement systems to sell or transfer any investments in a company
with business operations in Sudan. Existing law requires these
retirement systems to submit an annual report to the Legislature
regarding any investments in a company with business operations in
Sudan and the sale or transfer of those investments. Existing law
requires the state to indemnify, from the General Fund, and hold
harmless the present, former, and future board members, officers, and
employees of, and investment managers under contract with, these
retirement systems by reason of any decision to restrict, reduce, or
eliminate investments in Sudan, as specified.
This bill would additionally prohibit the Public Employees'
Retirement System and the State Teachers' Retirement System from
investing public employee retirement funds in a company with business
operations engaged in predatory investment practices that rely on,
or result in, the displacement of persons residing in rent-regulated
housing in order to generate profits to investors. The bill would
require the Board of Administration of the Public Employees'
Retirement System and the Teachers' Retirement Board of the State
Teachers' Retirement System to sell or transfer any investments in a
company with business operations engaged in predatory investment
practices, as specified. This bill would make related legislative
findings and declarations.
This bill would require these boards to report to the Legislature
any investments in a company with specified business operations
engaged in predatory investment practices and the sale or transfer of
those investments, subject to the fiduciary duty of these boards, by
January 1, 2012, and every year thereafter.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. (a) The Legislature finds and declares that investments
by public retirement boards in companies that engage in predatory
investment practices, which rely on, or result in, the displacement
of persons residing in rent-regulated housing in order to generate
profits to investors, are not only harmful to the persons displaced
by these practices but also to the entire community in which those
persons reside.
(b) The Legislature further finds and declares that it is in the
public's interest to enact legislation to prohibit the investment of
retirement funds in companies engaged in, or investing in companies
engaged in, predatory investment practices that result in excessive
rent increases imposed upon, or the eviction or displacement of,
persons residing in rent-regulated housing.
SEC. 2. Section 7513.75 is added to the Government Code, to read:
7513.75. (a) As used in this section, the following definitions
shall apply:
(1) "Board" means the Board of Administration of the Public
Employees' Retirement System or the Teachers' Retirement Board of the
State Teachers' Retirement System, as applicable.
(2) "Company" means a sole proprietorship, organization,
association, corporation, partnership, venture, or other entity, its
subsidiary or affiliate that exists for profitmaking purposes or to
otherwise secure economic advantage.
(3) "Invest" or "investment" means the purchase, ownership, or
control of stock of a company, association, or corporation, the
capital stock of a mutual water company or corporation, corporate
bonds or other debt instruments issued by a company, or the
commitment of funds or other assets to a company, including a loan or
extension of credit to that company.
(4) "Predatory investment practices" means investments that rely
on, or result in, the displacement of persons residing in
rent-regulated housing in order to generate profits to investors.
(5) "Public employee retirement funds" means the Public Employees'
Retirement Fund described in Section 20062 of this code, and the
Teachers' Retirement Fund described in Section 22167 of the Education
Code.
(6) "Substantial action" means curtailing business operations with
a company that engages in predatory investment practices.
(b) The board shall not invest public employee retirement funds
in a company that engages in predatory investment practices as
identified by the board through, as the board deems appropriate,
publicly available information including, but not limited to,
information provided by nonprofit and other organizations and
government entities, meets any of the following criteria:
(1) The company invested in, or is engaged in business operations
with, entities engaged in investment or lending practices that
resulted in excessive rent increases imposed on, or the eviction or
displacement of, persons residing in rent-regulated housing.
(2) The company has demonstrated complicity with business
operations that are engaged in investment or lending practices that
resulted in excessive rent increases imposed on, or the eviction or
displacement of, persons residing in rent-regulated housing.
(c) On or before June 30, 2011, the board shall determine which
companies are subject to divestment.
(d) After the determination described in subdivision (c), the
board shall determine, by the next applicable board meeting, if a
company engages in predatory investment practices as described in
subdivision (b). If the board plans to invest or has investments in a
company that meets the criteria described in subdivision (b), that
planned or existing investment shall be subject to subdivisions (g)
and (h).
(e) Investments of the board in a company that does not meet the
criteria described in subdivision (b) are not subject to subdivision
(h) if the company does not subsequently meet the criteria described
in subdivision (b). The board shall identify the reasons why that
company does not satisfy the criteria described in subdivision (b) in
the report to the Legislature described in subdivision (i).
