Texas 2009 - 81st Regular

Texas Senate Bill SB450 Compare Versions

Only one version of the bill is available at this time.

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1	1	81R1679 BEF-F
2	2	By: Patrick, Dan S.B. No. 450
3	3
4	4
5	5	A BILL TO BE ENTITLED
6	6	AN ACT
7	7	relating to prohibiting the investment of retirement system funds
8	8	in certain private business entities doing business in Iran.
9	9	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
10	10	SECTION 1. The legislature finds that:
11	11	(1) Iran is a leading sponsor of international
12	12	terrorism;
13	13	(2) United Nations Security Council Resolution 1737
14	14	imposes sanctions on Iran for its failure to suspend
15	15	uranium-enrichment activities;
16	16	(3) foreign entities have active business operations
17	17	involving the government of Iran despite Iran's support of
18	18	international terrorism and clandestine nuclear program, affording
19	19	Iran a free pass while many United States entities have unknowingly
20	20	invested in those same foreign entities;
21	21	(4) all United States and foreign entities that have
22	22	invested more than $20 million in Iran's energy sector since August
23	23	5, 1996, are subject to sanctions under United States law pursuant
24	24	to the Iran and Libya Sanctions Act of 1996, renewed in 2001, and
25	25	renewed in 2006 as the Iran Freedom Support Act;
26	26	(5) investors from Texas can have considerable
27	27	influence over the commercial decisions of the foreign entities in
28	28	which they invest;
29	29	(6) support for terrorism and the acquisition of
30	30	weapons of mass destruction represent a grave threat to the
31	31	security of the United States and to the residents of the State of
32	32	Texas;
33	33	(7) the State of Texas is deeply concerned about
34	34	investments in publicly traded companies that have active business
35	35	operations involving the government of Iran as both a global
36	36	security and a financial risk to the shareholders;
37	37	(8) the Securities and Exchange Commission has
38	38	determined that companies having business operations in
39	39	terrorist-sponsoring states are exposed to a special risk category
40	40	known as "global security risk," which is the risk to stock value
41	41	and corporate reputation stemming from the intersection of a
42	42	publicly traded company's international business activities and
43	43	security-related concerns, such as terrorism and weapons
44	44	proliferation;
45	45	(9) by investing in publicly traded companies having
46	46	active business operations involving the government of Iran, the
47	47	State of Texas is putting the pensions of its current and former
48	48	public employees and teachers at risk;
49	49	(10) it is a fundamental responsibility of the state
50	50	to decide where, how, and by whom financial resources in its control
51	51	should be invested, taking into account numerous pertinent factors;
52	52	(11) to protect Texas' public assets, it is in the best
53	53	interest of the state to enact a statutory prohibition against the
54	54	investment of public employee retirement funds in companies having
55	55	active business operations involving the government of Iran;
56	56	(12) this Act should remain in effect only as long as
57	57	it continues to be consistent with, and does not unduly interfere
58	58	with, the foreign policy of the United States as determined by the
59	59	United States government;
60	60	(13) this Act is not intended to interfere with the
61	61	performance of the fiduciary duties of a manager of funds subject to
62	62	this Act; and
63	63	(14) mandatory divestment of public funds from certain
64	64	companies is a measure that should be employed sparingly and
65	65	judiciously and a congressional and presidential declaration that
66	66	Iran poses a serious threat to the national security of the United
67	67	States satisfies this high threshold.
68	68	SECTION 2. Subtitle A, Title 8, Government Code, is amended
69	69	by adding Chapter 807 to read as follows:
70	70	CHAPTER 807. PROHIBITION ON INVESTMENT IN IRAN
71	71	SUBCHAPTER A. GENERAL PROVISIONS
72	72	Sec. 807.001. DEFINITIONS. In this chapter:
73	73	(1) "Active business operations" means all business
74	74	operations that are not inactive business operations.
75	75	(2) "Business operations" means engaging in commerce
76	76	in any form in Iran, including by acquiring, developing,
77	77	maintaining, owning, selling, possessing, leasing, or operating
78	78	equipment, facilities, personnel, products, services, personal
79	79	property, real property, or any other apparatus of business or
80	80	commerce.
81	81	(3) "Company" means a sole proprietorship,
82	82	organization, association, corporation, partnership, joint
83	83	venture, limited partnership, limited liability partnership,
84	84	limited liability company, or other entity or business association
85	85	whose securities are publicly traded, including a wholly owned
86	86	subsidiary, majority-owned subsidiary, parent company, or
87	87	affiliate of those entities or business associations, that exists
88	88	to make a profit.
