Amendment #1544 to H4000

Mandatory Unloading of Securities with Known conflicts of interest

Mr. Vargas of Haverhill moves to amend the bill by adding the following section:

SECTION XXXX SECTION 1. As used in this act the following words shall, unless the context clearly requires otherwise, have the following meanings:-

“Volatile Company,” a 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 that experiences frequent and significant price movements — either up or down affected by media outlet coverage, earnings, speculation, or market sentiment or unstable with inconsistent earnings or facing legal and or regulatory risks.

“Conflict of Interest,” a company whose chief executive officer, chief operating manager, chief technology officer, company owner, or significant shareholder are or appear to violate the federal code of conflict of interest 18 U.S.C. § 208, prohibiting whoever, being an officer or employee of the executive branch of the United States Government, or of any independent agency of the United States, a Federal Reserve bank director, officer, or employee, or an officer or employee of the District of Columbia, including a special Government employee, participates personally and substantially as a Government officer or employee, through decision, approval, disapproval, recommendation, the rendering of advice, investigation, or otherwise, in a judicial or other proceeding, application, request for a ruling or other determination, contract, claim, controversy, charge, accusation, arrest, or other particular matter in which, to his knowledge, he, his spouse, minor child, general partner, organization in which he is serving as officer, director, trustee, general partner or employee, or any person or organization with whom he is negotiating or has any arrangement concerning prospective employment, has a financial interest.

“Board”, the Pension Reserves Investment Management Board established in section 23 of chapter 32 of the General Laws.

“Company”, a 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.

“Direct holdings”, all securities of a company held directly by the public fund or in an account or fund in which the public fund owns all shares or interests.

“Indirect holdings”, all securities of a company held in an account or fund, such as a mutual fund, managed by 1 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 this act.

“Public fund”, the Pension Reserves Investment Trust or the Pension Reserves Investment Management Board charged with managing the pooled investment fund consisting of the assets of the state employees’ and teachers’ retirement systems as well as the assets of local retirement systems under the control of the board.

SECTION 2. Notwithstanding any general or special law to the contrary, within 30 days of enactment, the public fund shall identify volatile companies with conflicts of interest  or the appearance of a conflict of interest with the executive branch at the federal level, all in which the fund owns direct or indirect holdings and shall file a list of any such holdings with the attorney general and with the clerks of the senate and the house of representatives.

SECTION 3. Notwithstanding any general or special law to the contrary, it shall be the settled policy of the public fund and of the board of the public fund not to invest in any volatile companies with conflicts of interest or the appearance of a conflict of interest with the executive branch at the federal level. The public fund shall sell, redeem, divest or withdraw all publicly-traded securities of each company identified pursuant to section 2 of this act within 3 months of enactment. This section shall not apply to indirect holdings in actively managed investment funds; provided, however, that the public fund shall submit letters to the managers of any such investment funds that contain companies identified pursuant to section 2 of this act, requesting that they remove such companies from the investment fund or create a similar actively managed fund with indirect holdings devoid of such companies.

SECTION 4. Notwithstanding any general or special law to the contrary, the public fund may exercise section 3 of this act when not less than one of the following conditions are met for a publicly-traded security:

(i)conflict of interest;

(ii)appearance of a conflict of interest; or

(iii)a volatile company.

SECTION 5. Notwithstanding any general or special law to the contrary, with respect to actions taken in compliance with this act, the public fund shall be exempt from any conflicting statutory or common law obligation, including any such obligations with respect to choice of asset managers, investment funds or investments for the public fund’s securities portfolios and all good faith determinations regarding volatile companies with conflicts of interest or the appearance of a conflict of interest with the executive branch at the federal level.

SECTION 6. Notwithstanding any general or special law to the contrary, the public fund shall be permitted to cease divesting from companies identified pursuant to section 2 of this act, to reinvest in companies identified pursuant to section 2 of this act, or to continue to invest in companies pursuant to section 2 of this act from which it has not yet divested upon clear and convincing evidence showing that the value for all assets under management by the public fund becomes equal to or less than 99.5 per cent (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 said subsection. Cessation of divestment, reinvestment 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 the preceding sentence.

In advance of any cessation of divestment authorized by this subsection, the public fund shall provide a written report to the attorney general, the senate and house committees on ways and means and the joint committee on public service, updated annually thereafter as applicable, setting forth the reasons and justification, supported by clear and convincing evidence, for its decisions to cease divestment, to reinvest or to remain invested in companies identified pursuant to section 2.

SECTION 7. Present, future and former board members of the public fund, jointly and individually, state officers and employees, and investment managers under contract with the public fund shall be indemnified from the General Fund and held harmless by the Commonwealth from all claims, demands, suits, actions, damages, judgments, costs, charges and expenses, including court costs and attorney’s fees, and against all liability, losses, and damages of any nature whatsoever that these present, future, or former board members, officers, employees, or contract investment managers shall or may at any time sustain by reason of any decision to restrict, reduce, or eliminate investments in volatile companies with conflicts of interest or the appearance of a conflict of interest with the executive branch at the federal level.

SECTION 8. The public fund shall annually, as applicable, file a report with the attorney general and with the clerks of the senate and the house of representatives, including: (i) all investments sold, redeemed, divested or withdrawn in compliance with this act within the preceding year; and (ii) all investments prohibited by this act from which the public fund has not yet divested.

Additional co-sponsor(s) added to Amendment #1544 to H4000

Mandatory Unloading of Securities with Known conflicts of interest