A BILL TO BE ENTITLED
AN ACT to provide for how the state treasurer shall address certain state investments relating to IRAN.
The General Assembly of North Carolina enacts:
SECTION 1.  Short title. – This act shall be known and may be cited as the "Iran Divestment Act."
SECTION 2.  Legislative findings. – 
(1)	The Securities and Exchange Commission has determined that business activities in foreign states, such as Iran, that sponsor terrorism and that are subject to sanctions by the United States, may materially harm the share value of foreign companies. Shares in these foreign companies may be held in the portfolio of the Public Fund, as that term is defined in this act.
(2)	Publicly traded companies in the United States are substantially restricted in doing business in, or with, foreign states such as Iran, that the United States has identified as sponsoring terrorism.
(3)	On behalf of the citizens of North Carolina, funds in the Public Fund are currently invested in publicly traded foreign companies that may be at risk due to business ties with foreign states, such as Iran, that sponsor terrorism and are involved in the proliferation of weapons of mass destruction.
(4)	Investments in publicly traded foreign companies that have business operations in or with foreign states such as Iran are liable for sanctions under United States law and risk the pensions of the dedicated public employees of this State.
(5)	Excluding companies with business activities in foreign states, such as Iran, that sponsor terrorism and divesting from public portfolios will help protect the Public Fund from investment losses related to these business activities and may improve the investment performance of the Public Fund.
(6)	Public Law 104‑172, as renewed and amended in 2001 and 2006, specifically provides for sanctions to be imposed on any entity that has invested at least twenty million dollars ($20,000,000) in any year since 1996 to develop petroleum or natural gas resources of Iran.
(7)	It is unconscionable for this State to invest in foreign companies with business activities benefiting foreign states such as Iran that commit egregious violations of human rights and sponsor terrorism.
(8)	It is the government of Iran, and not the people of Iran, that is responsible for Iran's support of terrorism and that commits egregious violations of human rights under which its own citizens are required to live.
SECTION 3.  Definitions. – As used in this act, the following definitions apply:
(1)	"Active business operations." – All business operations that are not inactive business operations.
(2)	"Business operations." – Engaging in commerce in any form in Iran, 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.
(3)	"Company." – 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 such entities or business associations, that exists for profit‑making purposes.
(4)	"Complicit in prohibited activities." – A company is complicit in prohibited activities if it has done any of the following within the preceding 24 months:
a.	Invested in, or engaged in business operations with, entities in the defense or nuclear sectors of Iran.
b.	Invested in, or engaged in business operations with, entities involved in the development of petroleum or natural gas resources of Iran, and is subject to sanctions under Public Law 104‑172, as renewed and amended in 2001 and 2006.
c.	Demonstrated complicity with an Iranian organization that has been labeled a terrorist organization by the United States government.
(5)	"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.
(6)	"Government of Iran." – The government of Iran or its instrumentalities or political subdivisions. This term also includes any individual, company, or public agency located in Iran that provides material or financial support to the Islamic Republic of Iran.
(7)	"Inactive business operations." – The mere continued holding of renewal of rights to property previously operated for the purpose of generating revenues but not presently deployed for such purpose.
(8)	"Indirect holdings." – All securities of a company held in an account or fund, such as a mutual fund, managed by one 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 the provisions of this act.
(9)	"Iran." – The Islamic Republic of Iran or any territory under its administration or control.
(10)	"Military equipment." – Weapons, arms, military supplies, and equipment that readily may be used for military purposes, including, but not limited to, radar systems or military‑grade transport vehicles; or supplies or services sold or provided directly or indirectly to any force actively participating in armed conflict in Iran.
(11)	"Mineral extraction activities." – Includes exploring, extracting, processing, transporting, or wholesale selling or trading of elemental minerals or associated metal alloys or oxides (ore), including gold, copper, chromium, chromite, diamonds, iron, iron ore, silver, tungsten, uranium, and zinc, as well as facilitating such activities, including by providing supplies or services in support of such activities.
(12)	"Oil‑related activities." – Includes owning rights to oil block; exporting, extracting, producing, refining, processing, exploring for, transporting, selling, or trading of oil; constructing, maintaining, or operating a pipeline, refinery, or other oil‑field infrastructure; and facilitating such activities, including by providing supplies or services in support of such activities. The mere retail sale of gasoline and related consumer products shall not be considered oil‑related activities.
(13)	"Power production activities." – Any business operation that involves a project commissioned by the Government of Iran whose purpose is to facilitate power generation and delivery, including, but not limited to, establishing power‑generating plants or hydroelectric dams, selling or installing components for the project, providing service contracts related to the installation or maintenance of the project, as well as facilitating such activities, including by providing supplies or services in support of such activities.