89	89	(4) "Direct holdings in a company" means all
90	90	securities of that company held directly by a state governmental
91	91	entity in an account or fund in which a state governmental entity
92	92	owns all shares or interests.
93	93	(5) "Inactive business operations" means the mere
94	94	continued holding or renewal of rights to property previously
95	95	operated to generate revenue but not presently deployed to generate
96	96	revenue.
97	97	(6) "Indirect holdings in a company" means all
98	98	securities of that company held in an account or fund, such as a
99	99	mutual fund, managed by one or more persons not employed by a state
100	100	governmental entity, in which the state governmental entity owns
101	101	shares or interests together with other investors not subject to
102	102	the provisions of this chapter. The term does not include money
103	103	invested under a plan described by Section 401(k) or 457 of the
104	104	Internal Revenue Code of 1986.
105	105	(7) "Listed company" means a company listed by the
106	106	comptroller under Section 807.051.
107	107	(8) "Military equipment" means weapons, arms,
108	108	military supplies, and equipment that readily may be used for
109	109	military purposes, including radar systems and military-grade
110	110	transport vehicles.
111	111	(9) "Scrutinized company" means a company that engages
112	112	in scrutinized business operations described by Section 807.002.
113	113	(10) "State governmental entity" means the Employees
114	114	Retirement System of Texas or the Teacher Retirement System of
115	115	Texas.
116	116	Sec. 807.002. SCRUTINIZED BUSINESS OPERATIONS. A company
117	117	engages in scrutinized business operations if:
118	118	(1) the company has business operations that involve
119	119	contracts with or providing supplies or services to the government
120	120	of Iran, a company in which the government of Iran has any direct or
121	121	indirect equity share, a consortium or project commissioned by the
122	122	government of Iran, or a company involved in a consortium or project
123	123	commissioned by the government of Iran; or
124	124	(2) the company supplies military equipment to Iran.
125	125	Sec. 807.003. EXCEPTION. Notwithstanding any provision of
126	126	this chapter, a company that the United States government
127	127	affirmatively declares to be excluded from its federal sanctions
128	128	regime relating to Iran is not subject to divestment or investment
129	129	prohibition under this chapter.
130	130	Sec. 807.004. OTHER LEGAL OBLIGATIONS. With respect to
131	131	actions taken in compliance with this chapter, including all good
132	132	faith determinations regarding companies as required by this
133	133	chapter, a state governmental entity is exempt from any conflicting
134	134	statutory or common law obligations, including any obligations with
135	135	respect to making investments, divesting from any investment,
136	136	preparing or maintaining any list of companies, or choosing asset
137	137	managers, investment funds, or investments for the state
138	138	governmental entity's securities portfolios.
139	139	Sec. 807.005. INDEMNIFICATION OF STATE GOVERNMENTAL
140	140	ENTITIES, EMPLOYEES, AND OTHERS. In a cause of action based on an
141	141	action, inaction, decision, divestment, investment, company
142	142	communication, report, or other determination made or taken in
143	143	connection with this chapter, the state shall, without regard to
144	144	whether the person performed services for compensation, indemnify
145	145	and hold harmless for actual damages, court costs, and attorney's
146	146	fees adjudged against, and defend:
147	147	(1) an employee, a member of the governing body, or any
148	148	other officer of a state governmental entity;
149	149	(2) a contractor of a state governmental entity;
150	150	(3) a former employee, a former member of the
151	151	governing body, or any other former officer of a state governmental
152	152	entity who was an employee or officer when the act or omission on
153	153	which the damages are based occurred; and
154	154	(4) a former contractor of a state governmental entity
155	155	who was a contractor when the act or omission on which the damages
156	156	are based occurred.
157	157	Sec. 807.006. NO PRIVATE CAUSE OF ACTION. (a) A person,
158	158	including a member, retiree, and beneficiary of a retirement system
159	159	to which this chapter applies, an association, a research firm, a
160	160	company, or any other person may not sue or pursue a private cause
161	161	of action against the state, a state governmental entity, an
162	162	employee, a member of the governing body, or any other officer of a
163	163	state governmental entity, or a contractor of a state governmental
164	164	entity, for any claim or cause of action, including breach of
165	165	fiduciary duty, or for violation of any constitutional, statutory,
166	166	or regulatory requirement in connection with any action, inaction,
167	167	decision, divestment, investment, company communication, report,
168	168	or other determination made or taken in connection with this
169	169	chapter.
170	170	(b) A person who files suit against the state, a state
171	171	governmental entity, an employee, a member of the governing body,
172	172	or any other officer of a state governmental entity, or a contractor
173	173	of a state governmental entity, is liable for paying the costs and
174	174	attorney's fees of a person sued in violation of this section.
