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House File 227 - IntroducedA Bill ForAn Act 1relating to the investment of certain public funds in
2and contracts with Chinese domiciled companies and funds.
3BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. Section 12.8, subsection 1, Code 2023, is amended
2to read as follows:
31. The treasurer of state shall invest or deposit, subject
4to chapters 12F, 12H, and 12J, and 12K and as provided by law,
5any of the public funds not currently needed for operating
6expenses and shall do so upon receipt of monthly notice from
7the director of the department of administrative services of
8the amount not so needed. In the event of loss on redemption
9or sale of securities invested as prescribed by law, and if
10the transaction is reported to the executive council, neither
11the treasurer nor director of the department of administrative
12services is personally liable but the loss shall be charged
13against the funds which would have received the profits or
14interest of the investment and there is appropriated from the
15funds the amount so required.
16 Sec. 2. NEW SECTION. 12K.1 Legislative findings and intent.
17The general assembly is deeply concerned about the
18activities of the Chinese communist party, the entity in
19control of the government of the People’s Republic of China, as
20well as the risks inherent in investing in companies domiciled
21in China and Hong Kong due to the control exercised by that
22entity. Therefore, the general assembly intends that state
23funds and funds administered by the state, including public
24employee retirement funds, should not be invested in China
25domiciled companies and funds.
26 Sec. 3. NEW SECTION. 12K.2 Definitions.
27As used in this chapter, unless the context otherwise
28requires:
291. “China domiciled company” means a company incorporated
30in, or whose principal place of business is in, the People’s
31Republic of China or in the Hong Kong special administrative
32region of the People’s Republic of China. “China domiciled
33company” does not include a company incorporated in, or whose
34principal place of business is in, the Republic of China.
352. “China exchange-traded fund” means a fund of investments
-1-1in multiple China domiciled company securities that trades
2intraday on an exchange like individual stocks, and tracks an
3underlying index of such securities.
43. “Company” means any business or business entity that is
5publicly traded and that is not based in the United States.
64. “Direct holdings” in a company or exchange traded
7fund means all publicly traded securities of that company or
8exchange traded fund that are held directly by the public fund
9in an actively managed account or fund in which the public fund
10owns all shares or interests.
115. “Public entity” means the state, political subdivisions
12of the state, public school corporations, and all public
13officers, boards, commissions, departments, agencies, and
14authorities empowered by law to enter into public contracts for
15the expenditure of public funds, including the state board of
16regents and institutions under the control of the state board
17of regents.
186. “Public fund” means the treasurer of state, the state
19board of regents, the public safety peace officers’ retirement
20system created in chapter 97A, the Iowa public employees’
21retirement system created in chapter 97B, the statewide fire
22and police retirement system created in chapter 411, or the
23judicial retirement system created in chapter 602.
24 Sec. 4. NEW SECTION. 12K.3 Identification of Chinese
25companies and exchange-traded funds.
261. a. By October 1, 2023, the public fund shall make its
27best efforts to identify or have identified all China domiciled
28companies and China exchange-traded funds in which the public
29fund has direct holdings and compile a list of such companies
30and exchange-traded funds. The public fund shall review on
31an annual basis and update, if necessary, the China domiciled
32companies and China exchange-traded funds list.
33b. In making its best efforts to identify or have identified
34China domiciled companies and China exchange-traded funds,
35the public fund may review and rely, in the best judgment of
-2-1the public fund, on publicly available information regarding
2companies, and including other information that may be provided
3by nonprofit organizations, research firms, international
4organizations, and government entities.
5 Sec. 5. NEW SECTION. 12K.4 Prohibited investments —
6divestment.
71. a. The public fund shall not acquire publicly traded
8securities of a company or exchange-traded fund on the
9public fund’s most recent China domiciled companies and
10China exchange-traded funds list so long as such company
11or exchange-traded fund remains on the public fund’s China
12domiciled companies and China exchange-traded funds list as
13provided in this chapter.
14b. The public fund shall not acquire publicly traded
15securities of a company or exchange-traded fund which it knows
16to be a China domiciled company or China exchange-traded fund
17regardless of whether it is on the China domiciled companies
18and China exchange-traded funds list.
