SB-0846, As Passed Senate, January 17, 2008
SENATE BILL NO. 846
A bill to prohibit the investment of certain state money or
other assets in companies with certain types of business operations
in countries designated as state sponsors of terror; to require
divestment of any current investments in those companies; and to
provide for the powers and duties of certain state and local
governmental officers and entities.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 1. This act shall be known and may be cited as the
"divestment from terror act".
Sec. 2. As used in this act:
(a) "Active business operations" means all business operations
that are not inactive business operations. Active business
operations do not include the activities of any business, legal, or
governmental entity or institution that provides humanitarian aid
to the people of any state sponsors of terror.
(b) "Business operations" means engaging in commerce in any
form with a state sponsor of terror, 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 those entities or business
associations, that exists for profit-making purposes.
(d) "Direct holdings" in a company means all securities of
that company held directly by the fiduciary or in an account or
fund in which the fiduciary owns all shares or interests.
(e) "Fiduciary" means any of the following:
(i) The Michigan legislative retirement system board of
trustees for the Tier 1 retirement plan available under the
Michigan legislative retirement system act, 1957 PA 261, MCL
38.1001 to 38.1080.
(ii) The state treasurer for all of the following:
(A) The state police retirement system created under the state
police retirement act of 1986, 1986 PA 182, MCL 38.1601 to 38.1648.
(B) The Tier 1 retirement plan available under the judges
retirement act of 1992, 1992 PA 234, MCL 38.2101 to 38.2670.
(C) The Tier 1 retirement plan available under the state
employees retirement act, 1943 PA 240, MCL 38.1 to 38.69.
(D) The public school employees retirement system created
under the public school employees retirement act of 1979, 1980 PA
300, MCL 38.1301 to 38.1408.
(iii) The state treasurer in connection with his or her duties
under any of the following:
(A) 1946 (1st Ex Sess) PA 9, MCL 35.602 to 35.610.
(B) 1855 PA 105, MCL 21.141 to 21.147.
(C) Section 7 of the Michigan trust fund act, 2000 PA 489, MCL
(D) Children's trust fund under 1982 PA 249, MCL 21.171 to
(E) The McCauley-Traxler-Law-Bowman-McNeely lottery act, 1972
PA 239, MCL 432.1 to 432.47.
(F) Section 503b of the natural resources and environmental
protection act, 1994 PA 451, MCL 324.503b.
(iv) The board of trustees of a community college subject to
the community college act of 1966, 1966 PA 331, MCL 389.1 to
(v) The board of directors of the Michigan education trust
described in section 10 of the Michigan education trust act, 1986
PA 316, MCL 390.1430.
(vi) The board of the Michigan strategic fund under the
Michigan strategic fund act, 1984 PA 270, MCL 125.2001 to 125.2094.
(f) "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
(g) "Indirect holdings" in a company means all securities of
that company held in an account or fund, including a mutual fund or
other commingled fund, managed by 1 or more persons not employed by
the fiduciary, in which the fiduciary owns shares or interests
together with other investors not subject to the provisions of this
(h) "Scrutinized company" means, except for a social
development company or a company that only meets the criteria of
this subdivision because an independently owned franchisee of that
company is a scrutinized company, any company that has business
operations that involve contracts with or provision of supplies or
services to a state sponsor of terror; companies in which a state
sponsor of terror has any direct or indirect equity share,
consortiums, or projects commissioned by a state sponsor of terror;
or companies involved in consortiums and projects commissioned by a
state sponsor of terror and 1 or more of the following:
(i) More than 10% of the company's total revenues or assets are
directly invested in or earned from or significantly contributed to
a state sponsor of terror and the company has failed to take
(ii) The company has, with actual knowledge, made an investment
of $20,000,000.00 or more, or any combination of investments of at
least $10,000,000.00 each, which in the aggregate equals or exceeds
$20,000,000.00 in any 12-month period, and which directly or
significantly contributes to a state sponsor of terror, and the
company has failed to take substantial action.
(i) "Social development company" means a company licensed by
the United States department of treasury pursuant to the federal
trade sanction reform and export enhancement act of 2000, P.L. 106-
387, or a company lawfully operating under the laws of another
country, whose primary purpose in a state sponsor of terror is to
provide humanitarian goods or services including, food, other
agricultural products, supplies or infrastructure, clothing,
shelter, medicines or medical equipment, educational opportunities,
journalism-related activities, information or information
materials, spiritual-related activities, general consumer goods, or
services of a purely clerical or reporting nature, to aid the
inhabitants of a state sponsor of terror.
(j) "State sponsor of terror" means, subject to section 10 as
to applicability, any country determined by the United States
secretary of state to have repeatedly provided support for acts of
(k) "Substantial action" means adopting, publicizing, and
implementing a formal plan to cease scrutinized business operations
within 1 year and to refrain from any new business operations.
Sec. 3. Within 90 days after the effective date of this act,
the fiduciary shall make its best efforts to identify all
scrutinized companies in which the fiduciary has direct or indirect
holdings or has a current option to have such holdings in the
future. The efforts may include 1 or more of the following:
(a) Reviewing and relying, as appropriate in the fiduciary's
judgment, on publicly available information regarding companies
with business operations in a state sponsor of terror, including
information provided by nonprofit organizations, research firms,
international organizations, and government entities.
(b) Contacting asset managers contracted by the fiduciary that
invest in companies with business operations in a state sponsor of
(c) Contacting other institutional investors that have
divested from or engaged with companies that have business
operations in a state sponsor of terror.
