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Texas House Bill HB819

Texas 2013 - 83rd Regular

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11 83R9320 KFF-D
22 By: Taylor H.B. No. 819
33 Substitute the following for H.B. No. 819:
44 By: Callegari C.S.H.B. No. 819
55
66
77 A BILL TO BE ENTITLED
88 AN ACT
99 relating to prohibiting the investment of retirement system funds
1010 in certain private business entities doing business in Iran.
1111 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1212 SECTION 1. Subtitle A, Title 8, Government Code, is amended
1313 by adding Chapter 807 to read as follows:
1414 CHAPTER 807. PROHIBITION ON INVESTMENT IN IRAN
1515 SUBCHAPTER A. GENERAL PROVISIONS
1616 Sec. 807.001. DEFINITIONS. In this chapter:
1717 (1) "Active business operations" means all business
1818 operations that are not inactive business operations.
1919 (2) "Business operations" means engaging in commerce
2020 in any form in Iran, including by acquiring, developing,
2121 maintaining, owning, selling, possessing, leasing, or operating
2222 equipment, facilities, personnel, products, services, personal
2323 property, real property, or any other apparatus of business or
2424 commerce.
2525 (3) "Company" means a sole proprietorship,
2626 organization, association, corporation, partnership, joint
2727 venture, limited partnership, limited liability partnership,
2828 limited liability company, or other entity or business association
2929 whose securities are publicly traded, including a wholly owned
3030 subsidiary, majority-owned subsidiary, parent company, or
3131 affiliate of those entities or business associations, that exists
3232 to make a profit.
3333 (4) "Direct holdings" means, with respect to a
3434 company, all securities of that company held directly by a state
3535 governmental entity in an account or fund in which a state
3636 governmental entity owns all shares or interests.
3737 (5) "Inactive business operations" means the mere
3838 continued holding or renewal of rights to property previously
3939 operated to generate revenue but not presently deployed to generate
4040 revenue.
4141 (6) "Indirect holdings" means, with respect to a
4242 company, all securities of that company held in an account or fund,
4343 such as a mutual fund, managed by one or more persons not employed
4444 by a state governmental entity, in which the state governmental
4545 entity owns shares or interests together with other investors not
4646 subject to the provisions of this chapter. The term does not
4747 include money invested under a plan described by Section 401(k) or
4848 457 of the Internal Revenue Code of 1986.
4949 (7) "Listed company" means a company listed by the
5050 comptroller under Section 807.051.
5151 (8) "Military equipment" means weapons, arms,
5252 military supplies, and equipment that readily may be used for
5353 military purposes, including radar systems and military-grade
5454 transport vehicles.
5555 (9) "Scrutinized company" means a company that engages
5656 in scrutinized business operations described by Section 807.002.
5757 (10) "State governmental entity" means:
5858 (A) the Employees Retirement System of Texas,
5959 including a retirement system administered by that system;
6060 (B) the Teacher Retirement System of Texas;
6161 (C) the Texas Municipal Retirement System;
6262 (D) the Texas County and District Retirement
6363 System; and
6464 (E) the Texas Emergency Services Retirement
6565 System.
6666 Sec. 807.002. SCRUTINIZED BUSINESS OPERATIONS. A company
6767 engages in scrutinized business operations if:
6868 (1) the company has business operations that involve
6969 contracts with or providing supplies or services to the government
7070 of Iran, a company in which the government of Iran has any direct or
7171 indirect equity share, a consortium or project commissioned by the
7272 government of Iran, or a company involved in a consortium or project
7373 commissioned by the government of Iran; or
7474 (2) the company supplies military equipment to Iran.
7575 Sec. 807.003. EXCEPTION. Notwithstanding any provision of
7676 this chapter, a company that the United States government
7777 affirmatively declares to be excluded from its federal sanctions
7878 regime relating to Iran is not subject to divestment or the
7979 investment prohibition under this chapter.