(f) (1) Notwithstanding subdivisions (d) and (e), if the board's
investment in a company described in subdivision (b) is limited to
investment via an externally and actively managed commingled fund,
the board shall contact that fund manager in writing and request that
the fund manager remove that company from the fund. On or before
June 30, 2011, if the fund or account manager creates a fund or
account devoid of companies described in subdivision (b), the
transfer of board investments from the prior fund or account to the
fund or account devoid of companies that engage in predatory
investment practices shall be deemed to satisfy subdivision (h).
(2) If the board's investment in a company described in
subdivision (b) is limited to an alternative fund or account, the
alternative fund or account manager creates an actively managed
commingled fund that excludes companies described in subdivision (b),
and the new fund or account is deemed to be financially equivalent
to the existing fund or account, the transfer of board investments
from the existing fund or account to the new fund or account shall be
deemed to satisfy subdivision (h). If the board determines that the
new fund or account is not financially equivalent to the existing
fund, the board shall include the reasons for that determination in
the report described in subdivision (i).
(3) The board shall make a good faith effort to identify any
private equity investments that involve companies described in
subdivision (b). If the board determines that a private equity
investment clearly involves a company described in subdivision (b),
the board shall consider, at its discretion, if those private equity
investments shall be subject to subdivision (h). If the board
determines that a private equity investment clearly involves a
company described in subdivision (b), and the board does not take
action as described in subdivision (h), the board shall include the
reasons for its decision in the report described in subdivision (i).
(g) Except as described in subdivisions (e) and (f), the board, in
the board's capacity of shareholder or investor, shall notify any
company described in subdivision (d) that the company is subject to
subdivision (h) and permit that company to respond to the board. The
board shall request that the company take substantial action, no
later than 90 days from the date the board notified the company under
this subdivision. If the board determines that a company has taken
substantial action or has made sufficient progress towards
substantial action before the expiration of that 90-day period, that
company shall not be subject to subdivision (h). The board shall, at
intervals not to exceed 90 days, continue to monitor and review the
progress of the company until that company has taken substantial
action. A company that fails to complete substantial action within
one year from the date of the initial notice by the board shall be
subject to subdivision (h).
(h) If a company described in subdivision (d) fails to complete
substantial action by the time described in subdivision (g), the
board shall take the following actions:
(1) The board shall not make additional or new investments or
renew existing investments in that company.
(2) The board shall liquidate the investments of the board in that
company no later than 18 months after this subdivision applies to
that company. The board shall liquidate those investments in a manner
to address the need for companies to take substantial action and
consistent with the board's fiduciary responsibilities as described
in Section 17 of Article XVI of the California Constitution.
(i) On or before January 1, 2012, and every year thereafter, the
board shall file a report with the Legislature. The report shall
describe the following:
(1) A list of investments the board has in companies with business
operations that satisfy the criteria in subdivision (b), including,
but not limited to, the issuer, by name, of the stock, bonds,
securities, and other evidence of indebtedness.
(2) A detailed summary of the business operations a company
described in paragraph (1).
(3) Whether the board has reduced its investments in a company
that satisfies the criteria in subdivision (b).
(4) If the board has not completely reduced its investments in a
company that satisfies the criteria in subdivision (b), when the
board anticipates that the board will reduce all investments in that
company or the reasons why a sale or transfer of investments is
inconsistent with the fiduciary responsibilities of the board as
described in Section 17 of Article XVI of the California
Constitution.
(5) Any information described in subdivisions (d) and (e).
(6) A detailed summary of investments that were transferred to
funds or accounts devoid of companies with business operations that
involve predatory investment practices as described in subdivision
(f).
(7) An annual calculation of any costs or investment losses or
other financial results incurred in compliance with the provisions of
this section.
(j) If the board voluntarily sells or transfers all of its
investments in a company engaged in predatory investment practices,
this section shall not apply except that the board shall file a
report with the Legislature related to that company as described in
subdivision (i).
(k) Nothing in this section shall require the board to take action
as described in this section unless the board determines, in good
faith, that the action described in this section is consistent with
the fiduciary responsibilities of the board as described in Section
17 of Article XVI of the California Constitution.