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PRINTER'S NO. 2869
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No.
2447
Session of
2022
INTRODUCED BY BENNINGHOFF, ARMANINI, BERNSTINE, R. BROWN,
CAUSER, CIRESI, COOK, DeLUCA, DUNBAR, ECKER, FARRY, FREEMAN,
GREINER, GROVE, HAMM, HENNESSEY, HERSHEY, JONES, KEEFER,
KERWIN, M. MACKENZIE, R. MACKENZIE, MENTZER, MERCURI,
MILLARD, MIZGORSKI, MOUL, NEILSON, O'NEAL, OBERLANDER,
PICKETT, PISCIOTTANO, POLINCHOCK, RAPP, ROTHMAN, RYAN,
SAYLOR, SCHMITT, SMITH, STAATS, STAMBAUGH, THOMAS AND
TWARDZIK, MARCH 23, 2022
REFERRED TO COMMITTEE ON STATE GOVERNMENT, MARCH 23, 2022
AN ACT
Providing for divestiture by the State Treasurer, the State
Employees' Retirement System and the Public School Employees'
Retirement System of investments in companies doing business
in Russia and Belarus.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Short title.
This act shall be known and may be cited as the Russia and
Belarus Divestiture Act.
Section 2. Definitions.
The following words and phrases when used in this act shall
have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Alternative investments." An investment in a private equity
fund, private debt fund, venture fund, real estate fund, hedge
fund or absolute return fund.
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"Belarus." The Republic of Belarus.
"Board." As defined in section 102 of the act of February 1,
1974 (P.L.34, No.15), known as the Pennsylvania Municipal
Retirement Law, 24 Pa.C.S. § 8102 (relating to definitions) or
71 Pa.C.S. § 5102 (relating to definitions).
"Company." Any sole proprietorship, organization,
association, corporation, partnership, joint venture, limited
partnership, limited liability partnership, limited liability
company or other entity or business association that exists for
the purpose of making a profit.
"Direct holdings." All securities of a company, the
government of Russia or the government of Belarus that are held
directly by the public fund.
"Foreign company." Any entity which is not organized under
the laws of the United States.
"Government of Belarus." The government of Belarus and its
political subdivisions and the instrumentalities and companies
owned or controlled by the government of Belarus or its
political subdivisions.
"Government of Russia." The government of Russia and its
political subdivisions and the instrumentalities and companies
owned or controlled by the government of Russia or its political
subdivisions.
"Indemnitee." Each current or former board member, duly
appointed designee of a board member, officer, employee,
including, without limitation, the attorneys in the Office of
Chief Counsel that serve a public fund, agent, research firm or
investment manager of a public fund who was or is a party to, or
is threatened to be made a party to or is otherwise involved in,
any proceeding by reason of the fact that the person is or was a
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board member, designee of a board member, officer, employee,
agent, research firm or investment manager of a public fund.
"Indirect holdings." All securities held in an account or
fund such as a mutual fund managed by one or more persons not
employed by a public fund, in which the public fund owns shares
or interests together with other investors.
"Public fund." Any of the following:
(1) The State Employees' Retirement Fund established
pursuant to 71 Pa.C.S. Pt. XXV (relating to retirement for
State employees and officers).
(2) The Public School Employees' Retirement Fund
established pursuant to 24 Pa.C.S. Pt. IV (relating to
retirement for school employees).
(3) The Pennsylvania Municipal Retirement Fund.
(4) Any Commonwealth fund of which the State Treasurer
is the custodian.
"Russia." The Russian Federation.
"Sanctioned Belarusian company." Any foreign company that
has been sanctioned under the authority of Exec. Order No.
13405, 71 Fed. Reg. 35485 (June 16, 2006) or Exec. Order No.
14038, 86 Fed. Reg. 43905 (Aug. 9, 2021).
"Sanctioned Russian company." Any foreign company that has
been sanctioned under the authority of Exec. Order No. 14024, 86
Fed. Reg. 20249 (Apr. 15, 2021), Exec. Order No. 14039, 86 Fed.
Reg. 47205 (August 20, 2021) or Exec. Order No. 14066, 87 Fed.
Reg. 13625 (March 8, 2022).
"Scrutinized company." A foreign company which is domiciled
in or organized under the laws of Russia or Belarus. The term
includes sanctioned Russian companies and sanctioned Belarusian
companies.
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Section 3. Identification of companies.