8080 Sec. 807.004. OTHER LEGAL OBLIGATIONS. With respect to
8181 actions taken in compliance with this chapter, including all good
8282 faith determinations regarding companies as required by this
8383 chapter, a state governmental entity is exempt from any conflicting
8484 statutory or common law obligations, including any obligations with
8585 respect to making investments, divesting from any investment,
8686 preparing or maintaining any list of companies, or choosing asset
8787 managers, investment funds, or investments for the state
8888 governmental entity's securities portfolios.
8989 Sec. 807.005. INDEMNIFICATION OF STATE GOVERNMENTAL
9090 ENTITIES, EMPLOYEES, AND OTHERS. In a cause of action based on an
9191 action, inaction, decision, divestment, investment, company
9292 communication, report, or other determination made or taken in
9393 connection with this chapter, the state shall, without regard to
9494 whether the person performed services for compensation, indemnify
9595 and hold harmless for actual damages, court costs, and attorney's
9696 fees adjudged against, and defend:
9797 (1) an employee, a member of the governing body, or any
9898 other officer of a state governmental entity;
9999 (2) a contractor of a state governmental entity;
100100 (3) a former employee, a former member of the
101101 governing body, or any other former officer of a state governmental
102102 entity who was an employee or officer when the act or omission on
103103 which the damages are based occurred;
104104 (4) a former contractor of a state governmental entity
105105 who was a contractor when the act or omission on which the damages
106106 are based occurred; and
107107 (5) a state governmental entity.
108108 Sec. 807.006. NO PRIVATE CAUSE OF ACTION. (a) A person,
109109 including a member, retiree, or beneficiary of a retirement system
110110 to which this chapter applies, an association, a research firm, a
111111 company, or any other person may not sue or pursue a private cause
112112 of action against the state, a state governmental entity, an
113113 employee, a member of the governing body, or any other officer of a
114114 state governmental entity, or a contractor of a state governmental
115115 entity, for any claim or cause of action, including breach of
116116 fiduciary duty, or for violation of any constitutional, statutory,
117117 or regulatory requirement in connection with any action, inaction,
118118 decision, divestment, investment, company communication, report,
119119 or other determination made or taken in connection with this
120120 chapter.
121121 (b) A person who files suit against the state, a state
122122 governmental entity, an employee, a member of the governing body,
123123 or any other officer of a state governmental entity, or a contractor
124124 of a state governmental entity, is liable for paying the costs and
125125 attorney's fees of a person sued in violation of this section.
126126 Sec. 807.007. INAPPLICABILITY OF REQUIREMENTS INCONSISTENT
127127 WITH FIDUCIARY RESPONSIBILITIES AND RELATED DUTIES. A state
128128 governmental entity is not subject to a requirement of this chapter
129129 if the state governmental entity determines that the requirement
130130 would be inconsistent with its fiduciary responsibility with
131131 respect to the investment of entity assets or other duties imposed
132132 by law relating to the investment of entity assets, including the
133133 duty of care established under Section 67, Article XVI, Texas
134134 Constitution.
135135 Sec. 807.008. RELIANCE ON COMPANY RESPONSE. The
136136 comptroller and a state governmental entity may rely on a company's
137137 response to a notice or communication made under this chapter
138138 without conducting any further investigation, research, or
139139 inquiry.
140140 SUBCHAPTER B. DUTIES REGARDING INVESTMENTS
141141 Sec. 807.051. LISTED COMPANIES. (a) The comptroller shall
142142 prepare and maintain, and provide to each state governmental
143143 entity, a list of all scrutinized companies. In maintaining the
144144 list, the comptroller may review and rely, as appropriate in the
145145 comptroller's judgment, on publicly available information
146146 regarding companies with business operations in Iran, including
147147 information provided by the state, nonprofit organizations,
148148 research firms, international organizations, and governmental
149149 entities.
150150 (b) The comptroller shall update the list annually or more
151151 often as the comptroller considers necessary, but not more often
152152 than quarterly, based on information from, among other sources,
153153 those listed in Subsection (a).
154154 (c) Not later than the 30th day after the date the list of
155155 scrutinized companies is first provided or updated, the comptroller
156156 shall file the list with the presiding officer of each house of the
157157 legislature and the attorney general.