(14)	"Public Fund." – Any funds held by the State Treasurer to the credit of:
a.	The Teachers' and State Employees' Retirement System.
b.	The Consolidated Judicial Retirement System.
c.	The Firemen's and Rescue Workers' Pension Fund.
d.	The Local Governmental Employees' Retirement System.
e.	The Legislative Retirement System.
f.	The Legislative Retirement Fund.
g.	The North Carolina National Guard Pension Fund.
(15)	"Scrutinized business operations." – Business operations that have resulted in a company becoming a scrutinized company.
(16)	"Scrutinized company." – Any company that meets the criteria in sub‑subdivision a., b., or c. below:
a.	The company has business operations that involve contracts with, or provision of supplies or services to, the Government of Iran, to companies in which the Government of Iran has any direct or indirect equity share, Government of Iran‑commissioned consortiums or projects, or to companies involved in Government of Iran‑commissioned consortiums or projects; and more than ten percent (10%) of the company's revenues or assets linked to Iran involve oil‑related activities, power production activities, or mineral extraction activities and the company has failed to take substantial action.
b.	The company is complicit in prohibited activities.
c.	The company supplies military equipment within Iran, unless it clearly shows that the military equipment cannot be used to facilitate offensive military actions in Iran or the company implements rigorous and verifiable safeguards to prevent use of that equipment by forces actively participating in armed conflict, for example, through post‑sale tracking of such equipment by the company, certification from a reputable and objective third party that such equipment is not being used by a party participating in armed conflict in Iran, or sale of such equipment solely to any internationally recognized peacekeeping force or humanitarian organization.
Notwithstanding anything in this act to the contrary, a social development company which is not complicit in prohibited activities shall not be considered a scrutinized company.
(17)	"Social development company." – A company whose primary purpose in Iran is to provide humanitarian goods or services, including medicine or medical equipment, agricultural supplies or infrastructure, educational opportunities, journalism‑related activities, information or information materials, spiritual‑related activities, services of a purely clerical or reporting nature, food, clothing, or general consumer goods that are unrelated to oil‑related activities, mineral extraction activities, or power production activities.
(18)	"Substantial action." – Adopting, publicizing, and implementing a formal plan to cease scrutinized business operations within one year and to refrain from any such new business operations.
SECTION 4.(a)  Identification of companies. – Within 90 days of this act becoming effective, the State Treasurer shall attempt to identify all scrutinized companies in which the Public Fund has direct or indirect holdings or could possibly have such holdings in the future. These efforts shall include, as appropriate:
(1)	Reviewing and relying on, as appropriate in the State Treasurer's judgment, publicly available information regarding companies with business operations in Iran, including information provided by nonprofit organizations, research firms, international organizations, and government entities.
(2)	Contacting asset managers contracted by the Public Fund that invest in companies with business operations in Iran.
(3)	Contacting other institutional investors that have divested from or engaged with companies that have business operations in Iran.
SECTION 4.(b)  Within 120 days of this act becoming effective, the State Treasurer shall assemble all scrutinized companies identified into a "Scrutinized Companies List."
SECTION 4.(c)  The State Treasurer shall update the Scrutinized Companies List quarterly based on evolving information from, among other sources, those listed in subsection (a) of this section.
SECTION 5.(a)  Required actions. – General. – The State Treasurer shall adhere to the procedures relating to companies on the Scrutinized Companies List as provided in this section.
SECTION 5.(b)  Engagement. – 
(1)	As soon as the Scrutinized Companies List is prepared, the State Treasurer shall immediately determine the companies on the Scrutinized Companies List in which the Public Fund owns direct or indirect holdings.
(2)	For each company identified pursuant to subdivision (1) of this subsection with only inactive business operations, the State Treasurer  shall send a written notice informing the company of this act and encouraging it to continue to refrain from initiating active business operations in Iran until it is able to avoid scrutinized business operations. The State Treasurer shall continue such correspondence on a semiannual basis.
(3)	For each company newly identified in subdivision (1) of this subsection with active business operations, the State Treasurer shall send a written notice informing the company of its scrutinized company status and that it may become subject to divestment by the Public Fund. The notice shall offer the company the opportunity to clarify its Iran‑related activities and shall encourage the company, within 90 days, to either cease its scrutinized business operations or convert such operations to inactive business operations in order to avoid qualifying for divestment by the Public Fund.
(4)	If, within 90 days following the State Treasurer's first engagement with a company pursuant to subdivision (3) of this subsection that company ceases scrutinized business operations, the company shall be removed from the Scrutinized Companies List and the provisions of this section shall cease to apply to it unless it resumes scrutinized business operations. If, within 90 days following the State Treasurer's first engagement, the company converts its scrutinized active business operations to inactive business operations, the company shall be subject to all provisions relating thereto.