175	175	[Sections 807.007-807.050 reserved for expansion]
176	176	SUBCHAPTER B. DUTIES REGARDING INVESTMENTS
177	177	Sec. 807.051. LISTED COMPANIES. (a) The comptroller shall
178	178	prepare and maintain, and provide to each state governmental
179	179	entity, a list of all scrutinized companies. In maintaining the
180	180	list, the comptroller may review and rely, as appropriate in the
181	181	comptroller's judgment, on publicly available information
182	182	regarding companies with business operations in Iran, including
183	183	information provided by the state, nonprofit organizations,
184	184	research firms, international organizations, and governmental
185	185	entities.
186	186	(b) The comptroller shall update the list annually or more
187	187	often as the comptroller considers necessary, but not more often
188	188	than quarterly, based on information from, among other sources,
189	189	those listed in Subsection (a).
190	190	(c) Not later than the 30th day after the date the list of
191	191	scrutinized companies is first provided or updated, the comptroller
192	192	shall file the list with the presiding officer of each house of the
193	193	legislature and the attorney general.
194	194	Sec. 807.052. IDENTIFICATION OF INVESTMENT IN LISTED
195	195	COMPANIES. Not later than the 14th day after the date a state
196	196	governmental entity receives the list provided under Section
197	197	807.051, the state governmental entity shall notify the comptroller
198	198	of the listed companies in which the state governmental entity owns
199	199	direct or indirect holdings.
200	200	Sec. 807.053. NOTICE TO LISTED COMPANY ENGAGED IN INACTIVE
201	201	BUSINESS OPERATIONS. For each listed company identified under
202	202	Section 807.052 that is engaged in only inactive scrutinized
203	203	business operations, the state governmental entity shall send a
204	204	written notice informing the company of this chapter and
205	205	encouraging the company to continue to refrain from initiating
206	206	active business operations in Iran until it is able to avoid being
207	207	considered a listed company. The state governmental entity shall
208	208	continue the correspondence as the entity considers necessary, but
209	209	is not required to initiate correspondence more often than
210	210	semiannually.
211	211	Sec. 807.054. ACTIONS RELATING TO LISTED COMPANY ENGAGED IN
212	212	ACTIVE BUSINESS OPERATIONS. (a) For each listed company
213	213	identified under Section 807.052 that is engaged in scrutinized
214	214	active business operations, the state governmental entity shall
215	215	send a written notice informing the company of its listed company
216	216	status and warning the company that it may become subject to
217	217	divestment by state governmental entities.
218	218	(b) The notice shall offer the company the opportunity to
219	219	clarify its Iran-related activities and shall encourage the
220	220	company, not later than the 90th day after the date the company
221	221	receives notice under this section, to either cease its scrutinized
222	222	business operations or convert such operations to inactive business
223	223	operations in order to avoid qualifying for divestment by state
224	224	governmental entities.
225	225	(c) If, during the time provided by Subsection (b), the
226	226	company ceases scrutinized business operations, the comptroller
227	227	shall remove the company from the list maintained under Section
228	228	807.051 and this chapter will no longer apply to the company unless
229	229	it resumes scrutinized business operations.
230	230	(d) If, during the time provided by Subsection (b), the
231	231	company converts its scrutinized active business operations to
232	232	inactive business operations, the company is subject to all
233	233	provisions of this chapter relating to inactive business
234	234	operations.
235	235	(e) If, after the time provided by Subsection (b) expires,
236	236	the company continues to have scrutinized active business
237	237	operations, the state governmental entity shall sell, redeem,
238	238	divest, or withdraw all publicly traded securities of the company,
239	239	except securities described by Section 807.056, according to the
240	240	schedule provided by Section 807.055.
241	241	Sec. 807.055. DIVESTMENT OF ASSETS. (a) A state
242	242	governmental entity required to sell, redeem, divest, or withdraw
243	243	all publicly traded securities of a listed company shall comply
244	244	with the following schedule:
245	245	(1) at least 50 percent of those assets shall be
246	246	removed from the state governmental entity's assets under
247	247	management not later than the 270th day after the date the company
248	248	receives notice under Section 807.054 or Subsection (b); and
249	249	(2) 100 percent of those assets shall be removed from
250	250	the state governmental entity's assets under management not later
251	251	than the 450th day after the date the company receives notice under
252	252	Section 807.054 or Subsection (b).
253	253	(b) If a company that ceased scrutinized active business
254	254	operations after receiving notice under Section 807.054 resumes
255	255	scrutinized active business operations, the state governmental
256	256	entity shall send a written notice to the company informing it that
257	257	the state governmental entity will sell, redeem, divest, or
258	258	withdraw all publicly traded securities of the scrutinized company
259	259	according to the schedule in Subsection (a).
