BILL NUMBER: AB 1151	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  MARCH 30, 2011

INTRODUCED BY   Assembly Member Feuer

                        FEBRUARY 18, 2011

   An act to amend Section 7513.7 of the Government Code, relating to
investments.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 1151, as amended, Feuer. Public retirement systems:
investments: Iran.
   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.
   The California Public Divest from Iran Act prohibits the Public
Employees' Retirement System  (PERS)  and the State Teachers'
Retirement System  (STRS)  from investing public employee
retirement funds in a company with business operations in Iran that
is invested in or engaged in business operations with entities in the
defense or nuclear sectors of Iran, or the company is invested or
engaged in business operations with entities involved in the
development of petroleum or natural gas resources of Iran, and that
company is subject to sanctions under federal law, as specified, or
the company is engaged in business operations with an Iranian
organization that has been labeled as a terrorist organization by the
United States government. Existing law requires the Board of
Administration of  the Public Employees' Retirement System
  PERS  and the Teachers' Retirement Board of
 the State Teachers' Retirement System   STRS
 to sell or transfer any investments in a company with business
operations in Iran, until Iran is removed from the United States
Department of State's list of countries that have been determined to
repeatedly provide support for acts of international terrorism and
the President of the United States determines and certifies that Iran
has ceased its efforts to design, develop, manufacture, or acquire a
nuclear explosive device or related materials and technology, as
specified.  Existing law requires the boards of PERS and STRS, on
or before June 30, 2008, to determine the companies that are subject
to divestment and to notify those companies and request that those
companies take substantial action to curtail or end business
operations, as described above, in Iran. Existing law provides that
the board is not required to divest if the board determines that the
company has taken substantial action in a 90-day period to curtail or
end those operations. Existing law excepts certain investments from
these requirements, including those in companies providing
humanitarian relief and promoting health, education, journalistic,
  religious, or welfare activities. 
   Existing law provides that nothing in those provisions requires
the Board of Administration of  the Public Employees'
Retirement System   PERS  or the Teachers'
Retirement Board of  the State Teachers' Retirement System
  STRS  to take action as described in those
provisions unless the board determines, in good faith  and based
on specified information  , that the action is consistent with
the fiduciary responsibilities of the board as described in a
specified provision of the California Constitution. 
   This bill would instead provide that nothing in those provisions
requires either board to take action described in this section if the
board determines, in good faith, that the action would be a breach
of the fiduciary responsibilities of the board as described in the
provision of the California Constitution. The bill would require that
any determination that an action would be a breach of fiduciary duty
be made in a public hearing of the full board after proper public
notice and an opportunity for public comment.  
   This bill would provide that the boards shall not invest in a
company that has an investment of $20,000,000 or more in the energy
sector of Iran, including in a company that provides oil or liquefied
natural gas tankers, or products used to construct or maintain
pipelines used to transport oil or liquefied natural gas. The bill
would require the boards to review their investments annually and
would require that the boards' determinations that a company is
taking substantial actions to end or curtail its operations, as
described above, be supported by findings adopted by a rollcall vote
of the boards following a presentation and discussion of the findings
in open session, during a properly noticed public hearing of the
full board. The bill would require all proposed findings to be made
public 72 hours before they are considered by the board, and that the
board maintain a list of interested parties to be notified of
proposed findings 72 hours before the board's consideration. The bill
would require the findings and any public comments regarding the
adopted findings and determinations to be included in a report to the
Legislature. The bill would make the same notice, rollcall vote, and
public hearing requirements for adopted findings and determinations
of the boards regarding divestments that are found to disadvantage
the retirement funds. The bill would eliminate the exception provided
for investments in certain companies providing humanitarian relief
and promoting health, education, journalistic, religious, or welfare
activities. The bill would make findings regarding the California
Public Divest from Iran Act and would provide that its provisions are
severable. 
   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.    The Legislature finds and declares that
Section 7513.7 of the Government Code, known as the California
Public Divest from Iran Act, is consistent with the authority to
divest granted to state and local governments by, and is in
accordance with, the provisions of Public Law 111-195, enacted July
1, 2010. 
   SECTION 1.   SEC. 2.   Section 7513.7 of
the Government Code is amended to read:
   7513.7.  (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) "Business operations" means maintaining, selling, or leasing
equipment, facilities, personnel, or any other apparatus of business
or commerce in Iran, including the ownership or possession of real or
personal property located in Iran.
   (3) "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. "Company" also means a company
owned or controlled, either directly or indirectly, by the government
of Iran, that is established or organized under the laws of or has
its principal place of business in the Islamic Republic of Iran.

