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Iran Divesture Legislation (S.B. 1621)
On June 14, 2007, S.B. 1621 passed both houses of the Illinois Legislature with strong support. The Governor signed the bill into law on September 11, 2007 (Public Act 95-0616).
This legislation differs significantly from previously passed Sudan legislation, especially with regard to its impact on the pension funds’ private equity investments which we believe will be minimal.
For private equity purposes, the legislation applies only to the 5 state pension plans (State Employees’ Retirement System of Illinois, the Judges Retirement System of Illinois, the General Assembly Retirement System, The State Universities Retirement System, and the Teachers’ Retirement System of Illinois) and duty to comply with its requirements rests with the plans. Private equity is encouraged not to have pension fund investments in “scrutinized entities” but is exempted from the divestment provisions by the following provision:
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(g) Notwithstanding the provisions of this Section, | |
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paragraphs (d) and (e) do not apply to indirect holdings in a | |
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private market fund. However, the retirement system shall | |
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submit letters to the managers of those investment funds | |
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containing companies that have scrutinized active business | |
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operations requesting that they consider removing the | |
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companies from the fund or create a similar actively managed | |
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fund having indirect holdings devoid of the companies. If the | |
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manager creates a similar fund, the retirement system shall | |
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replace all applicable investments with investments in the | |
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similar fund in an expedited timeframe consistent with prudent | |
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investing standards. |
Scrutinized companies are defined as “…companies with business operations that involve contracts with or provisions of supplies or services to the government of Iran, companies in which the government of Iran has any direct or indirect equity share, consortiums or projects commissioned by the government of Iran, or companies involved in consortiums or projects commissioned by the government of Iran…” combined with the amount of business such companies (revenue/asset test) have related to oil-related or mineral-extraction activities in Iran or the level of annual investment in businesses that enhance “Iran’s ability to develop petroleum resources of Iran.”
To view the legislation, click here.