192. a. The public fund shall sell, redeem, divest, or
20withdraw all publicly traded securities of a company or
21publicly traded exchange-traded funds on the public fund’s list
22of China domiciled companies and China exchange-traded funds
23within ninety calendar days after the issuance of the first
24such list and within thirty calendar days after the issuance of
25subsequent lists.
26b. The public fund shall sell, redeem, divest, or withdraw
27all publicly traded securities of a company or exchange-traded
28fund within ninety calendar days of becoming aware it is a
29China domiciled company or China exchange-traded fund even if
30such company or fund is not yet on the public fund’s list of
31China domiciled companies and China exchange-traded funds.
32c. This subsection shall not be construed to require the
33premature or otherwise imprudent sale, redemption, divestment,
34or withdrawal of an investment, but such sale, redemption,
35divestment, or withdrawal shall be completed as provided by
-3-1this subsection.
2 Sec. 6. NEW SECTION. 12K.5 Reports.
31. Each public fund shall, within thirty days after the
4China domiciled companies and China exchange-traded funds list
5is created or updated as required by section 12K.3, make the
6list available to the public.
72. On October 1, 2023, and each October 1 thereafter, each
8public fund shall make available to the public, and file with
9the general assembly, an annual report covering the prior
10fiscal year that includes all of the following:
11a. The China domiciled companies and China exchange-traded
12funds list as of the end of the fiscal year.
13b. All investments sold, redeemed, divested, or withdrawn as
14provided in section 12K.4 during the fiscal year.
15 Sec. 7. NEW SECTION. 12K.6 Public entities — contract
16requirements.
17A public entity shall not enter into a contract of one
18thousand dollars or more with a China domiciled company
19included on a China domiciled company list created by a public
20fund pursuant to section 12K.3 or with any other company which
21the public entity is aware is a China domiciled company.
22 Sec. 8. NEW SECTION. 12K.7 Legal obligations — immunity.
23With respect to actions taken in compliance with this
24chapter, including all good-faith determinations regarding
25companies and exchange-traded funds as required by this
26chapter, the public fund shall be immune from any liability
27and exempt from any conflicting statutory or common law
28obligations, including but not limited to any such obligations
29in respect to choice of investments for the public fund’s
30securities portfolios.
31 Sec. 9. Section 35A.13, subsection 4, paragraph a, Code
322023, is amended to read as follows:
33a. Notwithstanding subsection 5, moneys in the fund, except
34so much of the fund as may be necessary to be kept on hand
35for the making of disbursements under this section, shall
-4-1be invested by the treasurer of state, in consultation with
2the commission and the public retirement systems committee
3established by section 97D.4, in any investments authorized for
4the Iowa public employees’ retirement system in section 97B.7A,
5including common stock, and subject to the requirements of
6chapters 12F, 12H, and 12J, and 12K, and the earnings therefrom
7shall be credited to the fund. The treasurer of state may
8execute contracts and agreements with investment advisors,
9consultants, and investment management and benefit consultant
10firms in the administration of investments of moneys in the
11fund.
12 Sec. 10. Section 97A.7, subsection 1, Code 2023, is amended
13to read as follows:
141. The board of trustees shall be the trustees of the
15retirement fund created by this chapter as provided in section
1697A.8 and shall have full power to invest and reinvest funds
17subject to the terms, conditions, limitations, and restrictions
18imposed by subsection 2 and chapters 12F, 12H, and 12J, and
1912K and subject to like terms, conditions, limitations, and
20restrictions said trustees shall have full power to hold,
21purchase, sell, assign, transfer, or dispose of any of the
22securities and investments of the retirement fund which have
23been invested, as well as of the proceeds of said investments
24and any moneys belonging to the retirement fund. The board
25of trustees may authorize the treasurer of state to exercise
26any of the duties of this section. When so authorized the
27treasurer of state shall report any transactions to the board
28of trustees at its next monthly meeting.
29 Sec. 11. Section 97B.4, subsection 5, Code 2023, is amended
30to read as follows:
315. Investments. The system, through the chief investment
32officer, shall invest, subject to chapters 12F, 12H, and 12J,
33and 12K and in accordance with the investment policy and
34goal statement established by the board, the portion of the
35retirement fund which, in the judgment of the system, is not
-5-1needed for current payment of benefits under this chapter
2subject to the requirements of section 97B.7A.