158158 Sec. 807.052. IDENTIFICATION OF INVESTMENT IN LISTED
159159 COMPANIES. Not later than the 14th day after the date a state
160160 governmental entity receives the list provided under Section
161161 807.051, the state governmental entity shall notify the comptroller
162162 of the listed companies in which the state governmental entity owns
163163 direct holdings or indirect holdings.
164164 Sec. 807.053. NOTICE TO LISTED COMPANY ENGAGED IN INACTIVE
165165 BUSINESS OPERATIONS. For each listed company identified under
166166 Section 807.052 that is engaged in only scrutinized inactive
167167 business operations, the state governmental entity shall send a
168168 written notice informing the company of this chapter and
169169 encouraging the company to continue to refrain from initiating
170170 active business operations in Iran until it is able to avoid being
171171 considered a listed company. The state governmental entity shall
172172 continue the correspondence as the entity, in its sole discretion,
173173 considers necessary, but is not required to initiate correspondence
174174 more often than semiannually.
175175 Sec. 807.054. ACTIONS RELATING TO LISTED COMPANY ENGAGED IN
176176 ACTIVE BUSINESS OPERATIONS. (a) For each listed company
177177 identified under Section 807.052 that is engaged in scrutinized
178178 active business operations, the state governmental entity shall
179179 send a written notice informing the company of its listed company
180180 status and warning the company that it may become subject to
181181 divestment by state governmental entities.
182182 (b) The notice must offer the company the opportunity to
183183 clarify its Iran-related activities and must encourage the company,
184184 not later than the 90th day after the date the company receives
185185 notice under this section, to either cease its scrutinized business
186186 operations or convert the operations to inactive business
187187 operations in order to avoid qualifying for divestment by state
188188 governmental entities.
189189 (c) If, during the time provided by Subsection (b), the
190190 company ceases scrutinized business operations, the comptroller
191191 shall remove the company from the list maintained under Section
192192 807.051 and this chapter will no longer apply to the company unless
193193 it resumes scrutinized business operations.
194194 (d) If, during the time provided by Subsection (b), the
195195 company converts its scrutinized active business operations to
196196 inactive business operations, the company is subject to all
197197 provisions of this chapter relating to inactive business
198198 operations.
199199 (e) If, after the time provided by Subsection (b) expires,
200200 the company continues to have scrutinized active business
201201 operations, the state governmental entity shall sell, redeem,
202202 divest, or withdraw all publicly traded securities of the company,
203203 except securities described by Section 807.056, according to the
204204 schedule provided by Section 807.055.
205205 Sec. 807.055. DIVESTMENT OF ASSETS. (a) A state
206206 governmental entity required to sell, redeem, divest, or withdraw
207207 all publicly traded securities of a listed company shall comply
208208 with the following schedule:
209209 (1) at least 50 percent of those assets must be removed
210210 from the state governmental entity's assets under management not
211211 later than the 270th day after the date the company receives notice
212212 under Section 807.054 or Subsection (b) unless the state
213213 governmental entity determines, based on a good faith exercise of
214214 its fiduciary discretion and subject to Subdivision (2), that a
215215 later date is more prudent; and
216216 (2) 100 percent of those assets must be removed from
217217 the state governmental entity's assets under management not later
218218 than the 450th day after the date the company receives notice under
219219 Section 807.054 or Subsection (b).
220220 (b) If a company that ceased scrutinized active business
221221 operations after receiving notice under Section 807.054 resumes
222222 scrutinized active business operations, the state governmental
223223 entity shall send a written notice to the company informing it that
224224 the state governmental entity will sell, redeem, divest, or
225225 withdraw all publicly traded securities of the scrutinized company
226226 according to the schedule in Subsection (a).
227227 (c) Except as provided by Subsection (a), a state
228228 governmental entity may delay the schedule for divestment under
229229 that subsection only to the extent that the state governmental
230230 entity determines, in the state governmental entity's good faith
231231 judgment, that divestment from listed companies will likely result
232232 in a loss in value or a benchmark deviation described by Section
233233 807.057(a). If a state governmental entity delays the schedule for
234234 divestment, the state governmental entity shall submit a report to
235235 the presiding officer of each house of the legislature and the
236236 attorney general stating the reasons and justification for the
237237 state governmental entity's delay in divestment from listed
238238 companies. The report must include documentation supporting its
239239 determination that the divestment would result in a loss in value or
240240 benchmark deviation described by Section 807.057(a), including
241241 objective numerical estimates. The state governmental entity shall
242242 update the report every six months.