Within 14 days of the effective date of this section and no
less frequently than every seven days thereafter until June 30,
2023, and as frequently as deemed necessary by the State
Treasurer or a board thereafter, a public fund shall make its
best effort to identify all direct holdings, indirect holdings
and alternative investments of securities of sanctioned Russian
companies, sanctioned Belarusian companies, scrutinized
companies, the government of Russia and the government of
Belarus.
Section 4. Divestment.
(a) Initial divestment of direct holdings.--To the extent
permitted under Federal law, the public fund shall sell, redeem,
divest or withdraw from its direct holdings all securities of
sanctioned Russian companies, sanctioned Belarusian companies,
the government of Russia and the government of Belarus.
(b) Subsequent divestment of direct holdings.--Upon the
determination that a foreign company meets the criteria as a
sanctioned Russian company or a sanctioned Belarusian company
after the effective date of this section, to the extent
permitted under Federal law, the public fund shall sell, redeem,
divest or withdraw from its direct holdings all securities of
sanctioned Russian companies and sanctioned Belarusian
companies.
(c) Additional divestment.--Beginning on the effective date
of this subsection, to the extent permitted under Federal law, a
public fund shall divest from the following:
(1) Scrutinized companies, other than sanctioned Russian
companies and sanctioned Belarusian companies, in which the
public fund has direct holdings.
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(2) Scrutinized companies in which the public fund has
indirect holdings and alternative investments.
(3) Securities of the government of Russia and the
government of Belarus in which the public fund has indirect
holdings and alternate investments.
(d) Prohibition.--A public fund may not acquire direct
holdings, indirect holdings or alternative investments of
scrutinized companies, the government of Russia or the
government of Belarus.
Section 5. Reporting.
(a) Report to Federal Government.--Within 30 days of the
effective date of this section, administrators of a public fund
shall file a written report to the United States Attorney
General, the Treasurer of the United States and the Director of
the Office of Foreign Assets Control of the United States
Department of the Treasury detailing the requirements contained
in this act.
(b) Duty of public fund.--A public fund shall, within three
months of the effective date of this section and not less than
once per year thereafter, provide a report to the Governor, the
President pro tempore of the Senate, the Speaker of the House of
Representatives and each member of the boards of the
Pennsylvania Municipal Retirement System, the State Employees'
Retirement System and Public School Employees' Retirement
System. The report shall include the items required under
subsection (c). The report shall be made available to the
public.
(c) Contents.--The report under subsection (b) shall include
all of the following:
(1) A list of all scrutinized companies in which the
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public fund has direct holdings, indirect holdings and
alternative investments.
(2) All investments sold, redeemed, divested or
withdrawn in compliance with section 4(a) and (b), the costs
and expenses of such transfers and a determination of net
gain or loss on account of such transactions incurred in
compliance with the provisions of this act.
(3) All investments sold, redeemed, divested or
withdrawn in compliance with section 4(c).
(4) All prohibited investments under section 4(d).
Section 6. Expiration.
A public fund shall have no obligations under this act with
respect to foreign companies which are domiciled in or organized
under the laws of Russia or Belarus, the government of Russia or
the government of Belarus upon the occurrence of any of the
following:
(1) Except for sanctioned Russian companies and
sanctioned Belarusian companies, the company is no longer a
foreign company which is domiciled in or organized under the
laws of Russia or Belarus.
(2) The President or Congress of the United States,
through executive order or legislation, declares that
mandatory divestment of the type provided for in this act
interferes with the conduct of United States foreign policy.
Section 7. Conflict with other laws.
(a) Compliance.--Except as otherwise provided under
subsection (b), a public fund may perform any action necessary
to comply with this act, notwithstanding the provisions of any
other law, including, but not limited to, any fiduciary or
prudent investing responsibilities as prescribed in 20 Pa.C.S. §
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7302 (relating to authorized investments; in general), 24
Pa.C.S. § 8521 (relating to management of fund and accounts), 71
Pa.C.S. § 5931 (relating to management of fund and accounts) and
section 110 of the act of February 1, 1974 (P.L.34, No.15),
known as the Pennsylvania Municipal Retirement Law, and any
obligations of a public fund with respect to choice of asset
managers, investment funds or investments for the public fund's
securities portfolios.
(b) Applicable standard.--Divestment under section 4(c)
shall be made in accordance with any applicable fiduciary or
prudent investing responsibilities as prescribed under 20
Pa.C.S. § 7302, 24 Pa.C.S. § 8521 and 71 Pa.C.S. § 5931, section
110 of the Pennsylvania Municipal Retirement Law and any
obligations of a public fund with respect to choice of asset
managers, investment funds or investments for the public fund's
securities portfolios.
Section 8. Indemnification.