3 Sec. 12. Section 262.14, unnumbered paragraph 1, Code 2023,
4is amended to read as follows:
5The board may invest funds belonging to the institutions,
6subject to chapters 12F, 12H, and 12J, and 12K and the
7following regulations:
8 Sec. 13. Section 411.7, subsection 1, Code 2023, is amended
9to read as follows:
101. The board of trustees is the trustee of the fire
11and police retirement fund created in section 411.8 and
12shall annually establish an investment policy to govern the
13investment and reinvestment of the moneys in the fund, subject
14to the terms, conditions, limitations, and restrictions
15imposed by subsection 2 and chapters 12F, 12H, and 12J, and
1612K. Subject to like terms, conditions, limitations, and
17restrictions the system has full power to hold, purchase, sell,
18assign, transfer, or dispose of any of the securities and
19investments in which the fund has been invested, as well as of
20the proceeds of the investments and any moneys belonging to the
21fund.
22 Sec. 14. Section 602.9111, subsection 1, Code 2023, is
23amended to read as follows:
241. So much of the judicial retirement fund as may not be
25necessary to be kept on hand for the making of disbursements
26under this article shall be invested by the treasurer of
27state in any investments authorized for the Iowa public
28employees’ retirement system in section 97B.7A and subject to
29the requirements of chapters 12F, 12H, and 12J, and 12K, and
30the earnings therefrom shall be credited to the fund. The
31treasurer of state may execute contracts and agreements with
32investment advisors, consultants, and investment management and
33benefit consultant firms in the administration of the judicial
34retirement fund.
35EXPLANATION
-6-1The inclusion of this explanation does not constitute agreement with
2the explanation’s substance by the members of the general assembly.
3This bill creates new Code chapter 12K, which restricts
4public funds, defined as the treasurer of state, the state
5board of regents, the Iowa public employees’ retirement system
6(IPERS), the public safety peace officers’ retirement system,
7the statewide fire and police retirement system, and the
8judicial retirement system, and public entities, defined to
9include a public fund and the state and political subdivisions
10of the state, from generally investing in China domiciled
11companies and China exchange-traded funds and entering into a
12contract with China domiciled companies.
13The bill defines “China domiciled company” as a company
14incorporated in, or whose principal place of business is in,
15the People’s Republic of China or in the Hong Kong special
16administrative region of the People’s Republic of China.
17The definition excludes companies incorporated or located
18in the Republic of China. The bill also defines “China
19exchange-traded fund” as a fund of investments in multiple
20China domiciled company securities that trades intraday on an
21exchange like individual stocks, and tracks an underlying index
22of such securities.
23The bill requires a public fund to identify all China
24domiciled companies and China exchange-traded funds in which
25the public fund has direct holdings by October 1, 2023.
26Additionally, the bill requires a public fund to create and
27make available to the public the list and review and update
28the list on an annual basis. The bill authorizes a public
29fund to review and rely on publicly available information and
30information from other sources when identifying prohibited
31companies.
32The bill prohibits a public fund from acquiring direct
33holdings in China domiciled companies and China exchange-traded
34funds publicly traded securities. The bill requires a public
35fund to sell, redeem, divest, or withdraw all direct holdings
-7-1in publicly traded securities of such a company or fund
2no later than 90 days following the date the public fund
3becomes aware that it is a China domiciled company or China
4exchange-traded fund.
5The bill requires each public fund, within 30 days after the
6list of China domiciled companies and China exchange-traded
7funds is created or updated, to make the list available to the
8public. Additionally, the bill requires a public fund to make
9available to the public and file with the general assembly an
10annual report beginning October 1, 2023, and each October 1
11thereafter.
12The bill also provides that a public entity shall not enter
13into a contract of $1,000 or more with a China domiciled
14company.
15The bill provides that, with respect to actions taken
16in compliance with the bill, including all good-faith
17determinations regarding companies and funds subject to the
18bill, the public fund shall be immune from any liability
19and exempt from any conflicting statutory or common law
20obligations, including any such obligations in respect
21to choice of investments for the public fund’s securities
22portfolios.
23The bill makes conforming changes to Code sections 12.8,
2435A.13, 97A.7, 97B.4, 262.14, 411.7, and 602.9111.