   (4) "Government of Iran" means the government of Iran or its
instrumentalities or political subdivisions. "Government of Iran"
also means an individual, company, or public agency located in Iran
that provides material or financial support to the Islamic Republic
of Iran.  
   (4) "Energy sector of Iran" means activities to develop petroleum
or natural gas resources or nuclear power in Iran. 
   (5) "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, bonds issued
by the government or a political subdivision of Iran, 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.
   (6) "Iran" means the  Islamic Republic of Iran or a
territory under the administration or control of Iran.  
government of Iran and any agency or   instrumentality of
Iran.  
   (7) "Military equipment" means weapons, arms, or military defense
supplies.  
   (8) 
    (7)  "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. 
   (9) 
    (8)  "Substantial action" means a boycott of the
government of Iran, curtailing business in Iran until that time
described in subdivision (m), or selling company assets, equipment,
or real and personal property located in Iran.
   (b) The board shall not invest public employee retirement funds in
a company which has business operations in Iran 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, that meets
either of the following criteria:
   (1) The company (A) is invested in or engaged in business
operations with entities in the defense or nuclear sectors of Iran
 or (B) is invested in or engaged in business operations with
entities involved in the development of petroleum or natural gas
resources   or (B) has an investment of twenty million
dollars ($20,000,000) or more in the energy sector of Iran, including
in a company that provides oil or liquefied natural gas tankers, or
products used to construct or maintain pipelines used to transport
oil or liquefied natural gas, for the energy sector  of Iran,
and that company is subject to sanctions under Public Law 104-172, as
renewed and amended in 2001 and 2006.
   (2) The company has demonstrated complicity with an Iranian
organization that has been labeled as a terrorist organization by the
United States government.
   (c)  On or before June 30, 2008   Annually,
on or before June 30  , the board shall  review its
investment portfolio and  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 meets the criteria 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 as described in
subdivision (h). On or before June 30,  2008,  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 with business operations in Iran 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), or are linked to the government of Iran. If the
board determines that a private equity investment clearly involves a
company described in subdivision (b), or is linked to the government
of Iran, 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), or is linked to the
government of Iran 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  bas   ed on
credible   information available to the public  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 in Iran.  Any determination made at each
90-day interval that a company has taken substantial action shall be
supported by findings adopted by a rollcall vote of the board
following a presentation and discussion of the findings in open
session, during a properly noticed public hearing of the full board.
All proposed findings of the board shall be made public 72 hours
before they are considered by the board, and the board shall maintain
a list of interested parties who shall be notified of proposed
findings 72   hours before the board's consideration. The
findings and any public comments regarding the adopted findings and
determinations made pursuant to this subdivision shall be included in
the report to the Legislature required by subdivision (i).  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 in Iran
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, 2009, 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) has in Iran.
   (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   findings adopted in
support of a determination made pursuant to subdivision (k)
pertaining to  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 in
Iran 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 with business operations in Iran, 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 if the board determines,  and
adopts findings,  in good faith  and based on credible
information available to the public  , that the action described
in this section would be a breach of the fiduciary responsibilities
of the board as described in Section 17 of Article XVI of the
California  Constitution. Any determination that an action
would be a breach of fiduciary duty shall be made in a public hearing
of the full board after proper public notice and an opportunity for
public comment.  
   (l) Subdivision (h) shall not apply to any of the following:
 
   (1) Investments in a company that is primarily engaged in
supplying goods or services intended to relieve human suffering in
Iran.  
   (2) Investments in a company that promotes health, education, or
journalistic, religious, or welfare activities in Iran. 
    (3)     Investments in
a United States company that is authorized by the federal government
to have business operations in Iran.   Constitution. Any
adopted findings shall demonstrate how divestment disadvantages the
fund and that any feasible investment alternatives would yield a
lower rate of return with commensurate degrees of risk, or create a
higher degree of risk with commensurate rates of return. Any
determination that an action would be a breach of fiduciary duty
shall require a recorded rollcall vote of the full board, following a
presentation and discussion of findings in open session, during a
properly noticed public hearing of the full board. All proposed
findings of the board shall be made public 72   hours before
they are considered by the board, and the board shall maintain a
list of interested parties who shall be notified of proposed findings
72 hours before board consideration. The findings and any public
comments regarding the adopted findings and determinations made
pursuant to this subdivision shall be included in the report to the
Legislature required by subdivision (i).  
   (m) 
    (l   )  This section shall cease to be
operative if both of the following apply:
   (1) Iran is removed from the United States Department of State's
list of countries that have been determined to repeatedly provide
support for acts of international terrorism.
   (2) Pursuant to Public Law 104-172, as amended, the President of
the United States determines and certifies to the appropriate
committee of the Congress of the United States that Iran has ceased
its efforts to design, develop, manufacture, or acquire a nuclear
explosive device or related materials and technology. 
   (n) 
    (m)  This section shall be known and may be cited as the
California Public Divest from Iran Act. 
   (n) The provisions of this section are severable. If any provision
of this section or its application is held invalid, that invalidity
shall not affect other provisions or applications that can be given
effect without the invalid provision or application.