HB1296eng 98TH GENERAL ASSEMBLY

HB1296 Engrossed LRB098 06860 JDS 36909 b

AN ACT concerning public employee benefits.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 5. The Illinois Pension Code is amended by adding Section 1-110.16 as follows:

(40 ILCS 5/1-110.16 new)

Sec. 1-110.16. Transactions prohibited by retirement systems; manufacturers of firearms and ammunition.

(a) As used in this Section:

"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 the purpose of making profit.

"Direct holdings" in a company means all securities of that company that are held directly by the retirement system or in an account or fund in which the retirement system owns all shares or interests.

"Firearm manufacturing company" means a company that is licensed pursuant to 27 C.F.R. 478.41 as a manufacturer of destructive devices, ammunition for destructive devices, armor piercing ammunition, firearms other than destructive devices, or ammunition for firearms other than destructive devices or armor piercing ammunition but does not include either a company that manufactures only ceremonial weapons or a company that manufactures only unassembled component parts for any of the following: destructive devices, ammunition for destructive devices, armor piercing ammunition, firearms other than destructive devices, or ammunition for firearms other than destructive devices or armor piercing ammunition.

"Indirect holdings" in a company means all securities of that company that are held in an account or fund, such as a mutual fund, managed by one or more persons not employed by the retirement system, in which the retirement system owns shares or interests together with other investors not subject to the provisions of this Section.

"Private market fund" means any private equity fund, private equity fund of funds, venture capital fund, hedge fund, hedge fund of funds, real estate fund, or other investment vehicle that is not publicly traded.

"Retirement system" means any pension fund or retirement system established under this Code.

(b) Within 90 days after the effective date of this Section, each retirement system shall make its best efforts to identify all firearm manufacturing companies in which the retirement system has direct or indirect holdings.

These efforts shall include the following, as appropriate in the retirement system's judgment:

(1) reviewing and relying on publicly available information regarding firearm manufacturing companies, including information provided by nonprofit organizations, research firms, and government entities;

(2) contacting asset managers contracted by the retirement system that invest in firearm manufacturing companies; and

(3) contacting other institutional investors that have divested from or engaged with firearm manufacturing companies.

The retirement system may retain an independent research firm to identify firearm manufacturing companies in which the retirement system has direct or indirect holdings. By the first meeting of the retirement system following the 90-day period described in this subsection (b), the retirement system shall assemble all identified firearm manufacturing companies into a firearm manufacturing companies list.

The retirement system shall update the firearm manufacturing companies list annually based on evolving information from, among other sources, those listed in this subsection (b).

(c) The retirement system shall adhere to the following procedures for companies on the firearm manufacturing companies list:

(1) The retirement system shall determine the firearm manufacturing companies on the firearm manufacturing companies list in which the retirement system owns direct or indirect holdings.

(2) For each company newly identified in item (1) of this subsection (c), the retirement system shall send a written notice informing the firearm manufacturing company of its status and that it may become subject to divestment by the retirement system.

(3) If, within 90 days after the retirement system's first engagement with a firearm manufacturing company pursuant to this subsection (c), that company ceases to manufacture firearms, the company shall be removed from the firearm manufacturing companies list and the provisions of this Section shall cease to apply to it unless it resumes manufacturing firearms.

(d) If, after 90 days following the retirement system's first engagement with a firearm manufacturing company pursuant to subsection (c), the company continues to manufacture firearms, the retirement system shall sell, redeem, divest, or withdraw all publicly traded securities of the company from the retirement system's assets under management within 12 months after the company's most recent appearance on the firearm manufacturing companies list.

(e) The retirement system may not acquire securities of firearm manufacturing companies on the firearm manufacturing companies list.

(f) Each retirement system shall file a report with the Public Pension Division of the Department of Financial and Professional Regulation that includes the firearm manufacturing companies list within 30 days after the list is created. This report shall be made available to the public.

Each retirement system shall file an annual report with the Public Pension Division, which shall be made available to the public, that includes all of the following:

(1) a summary of correspondence with companies engaged by the retirement system under items (2) and (3) of subsection (c);

(2) all investments sold, redeemed, divested, or withdrawn in compliance with subsection (d); and

(3) all prohibited investments under subsection (e).

(g) With respect to actions taken in compliance with this Act, including all good-faith determinations regarding companies as required by this Act, the retirement system is exempt from any conflicting statutory or common law obligations, including any fiduciary duties under this Article and any obligations with respect to choice of asset managers, investment funds, or investments for the retirement system's securities portfolios.

(h) If any provision of this Section or its application to any person or circumstance is held invalid, the invalidity of that provision or application does not affect other provisions or applications of this Section that can be given effect without the invalid provision or application.

Section 99. Effective date. This Act takes effect upon becoming law.