260	260	(c) A state governmental entity may delay the schedule for
261	261	divestment under Subsection (a) only to the extent that the state
262	262	governmental entity determines, in the state governmental entity's
263	263	good faith judgment, that divestment from listed companies will
264	264	likely result in a loss in value described by Section 807.057(a).
265	265	If a state governmental entity delays the schedule for divestment,
266	266	the state governmental entity shall submit a report to the
267	267	presiding officer of each house of the legislature and the attorney
268	268	general stating the reasons and justification for the state
269	269	governmental entity's delay in divestment from listed companies.
270	270	The report must include documentation supporting its determination
271	271	that the divestment would result in a loss in value described by
272	272	Section 807.057(a), including objective numerical estimates. The
273	273	state governmental entity shall update the report every six months.
274	274	Sec. 807.056. INVESTMENTS EXEMPTED FROM DIVESTMENT. A
275	275	state governmental entity is not required to divest from any
276	276	indirect holdings in actively managed investment funds or private
277	277	equity funds. The state governmental entity shall submit letters
278	278	to the managers of investment funds containing listed companies
279	279	requesting that they consider removing those companies from the
280	280	fund or create a similar actively managed fund with indirect
281	281	holdings devoid of listed companies. If the manager creates a
282	282	similar fund with substantially the same management fees and same
283	283	level of investment risk, the state governmental entity shall
284	284	replace all applicable investments with investments in the similar
285	285	fund in an expedited time frame consistent with prudent fiduciary
286	286	standards.
287	287	Sec. 807.057. AUTHORIZED INVESTMENT IN LISTED COMPANIES.
288	288	(a) A state governmental entity may cease divesting from or may
289	289	reinvest in one or more listed companies if clear and convincing
290	290	evidence shows that the value for all assets under management by the
291	291	state governmental entity becomes equal to or less than 99.7
292	292	percent of the hypothetical value of all assets under management by
293	293	the state governmental entity had the state governmental entity not
294	294	divested from listed companies under this chapter.
295	295	(b) A state governmental entity may cease divesting from or
296	296	may reinvest in a listed company as provided by this section only to
297	297	the extent necessary to ensure that the value of the assets managed
298	298	by the state governmental entity does not fall below the value
299	299	described by Subsection (a).
300	300	(c) Before a state governmental entity may cease divesting
301	301	from or may reinvest in a listed company under this section, the
302	302	state governmental entity must provide a written report to the
303	303	presiding officer of each house of the legislature and the attorney
304	304	general setting forth the reason and justification, supported by
305	305	clear and convincing evidence, for its decisions to cease
306	306	divestment, to reinvest, or to remain invested in a listed company.
307	307	(d) The state governmental entity shall update the report
308	308	required by Subsection (c) semiannually, as applicable.
309	309	(e) This section does not apply to reinvestment in a company
310	310	that is no longer a listed company.
311	311	Sec. 807.058. PROHIBITED INVESTMENTS. Except as provided
312	312	by Sections 807.003 and 807.057, a state governmental entity may
313	313	not acquire securities of a listed company.
314	314	[Sections 807.059-807.100 reserved for expansion]
315	315	SUBCHAPTER C. EXPIRATION; REPORT; ENFORCEMENT
316	316	Sec. 807.101. EXPIRATION OF CHAPTER. This chapter expires
317	317	on the earlier of:
318	318	(1) the date the United States revokes its sanctions
319	319	against the government of Iran; or
320	320	(2) the date the United States Congress or the
321	321	president of the United States, through legislation or executive
322	322	order, declares that mandatory divestment of the type provided for
323	323	in this chapter interferes with the conduct of United States
324	324	foreign policy.
325	325	Sec. 807.102. REPORT. Not later than December 31 of each
326	326	year, each state governmental entity shall file a publicly
327	327	available report with the presiding officer of each house of the
328	328	legislature and the attorney general, that:
329	329	(1) identifies all securities sold, redeemed,
330	330	divested, or withdrawn in compliance with Section 807.055;
331	331	(2) identifies all prohibited investments under
332	332	Section 807.058; and
333	333	(3) summarizes any changes made under Section 807.056.
334	334	Sec. 807.103. ENFORCEMENT. The attorney general may bring
335	335	any action necessary to enforce this chapter.
336	336	SECTION 3. Not later than January 1, 2010, the comptroller
337	337	of public accounts shall prepare and provide to each state
338	338	governmental entity, as defined by Section 807.001, Government
339	339	Code, as added by this Act, the list of scrutinized companies
340	340	required by Section 807.051, Government Code, as added by this Act.
341	341	SECTION 4. This Act takes effect January 1, 2010.