-8-ec/rn
2and contracts with Chinese domiciled companies and funds.
3BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. Section 12.8, subsection 1, Code 2023, is amended
2to read as follows:
31. The treasurer of state shall invest or deposit, subject
4to chapters 12F, 12H, and 12J, and 12K and as provided by law,
5any of the public funds not currently needed for operating
6expenses and shall do so upon receipt of monthly notice from
7the director of the department of administrative services of
8the amount not so needed. In the event of loss on redemption
9or sale of securities invested as prescribed by law, and if
10the transaction is reported to the executive council, neither
11the treasurer nor director of the department of administrative
12services is personally liable but the loss shall be charged
13against the funds which would have received the profits or
14interest of the investment and there is appropriated from the
15funds the amount so required.
16 Sec. 2. NEW SECTION. 12K.1 Legislative findings and intent.
17The general assembly is deeply concerned about the
18activities of the Chinese communist party, the entity in
19control of the government of the People’s Republic of China, as
20well as the risks inherent in investing in companies domiciled
21in China and Hong Kong due to the control exercised by that
22entity. Therefore, the general assembly intends that state
23funds and funds administered by the state, including public
24employee retirement funds, should not be invested in China
25domiciled companies and funds.
26 Sec. 3. NEW SECTION. 12K.2 Definitions.
27As used in this chapter, unless the context otherwise
28requires:
291. “China domiciled company” means a company incorporated
30in, or whose principal place of business is in, the People’s
31Republic of China or in the Hong Kong special administrative
32region of the People’s Republic of China. “China domiciled
33company” does not include a company incorporated in, or whose
34principal place of business is in, the Republic of China.
352. “China exchange-traded fund” means a fund of investments
-1-1in multiple China domiciled company securities that trades
2intraday on an exchange like individual stocks, and tracks an
3underlying index of such securities.
43. “Company” means any business or business entity that is
5publicly traded and that is not based in the United States.
64. “Direct holdings” in a company or exchange traded
7fund means all publicly traded securities of that company or
8exchange traded fund that are held directly by the public fund
9in an actively managed account or fund in which the public fund
10owns all shares or interests.
115. “Public entity” means the state, political subdivisions
12of the state, public school corporations, and all public
13officers, boards, commissions, departments, agencies, and
14authorities empowered by law to enter into public contracts for
15the expenditure of public funds, including the state board of
16regents and institutions under the control of the state board
17of regents.
186. “Public fund” means the treasurer of state, the state
19board of regents, the public safety peace officers’ retirement
20system created in chapter 97A, the Iowa public employees’
21retirement system created in chapter 97B, the statewide fire
22and police retirement system created in chapter 411, or the
23judicial retirement system created in chapter 602.
24 Sec. 4. NEW SECTION. 12K.3 Identification of Chinese
25companies and exchange-traded funds.
261. a. By October 1, 2023, the public fund shall make its
27best efforts to identify or have identified all China domiciled
28companies and China exchange-traded funds in which the public
29fund has direct holdings and compile a list of such companies
30and exchange-traded funds. The public fund shall review on
31an annual basis and update, if necessary, the China domiciled
32companies and China exchange-traded funds list.
33b. In making its best efforts to identify or have identified
34China domiciled companies and China exchange-traded funds,
35the public fund may review and rely, in the best judgment of
-2-1the public fund, on publicly available information regarding
2companies, and including other information that may be provided
3by nonprofit organizations, research firms, international
4organizations, and government entities.
5 Sec. 5. NEW SECTION. 12K.4 Prohibited investments —
6divestment.
71. a. The public fund shall not acquire publicly traded
8securities of a company or exchange-traded fund on the
9public fund’s most recent China domiciled companies and
10China exchange-traded funds list so long as such company
11or exchange-traded fund remains on the public fund’s China
12domiciled companies and China exchange-traded funds list as
13provided in this chapter.
14b. The public fund shall not acquire publicly traded
15securities of a company or exchange-traded fund which it knows
16to be a China domiciled company or China exchange-traded fund
17regardless of whether it is on the China domiciled companies
18and China exchange-traded funds list.