(a) General rule.--Each indemnitee shall be indemnified and
held harmless by the Commonwealth for all good faith actions
taken by the indemnitee and for all good faith failures to take
action, regardless of the date of any such action or failure to
take action, in connection with attempts to comply with any
investment limitations imposed by statute against all expense,
liability and loss, including, without limitation, attorney
fees, judgments, fines, taxes, penalties and amounts paid or to
be paid in settlements reasonably incurred or suffered by the
indemnitee in connection with any proceeding.
(b) Advance payment.--The right to indemnification provided
under this section shall include the right to have the expenses
reasonably incurred by the indemnitee in defending any
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proceeding paid by the Commonwealth in advance of the final
disposition of the proceeding upon the receipt by the
Commonwealth of a written undertaking by the indemnitee to
refund the amounts so advanced if it is ultimately determined
that the indemnitee is not entitled to indemnification under
this section.
(c) Persons entitled.--Indemnification under this section
shall continue as to an indemnitee who has ceased to be a board
member, designee of a board member, officer or employee of a
public fund and shall inure to the benefit of such person's
legal representatives, heirs, executors and administrators.
(d) Reimbursement to public funds.--To the extent that the
Commonwealth does not make any indemnification payments,
including any advancement of legal fees and expenses, within 30
days of demand therefor, a public fund shall make such payment
and the Commonwealth shall reimburse the public fund.
(e) Construction.--The repeal, expiration or amendment of
any provision of this section shall not limit the rights of any
indemnitee to indemnification, including advancement of
expenses, with respect to any action or failure to act occurring
prior to the effective date of such repeal or amendment.
Section 9. Fund reimbursement.
The Commonwealth shall reimburse each public fund for the
public fund's net losses, costs and expenses incurred as a
result of compliance with the provisions of this act. The
reimbursements shall occur in the following manner:
(1) The public fund shall submit to the Secretary of the
Budget an itemization of the amount necessary to be
appropriated by the General Assembly to reimburse the public
fund for their net losses, costs and expenses incurred as a
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result of compliance with the provisions of section 4(a) and
(b) in the previous fiscal year. This paragraph shall only
apply to net losses, costs and expenses relating to a first
year in which a company meets the requirements criteria as a
sanctioned Russian company or a sanctioned Belarusian
company. To the extent the public fund experiences net gains
as a result of compliance with the provisions of section 4(a)
and (b) in a fiscal year, the net gains shall be used to
offset any reported costs or expenses incurred by the public
fund.
(2) In consultation with each public fund, the Secretary
of the Budget shall annually establish a uniform method for
the determination of gains and losses under paragraph (1).
The method shall be used by each public fund in making a
claim for reimbursement under this section. The budget
submission shall be on a form and in a manner determined by
the Secretary of the Budget, including net losses, along with
an itemized accounting of all costs and expenses claimed by
the public fund. Budget submission shall occur no later than
November 1 following the fiscal year in which the net losses,
costs and expenses were incurred.
(3) Upon appropriation by the General Assembly to
provide for the obligations of the Commonwealth, the amount
shall be paid by the State Treasurer through the Department
of Revenue into the public fund within 90 days of receipt of
the requisition presented by the public fund.
Section 10. Defined contribution plans.
(a) State Employees' Defined Contribution Plan and
Commonwealth's Deferred Compensation Plan.--The provisions and
restrictions of this act shall not apply to the State Employees'
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Defined Contribution Plan established under 71 Pa.C.S. Pt. XXV
(relating to retirement for State employees and officers), known
as the State Employees' Retirement Code, the Commonwealth's
Deferred Compensation Plan established under section VIII.2 of
the act of March 30, 1811 (P.L.145, No.99), referred to as the
Settlement of Public Accounts Act, or to the individual
investment accounts or the funds and investments therein of the
participants of the plans, but the State Employees' Retirement
Board is authorized to offer to the participants of the plans
investment vehicles that would be permitted under this act.
(b) School Employees' Defined Contribution Plan.--The
provisions and restrictions of this act shall not apply to the
School Employees' Defined Contribution Plan established under 24
Pa.C.S. Ch. 84 (relating to School Employees' Defined
Contribution Plan) or to the individual investment accounts or
the funds and investments therein of the participants of the
plan, but the Public School Employees' Retirement Board is
authorized to offer to the participants of the plan investment
vehicles that would be permitted under this act.
Section 11. Severability.
If any provision of this act or its application to any person
or circumstances is held invalid, the invalidity shall not
affect other provisions or applications of this act that can be
given effect without the invalid provision or application.
Section 12. Effective date.
This act shall take effect immediately.
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