243243 Sec. 807.056. INVESTMENTS EXEMPTED FROM DIVESTMENT. A
244244 state governmental entity is not required to divest from any
245245 indirect holdings in actively or passively managed investment funds
246246 or private equity funds. The state governmental entity shall
247247 submit letters to the managers of investment funds containing
248248 listed companies requesting that they consider removing those
249249 companies from the fund or create a similar actively or passively
250250 managed fund with indirect holdings devoid of listed companies. If
251251 the manager creates a similar fund with substantially the same
252252 management fees and same level of investment risk and anticipated
253253 return, the state governmental entity may replace all applicable
254254 investments with investments in the similar fund in a time frame
255255 consistent with prudent fiduciary standards.
256256 Sec. 807.057. AUTHORIZED INVESTMENT IN LISTED COMPANIES.
257257 (a) A state governmental entity may cease divesting from or may
258258 reinvest in one or more listed companies if clear and convincing
259259 evidence shows that:
260260 (1) the state governmental entity has suffered or will
261261 suffer a loss in the hypothetical value of all assets under
262262 management by the state governmental entity as a result of having to
263263 divest from listed companies under this chapter; or
264264 (2) an individual portfolio that uses a
265265 benchmark-aware strategy would be subject to an aggregate expected
266266 deviation from its benchmark as a result of having to divest from
267267 listed companies under this chapter.
268268 (b) A state governmental entity may cease divesting from or
269269 may reinvest in a listed company as provided by this section only to
270270 the extent necessary to ensure that the state governmental entity
271271 does not suffer a loss in value or deviate from its benchmark as
272272 described by Subsection (a).
273273 (c) Before a state governmental entity may cease divesting
274274 from or may reinvest in a listed company under this section, the
275275 state governmental entity must provide a written report to the
276276 presiding officer of each house of the legislature and the attorney
277277 general setting forth the reason and justification, supported by
278278 clear and convincing evidence, for its decisions to cease
279279 divestment, to reinvest, or to remain invested in a listed company.
280280 (d) The state governmental entity shall update the report
281281 required by Subsection (c) semiannually, as applicable.
282282 (e) This section does not apply to reinvestment in a company
283283 that is no longer a listed company.
284284 Sec. 807.058. PROHIBITED INVESTMENTS. Except as provided
285285 by Sections 807.003 and 807.057, a state governmental entity may
286286 not acquire securities of a listed company.
287287 SUBCHAPTER C. EXPIRATION; REPORT; ENFORCEMENT
288288 Sec. 807.101. EXPIRATION OF CHAPTER. This chapter expires
289289 on the earlier of:
290290 (1) the date the United States revokes its sanctions
291291 against the government of Iran; or
292292 (2) the date the United States Congress or the
293293 president of the United States, through legislation or executive
294294 order, declares that mandatory divestment of the type provided for
295295 in this chapter interferes with the conduct of United States
296296 foreign policy.
297297 Sec. 807.102. REPORT. Not later than December 31 of each
298298 year, each state governmental entity shall file a publicly
299299 available report with the presiding officer of each house of the
300300 legislature and the attorney general, that:
301301 (1) identifies all securities sold, redeemed,
302302 divested, or withdrawn in compliance with Section 807.055;
303303 (2) identifies all prohibited investments under
304304 Section 807.058; and
305305 (3) summarizes any changes made under Section 807.056.
306306 Sec. 807.103. ENFORCEMENT. The attorney general may bring
307307 any action necessary to enforce this chapter.
308308 SECTION 2. Not later than January 1, 2014, the comptroller
309309 of public accounts shall prepare and provide to each state
310310 governmental entity, as defined by Section 807.001, Government
311311 Code, as added by this Act, the list of scrutinized companies
312312 required by Section 807.051, Government Code, as added by this Act.
313313 SECTION 3. This Act takes effect January 1, 2014.