192. a. The public fund shall sell, redeem, divest, or
20withdraw all publicly traded securities of a company or
21publicly traded exchange-traded funds on the public fund’s list
22of China domiciled companies and China exchange-traded funds
23within ninety calendar days after the issuance of the first
24such list and within thirty calendar days after the issuance of
25subsequent lists.
26b. The public fund shall sell, redeem, divest, or withdraw
27all publicly traded securities of a company or exchange-traded
28fund within ninety calendar days of becoming aware it is a
29China domiciled company or China exchange-traded fund even if
30such company or fund is not yet on the public fund’s list of
31China domiciled companies and China exchange-traded funds.
32c. This subsection shall not be construed to require the
33premature or otherwise imprudent sale, redemption, divestment,
34or withdrawal of an investment, but such sale, redemption,
35divestment, or withdrawal shall be completed as provided by
-3-1this subsection.
2 Sec. 6. NEW SECTION. 12K.5 Reports.
31. Each public fund shall, within thirty days after the
4China domiciled companies and China exchange-traded funds list
5is created or updated as required by section 12K.3, make the
6list available to the public.
72. On October 1, 2023, and each October 1 thereafter, each
8public fund shall make available to the public, and file with
9the general assembly, an annual report covering the prior
10fiscal year that includes all of the following:
11a. The China domiciled companies and China exchange-traded
12funds list as of the end of the fiscal year.
13b. All investments sold, redeemed, divested, or withdrawn as
14provided in section 12K.4 during the fiscal year.
15 Sec. 7. NEW SECTION. 12K.6 Public entities — contract
16requirements.
17A public entity shall not enter into a contract of one
18thousand dollars or more with a China domiciled company
19included on a China domiciled company list created by a public
20fund pursuant to section 12K.3 or with any other company which
21the public entity is aware is a China domiciled company.
22 Sec. 8. NEW SECTION. 12K.7 Legal obligations — immunity.
23With respect to actions taken in compliance with this
24chapter, including all good-faith determinations regarding
25companies and exchange-traded funds as required by this
26chapter, the public fund shall be immune from any liability
27and exempt from any conflicting statutory or common law
28obligations, including but not limited to any such obligations
29in respect to choice of investments for the public fund’s
30securities portfolios.
31 Sec. 9. Section 35A.13, subsection 4, paragraph a, Code
322023, is amended to read as follows:
33a. Notwithstanding subsection 5, moneys in the fund, except
34so much of the fund as may be necessary to be kept on hand
35for the making of disbursements under this section, shall
-4-1be invested by the treasurer of state, in consultation with
2the commission and the public retirement systems committee
3established by section 97D.4, in any investments authorized for
4the Iowa public employees’ retirement system in section 97B.7A,
5including common stock, and subject to the requirements of
6chapters 12F, 12H, and 12J, and 12K, and the earnings therefrom
7shall be credited to the fund. The treasurer of state may
8execute contracts and agreements with investment advisors,
9consultants, and investment management and benefit consultant
10firms in the administration of investments of moneys in the
11fund.
12 Sec. 10. Section 97A.7, subsection 1, Code 2023, is amended
13to read as follows:
141. The board of trustees shall be the trustees of the
15retirement fund created by this chapter as provided in section
1697A.8 and shall have full power to invest and reinvest funds
17subject to the terms, conditions, limitations, and restrictions
18imposed by subsection 2 and chapters 12F, 12H, and 12J, and
1912K and subject to like terms, conditions, limitations, and
20restrictions said trustees shall have full power to hold,
21purchase, sell, assign, transfer, or dispose of any of the
22securities and investments of the retirement fund which have
23been invested, as well as of the proceeds of said investments
24and any moneys belonging to the retirement fund. The board
25of trustees may authorize the treasurer of state to exercise
26any of the duties of this section. When so authorized the
27treasurer of state shall report any transactions to the board
28of trustees at its next monthly meeting.
29 Sec. 11. Section 97B.4, subsection 5, Code 2023, is amended
30to read as follows:
315. Investments. The system, through the chief investment
32officer, shall invest, subject to chapters 12F, 12H, and 12J,
33and 12K and in accordance with the investment policy and
34goal statement established by the board, the portion of the
35retirement fund which, in the judgment of the system, is not
-5-1needed for current payment of benefits under this chapter
2subject to the requirements of section 97B.7A.