(d) Reviewing the laws of the United States regarding the
levels of business activity that would cause application of
sanctions against companies conducting business or investing in
countries that are designated state sponsors of terror.
Sec. 4. (1) At the end of the 90-day period or by the first
meeting of the fiduciary following the 90-day period described in
section 3, the fiduciary shall assemble all scrutinized companies
identified into a scrutinized companies list.
(2) The fiduciary shall update the scrutinized companies list
described in subsection (1) on a quarterly basis based on evolving
information from, among other sources, those sources listed in
section 3. However, if a fiduciary receives credible information
that shows that a scrutinized company was wrongfully identified as
a scrutinized company, the fiduciary shall immediately modify the
scrutinized company list to remove the name of the scrutinized
(3) The fiduciary shall adhere to the following procedure for
companies on the scrutinized companies list described in subsection
(a) The fiduciary shall immediately determine the companies on
the scrutinized companies list in which the fiduciary oversees
pursuant to its responsibilities as described in section 2(e).
(b) If, within 90 days following the fiduciary's first
engagement with a company, that company ceases scrutinized business
operations, the company shall be removed from the scrutinized
companies list and this act shall cease to apply to it unless it
resumes scrutinized business operations. If, within 9 months
following the fiduciary's first engagement, the company converts
its scrutinized active business operations to inactive business
operations, the company shall not be subject to this act.
(c) If, after 90 days following the fiduciary's first
engagement with a company, if the company has not developed and
announced a plan to convert its active business operations to
inactive business operations, and only while the company continues
to have scrutinized active business operations, the fiduciary shall
sell, redeem, divest, or withdraw all publicly traded securities of
the company, according to the following schedule:
(i) At least 50% of the assets shall be removed from the
fiduciary's assets under management within 9 months after the
company's most recent appearance on the scrutinized companies list.
(ii) 100% of the assets shall be removed from the fiduciary's
assets under management within 15 months after the company's most
recent appearance on the scrutinized companies list.
(d) Except as provided in subdivision (e), at no time shall
the fiduciary acquire securities of companies on the scrutinized
companies list that have active business operations.
(e) Subdivisions (c) and (d) shall not apply to indirect
holdings in actively managed investment funds. For purposes of this
section, actively managed investment funds include private equity
funds and publicly traded funds. Before the fiduciary invests in a
new private equity fund that is not in the fiduciary's portfolio as
of the effective date of this act, the fiduciary shall perform due
diligence to prevent investment in any private equity fund in
violation of this act. The fiduciary is not required to identify
holdings in private equity funds or submit engagement letters to
those funds. If the manager of a publicly traded, actively managed
fund that is in the fiduciary's portfolio on the effective date of
this act creates a similar publicly traded, actively managed fund
with indirect holdings devoid of identified scrutinized companies
with scrutinized active business operations as defined in this act,
the fiduciary is not required to, but is strongly encouraged to,
replace all applicable investments with investments in the similar
fund in an expedited time frame consistent with prudent investment
Sec. 5. The department of treasury shall collect and publish
the following information on the department's internet website no
later than 1 year after the effective date of this act and shall
periodically update the information at reasonable intervals:
(a) All investments sold, redeemed, divested, or withdrawn in
compliance with this section.
(b) All prohibited investments made under this section.
(c) Any progress made under section 4(3)(e).
Sec. 6. (1) With respect to actions taken in compliance with
this act, including all good faith determinations regarding
companies as required by this act, the fiduciary shall be exempt
from any conflicting statutory or common law obligations, including
any obligations in respect to choice of asset managers, investment
funds, or investments for the fiduciary's securities portfolios.
(2) The fiduciary, members of an investment advisory
committee, and any person with decision-making authority with
regard to investments of the fiduciary shall not be held liable for
any action undertaken for the purpose of complying with or
executing the mandates required under this act.
Sec. 7. If any provision, section, subsection, sentence,
clause, phrase, or word of this act or its application 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.
Sec. 8. If a scrutinized company does business with the
government of Sudan and the fiduciary is subject to the divestment
provisions of section 13c of the public employee retirement system
investment act, 1965 PA 314, MCL 38.1133c, for that period of time
the fiduciary shall follow the divestment criteria contained in
section 13c of the public employee retirement system investment
act, 1965 PA 314, MCL 38.1133c, and not the divestment provisions
of this act.
Sec. 9. If a scrutinized company does business with the
government of Iran and the fiduciary is subject to the divestment
provisions of section 13d of the public employee retirement system
investment act, 1965 PA 314, MCL 38.1133d, for that period of time
the fiduciary shall follow the divestment criteria contained in
section 13d of the public employee retirement system investment
act, 1965 PA 314, MCL 38.1133d, and not the divestment provisions
of this act.
Sec. 10. If a state sponsor of terror is any of the following
countries, then the provisions of this act begin to apply on the
(a) Syria, January 1, 2010.
(b) North Korea, January 1, 2011.
(c) Cuba, January 1, 2012.
(d) Any other country, 12 months following the determination
by the United States secretary of state.
Sec. 11. Not later than October 1, 2010, October 1, 2011, and
October 1, 2012, and not later than 9 months immediately following
the determination of another country as a state sponsor of terror,
the department of treasury shall make recommendations to each house
of the legislature and to the standing committees of the senate and
house of representatives having jurisdiction over issues pertaining
to divestment of state funds on what statutory changes are needed
to improve the effectiveness of this act.
Enacting section 1. This act does not take effect unless all
of the following bills of the 94th Legislature are enacted into
(a) House Bill No. 4854.
(b) House Bill No. 4903.