SECTION 5.(c)  Divestment. – 
(1)	If, after 90 days following the State Treasurer's first engagement with a company pursuant to subdivision (3) of subsection (b) of this section, the company continues to have scrutinized active business operations, and only while such company continues to have scrutinized active business operations, the Public Fund shall sell, redeem, divest, or withdraw all publicly traded securities of the company within 15 months after the company's most recent appearance on the Scrutinized Companies List.
(2)	If a company that ceased scrutinized active business operations following engagement pursuant to subdivision (3) of subsection (b) of this section resumes such operations, subdivision (1) of this subsection shall immediately apply, and the Public Fund shall send a written notice to the company. The company shall also be immediately reintroduced onto the Scrutinized Companies List.
SECTION 5.(d)  Prohibition. – At no time shall the Public Fund acquire securities of companies on the Scrutinized Companies List that have active business operations, except as provided in subsections (e) and (f) of this section.
SECTION 5.(e)  Exemption. – No company which the United States Government affirmatively declares to be excluded from its present or any future federal sanctions regime relating to Iran shall be subject to divestment or investment prohibition pursuant to subsections (c) and (d) of this section.
SECTION 5.(f)  Excluded securities. – Notwithstanding anything in this act to the contrary, subsections (c) and (d) of this section shall not apply to indirect holdings in actively managed investment funds. The State Treasurer shall, however, submit letters to the managers of such investment funds containing companies with scrutinized active business operations requesting that they consider removing such companies from the fund or create a similar actively managed fund with indirect holdings devoid of such companies. If the manager creates a similar fund, the Public Fund shall replace all applicable investments with investments in the similar fund in an expedited time frame consistent with prudent investing standards. For the purposes of this section, "private equity" funds shall be deemed to be actively managed investment funds.
SECTION 6.  Reporting. – The State Treasurer shall annually file a publicly available report to the General Assembly that includes the Scrutinized Companies List. This report shall include all of the following:
(1)	A summary of correspondence with companies engaged by the Public Fund under subdivisions (2) and (3) of subsection (b) of Section 5 of this act.
(2)	All investments sold, redeemed, divested, or withdrawn in compliance with subsection (c) of Section 5 of this act.
(3)	All prohibited investments under subsection (d) of Section 5 of this act.
(4)	Any progress made under subsection (f) of Section 5 of this act.
SECTION 7.  Expiration of this act. – This act expires upon the occurrence of any of the following:
(1)	The United States revoking all sanctions imposed against the Government of Iran.
(2)	The Congress or President of the United States declaring that the Government of Iran has honored its commitments to cease efforts to develop or otherwise acquire nuclear reactors and declaring that the Government of Iran does not support international terrorist organizations.
(3)	The Congress or President of the United States, through legislation or executive order, declaring that mandatory divestment of the type provided for in this act interferes with the conduct of United States foreign policy.
SECTION 8.  Other legal obligations. – With respect to actions taken in compliance with this act, including all good faith determinations regarding companies as required by this act, the Public Fund shall be exempt from any conflicting statutory or common law obligations, including any such obligations in respect to choice of asset managers, investment funds, or investments for the Public Fund's securities portfolios.
SECTION 9.  Reinvestment in certain companies with scrutinized active business operations. – Notwithstanding anything in this act, the Public Fund is permitted to cease divesting from certain scrutinized companies of this act, and to reinvest in certain scrutinized companies from which it divested pursuant to subsection (c) of Section 5 of this act,  if clear and convincing evidence shows that the value for all assets under management by the Public Fund becomes equal to or less than ninety‑nine and fifty‑hundredths percent (99.50%) (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 subsection (c) of Section 5 of this act. 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. For any cessation of divestment, reinvestment, and/or subsequent ongoing investment authorized by this section, the State Treasurer  shall provide a written report to the General Assembly in advance of initial reinvestment, updated semiannually 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 with scrutinized active business operations. This section has no application to reinvestment in companies on the ground that they have ceased to have scrutinized active business operations.
SECTION 10.  Enforcement. – The Attorney General is charged with enforcing the provisions of this act and, through any lawful designee, may bring such actions in court as are necessary to do so.
SECTION 11.  Severability. – If any one or more provision, section, subsection, sentence, clause, phrase, or word of this legislation or the application thereof 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 the invalidity, illegality, unenforceability, or unconstitutionality. The General Assembly declares that it would have passed this legislation, and each provision, section, subsection, sentence, clause, phrase, or word thereof, irrespective of the fact that any one or more provision, section, subsection, sentence, clause, phrase, or word be declared invalid, illegal, unenforceable, or unconstitutional, including, but not limited to, each of the engagement, divestment, and prohibition provisions of this legislation.
SECTION 12.  This act is effective when it becomes law.