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PA Treasurer McCord Informs U.S. Attorney General of State Divestment Law Requirements
McCord sent letter to Attorney General Holder on behalf of Treasury and three public pension boards

HARRISBURG - In his capacity as Pennsylvania's chief investment officer – and on behalf of the Commonwealth's three largest public pension funds – State Treasurer Rob McCord last week sent a report apprising U.S. Attorney General Eric Holder of the Commonwealth's responsibilities under Act 44 of 2010, the state's recent divestment legislation.

"Prior to passage of the 'Protecting Pennsylvania's Investments Act,' my investment policy at Treasury had already incorporated many of the same geopolitical considerations and monitoring and reporting practices that Act 44 has now mandated by law," Treasurer McCord said. "Treasury is pleased and eager to coordinate the divestment process as required by state law in order to avoid direct holdings in companies that have a prohibited association with the nations of Sudan or Iran."

McCord's letter to Attorney General Holder is required by Pennsylvania's Act 44 legislation – Treasurer McCord supported and helped craft the legislation – and the letter outlines the monitoring, engaging, and reporting steps that Treasury and the public pension boards (as well as other public funds) must follow. A copy of McCord's letter is attached below.

Treasurer McCord is directly responsible for investing money belonging to nearly all Pennsylvania state agencies. Treasury's public funds investments include a wide range of holdings, including equities and mutual funds that are subject to the prudent investor standard, and with Treasurer McCord's approval, this standard now explicitly includes consideration of geopolitical risks associated with activities in Iran and Sudan.

Treasurer McCord also serves as the statutory custodian of various funds deposited with the Commonwealth, the largest of which are the state's Public School Employees' Retirement System, with assets currently of about $46 billion, State Employees' Retirement System, with assets currently of about $25 billion, and the Pennsylvania Municipal Retirement System, with assets currently of about $1.4 billion. The investments of each of these funds are managed and controlled by separate retirement boards that stand in a fiduciary relationship to their beneficiaries and are also subject to the prudent investor standard of care.

Pennsylvania Treasurer Rob McCord is committed to increasing the economic security and prosperity of all Pennsylvanians. Before winning the statewide elected job of State Treasurer, McCord was a successful business leader. He is now focused on strengthening the state’s economy, managing investments to get strong returns for taxpayers, and helping to create good jobs and retirement security for Pennsylvanians. To learn more about Treasurer McCord's initiatives, please visit the Pennsylvania Treasury at www.patreasury.gov.

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Dear Attorney General Holder:

I write to you pursuant to the Protecting Pennsylvania’s Investments Act (Act 44 of 2010, hereinafter cited as “Act 44”), a state divestment law that controls direct holdings by public funds in companies that have a prohibited association with the nations of Sudan or Iran. I am providing this report in accordance with Act 44 and with the Comprehensive Iran Sanctions Accountability and Divestment Act of 2010 (H.R. 2194, 111th Cong. Title II) § 202(e) and the Sudan Accountability and Divestment Act of 2007 (P.L. 110-174) §3.

Please accept this report from Pennsylvania Treasury, which is also acting on behalf of the other affected public funds that are required to provide you with a written report, namely the Pennsylvania State Employees' Retirement System, the Pennsylvania Public School Employees’ Retirement System and the Pennsylvania Municipal Retirement System. Each of these public funds has authorized me to act on its behalf in this regard.

The Pennsylvania Treasurer is statutorily designated as custodian of various funds deposited with the Commonwealth and is also authorized to invest on behalf of certain funds. Among the larger funds under the custody of the Treasurer is the Public School Employees’ Retirement Fund, with assets currently of about $46 billion, the State Employees’ Retirement Fund, with assets currently of about $25 billion, and the Pennsylvania Municipal Retirement Fund, with assets currently of about $1.4 billion. The investments of each of these funds are managed and controlled by separate retirement boards that stand in a fiduciary relationship to their beneficiaries and are subject to a prudent investor standard of care.

Act 44 regulates and limits the Treasurer’s and the pension boards' investment authority pertaining to investments in certain companies defined by the statute as “scrutinized companies” based upon their involvement or association with Sudan and Iran. In particular, Act 44 directs the Treasurer, the pension boards, and other public funds, as follows:

• Within 90 days, identify all scrutinized companies having business activities with either Sudan or Iran in which public funds are invested;
• Following the initial 90 day period, develop lists of all such scrutinized companies in each country;
• Provide written notice to each company on the scrutinized company lists advising the business that its business activities have resulted in a determination that it may become subject to divestment;
• Within 180 days of receipt of such written notice, if the notified company makes a public announcement indicating the intention of the company to cease activities with either Sudan or Iran, determine whether to remove the company from the scrutinized company list and maintain its investment; however,
• Within 180 days of receipt of such written notice, if the company has not made any public announcement concerning its intention to cease activities with either Sudan or Iran, the public fund shall completely divest its investment in the company within 26 months following the 180 day period.

Act 44 mandates additional monitoring and reporting requirements applicable to each Commonwealth public fund custodian. In addition, Act 44 permits scrutinized investments to continue or be reinstated under specific circumstances related to each nation’s status as a state sponsor of terrorism pursuant to the federal Foreign Relations Authorization Act of 1988 and 1989.

A complete copy of Act 44 is attached for your consideration. Please do not hesitate to get in touch with me if you have questions or if we can be of assistance.

Sincerely,

Robert M. McCord
Treasurer

cc: Leonard Knepp, Executive Director, State Employees’ Retirement System
cc: Jeffrey Clay, Executive Director, Public School Employees’ Retirement System
cc: James Allen, Secretary, Pennsylvania Municipal Retirement System

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