3 Sec. 12. Section 262.14, unnumbered paragraph 1, Code 2023,
4is amended to read as follows:
5The board may invest funds belonging to the institutions,
6subject to chapters 12F, 12H, and 12J, and 12K and the
7following regulations:
8 Sec. 13. Section 411.7, subsection 1, Code 2023, is amended
9to read as follows:
101. The board of trustees is the trustee of the fire
11and police retirement fund created in section 411.8 and
12shall annually establish an investment policy to govern the
13investment and reinvestment of the moneys in the fund, subject
14to the terms, conditions, limitations, and restrictions
15imposed by subsection 2 and chapters 12F, 12H, and 12J, and
1612K. Subject to like terms, conditions, limitations, and
17restrictions the system has full power to hold, purchase, sell,
18assign, transfer, or dispose of any of the securities and
19investments in which the fund has been invested, as well as of
20the proceeds of the investments and any moneys belonging to the
21fund.
22 Sec. 14. Section 602.9111, subsection 1, Code 2023, is
23amended to read as follows:
241. So much of the judicial retirement fund as may not be
25necessary to be kept on hand for the making of disbursements
26under this article shall be invested by the treasurer of
27state in any investments authorized for the Iowa public
28employees’ retirement system in section 97B.7A and subject to
29the requirements of chapters 12F, 12H, and 12J, and 12K, and
30the earnings therefrom shall be credited to the fund. The
31treasurer of state may execute contracts and agreements with
32investment advisors, consultants, and investment management and
33benefit consultant firms in the administration of the judicial
34retirement fund.
35EXPLANATION
-6-1The inclusion of this explanation does not constitute agreement with
2the explanation’s substance by the members of the general assembly.
3This bill creates new Code chapter 12K, which restricts
4public funds, defined as the treasurer of state, the state
5board of regents, the Iowa public employees’ retirement system
6(IPERS), the public safety peace officers’ retirement system,
7the statewide fire and police retirement system, and the
8judicial retirement system, and public entities, defined to
9include a public fund and the state and political subdivisions
10of the state, from generally investing in China domiciled
11companies and China exchange-traded funds and entering into a
12contract with China domiciled companies.
13The bill defines “China domiciled company” as a company
14incorporated in, or whose principal place of business is in,
15the People’s Republic of China or in the Hong Kong special
16administrative region of the People’s Republic of China.
17The definition excludes companies incorporated or located
18in the Republic of China. The bill also defines “China
19exchange-traded fund” as a fund of investments in multiple
20China domiciled company securities that trades intraday on an
21exchange like individual stocks, and tracks an underlying index
22of such securities.
23The bill requires a public fund to identify all China
24domiciled companies and China exchange-traded funds in which
25the public fund has direct holdings by October 1, 2023.
26Additionally, the bill requires a public fund to create and
27make available to the public the list and review and update
28the list on an annual basis. The bill authorizes a public
29fund to review and rely on publicly available information and
30information from other sources when identifying prohibited
31companies.
32The bill prohibits a public fund from acquiring direct
33holdings in China domiciled companies and China exchange-traded
34funds publicly traded securities. The bill requires a public
35fund to sell, redeem, divest, or withdraw all direct holdings
-7-1in publicly traded securities of such a company or fund
2no later than 90 days following the date the public fund
3becomes aware that it is a China domiciled company or China
4exchange-traded fund.
5The bill requires each public fund, within 30 days after the
6list of China domiciled companies and China exchange-traded
7funds is created or updated, to make the list available to the
8public. Additionally, the bill requires a public fund to make
9available to the public and file with the general assembly an
10annual report beginning October 1, 2023, and each October 1
11thereafter.
12The bill also provides that a public entity shall not enter
13into a contract of $1,000 or more with a China domiciled
14company.
15The bill provides that, with respect to actions taken
16in compliance with the bill, including all good-faith
17determinations regarding companies and funds subject to the
18bill, the public fund shall be immune from any liability
19and exempt from any conflicting statutory or common law
20obligations, including any such obligations in respect
21to choice of investments for the public fund’s securities
22portfolios.
23The bill makes conforming changes to Code sections 12.8,
2435A.13, 97A.7, 97B.4, 262.14, 411.7, and 602.9111.
-8-ec/rn