PERAC Memo #26 - 2001: Tobacco Company List
Tobacco Company List
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PERAC Memo #26/2001 transmits an updated Tobacco Company List (dated April 1, 2001), which replaces all prior versions and is effective immediately upon receipt, identifying companies deriving over 15% of revenue from tobacco sales that boards are prohibited from newly investing in under Chapter 119 of the Acts of 1997. Boards must distribute the list to their investment advisors (or direct them to it on PERAC's website), and any board found non-compliant during PERAC's audit process must divest in a prudent manner after consulting with PERAC beforehand. The memo also clarifies that pooled funds are assessed against the 15% threshold at the aggregate pool level, not by individual underlying holdings.
Full Text
PERAC MEMO #26/2001
M E M O R A N D U M TO: All Retirement Boards FROM: Joseph I. Martin, Deputy Executive Director RE: Tobacco Company List
DATE: April 20, 2001
On October 22, 1997 PERAC Memo #37/1997 informed you of the adoption of Chapter 119 of the Acts of 1997. That statute prohibits retirement systems from making any new investments in stocks, securities, or other obligations of any company which derives more than 15% of its revenue from the sale of tobacco products. On December 18, 1997 PERAC sent Memo #48 regarding the implementation of Chapter 119 and the first Tobacco Company List.
Enclosed please find a Tobacco Company List dated April 1, 2001. This list replaces any other Tobacco Company List previously sent to your board and is effective upon receipt by the retirement boards. After that, no new investments may be made in stocks, securities, or other obligations of these companies. Please forward a copy to your investment advisors or inform them that this list is available on the PERAC Home Page under the Investment Unit’s 2001 Memo Index.
As part of its audit process, PERAC will assess the portfolio of each board to determine compliance. That review will determine if the board, after January 13, 1998, has purchased stock, securities, or other obligations of any company which derives more than 15% of its revenue from the sale of tobacco products. In the event a portfolio is not in compliance, the board must bring the portfolio into compliance by divesting in a prudent manner. Prior to taking any action, the board shall consult with PERAC.
In applying the statute to pooled funds, PERAC will assess the 15% rule against the entire pool as the board is purchasing shares in the pool not the individual holdings of the pool. Thus a pooled fund, if in violation of this standard, will be included on the list.
If you have any questions, please call Robert Dennis, Investment Unit Director at 617-666-4446 ext. 922.