83R9320 KFF-D
By: Taylor H.B. No. 819
Substitute the following for H.B. No. 819:
By: Callegari C.S.H.B. No. 819
A BILL TO BE ENTITLED
AN ACT
relating to prohibiting the investment of retirement system funds
in certain private business entities doing business in Iran.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subtitle A, Title 8, Government Code, is amended
by adding Chapter 807 to read as follows:
CHAPTER 807. PROHIBITION ON INVESTMENT IN IRAN
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 807.001. DEFINITIONS. In this chapter:
(1) "Active business operations" means all business
operations that are not inactive business operations.
(2) "Business operations" means engaging in commerce
in any form in Iran, including by acquiring, developing,
maintaining, owning, selling, possessing, leasing, or operating
equipment, facilities, personnel, products, services, personal
property, real property, or any other apparatus of business or
commerce.
(3) "Company" means a sole proprietorship,
organization, association, corporation, partnership, joint
venture, limited partnership, limited liability partnership,
limited liability company, or other entity or business association
whose securities are publicly traded, including a wholly owned
subsidiary, majority-owned subsidiary, parent company, or
affiliate of those entities or business associations, that exists
to make a profit.
(4) "Direct holdings" means, with respect to a
company, all securities of that company held directly by a state
governmental entity in an account or fund in which a state
governmental entity owns all shares or interests.
(5) "Inactive business operations" means the mere
continued holding or renewal of rights to property previously
operated to generate revenue but not presently deployed to generate
revenue.
(6) "Indirect holdings" means, with respect to a
company, all securities of that company held in an account or fund,
such as a mutual fund, managed by one or more persons not employed
by a state governmental entity, in which the state governmental
entity owns shares or interests together with other investors not
subject to the provisions of this chapter. The term does not
include money invested under a plan described by Section 401(k) or
457 of the Internal Revenue Code of 1986.
(7) "Listed company" means a company listed by the
comptroller under Section 807.051.
(8) "Military equipment" means weapons, arms,
military supplies, and equipment that readily may be used for
military purposes, including radar systems and military-grade
transport vehicles.
(9) "Scrutinized company" means a company that engages
in scrutinized business operations described by Section 807.002.
(10) "State governmental entity" means:
(A) the Employees Retirement System of Texas,
including a retirement system administered by that system;
(B) the Teacher Retirement System of Texas;
(C) the Texas Municipal Retirement System;
(D) the Texas County and District Retirement
System; and
(E) the Texas Emergency Services Retirement
System.
Sec. 807.002. SCRUTINIZED BUSINESS OPERATIONS. A company
engages in scrutinized business operations if:
(1) the company has business operations that involve
contracts with or providing supplies or services to the government
of Iran, a company in which the government of Iran has any direct or
indirect equity share, a consortium or project commissioned by the
government of Iran, or a company involved in a consortium or project
commissioned by the government of Iran; or
(2) the company supplies military equipment to Iran.
Sec. 807.003. EXCEPTION. Notwithstanding any provision of
this chapter, a company that the United States government
affirmatively declares to be excluded from its federal sanctions
regime relating to Iran is not subject to divestment or the
investment prohibition under this chapter.
Sec. 807.004. OTHER LEGAL OBLIGATIONS. With respect to
actions taken in compliance with this chapter, including all good
faith determinations regarding companies as required by this
chapter, a state governmental entity is exempt from any conflicting
statutory or common law obligations, including any obligations with
respect to making investments, divesting from any investment,
preparing or maintaining any list of companies, or choosing asset
managers, investment funds, or investments for the state
governmental entity's securities portfolios.
Sec. 807.005. INDEMNIFICATION OF STATE GOVERNMENTAL
ENTITIES, EMPLOYEES, AND OTHERS. In a cause of action based on an
action, inaction, decision, divestment, investment, company
communication, report, or other determination made or taken in
connection with this chapter, the state shall, without regard to
whether the person performed services for compensation, indemnify
and hold harmless for actual damages, court costs, and attorney's
fees adjudged against, and defend:
(1) an employee, a member of the governing body, or any
other officer of a state governmental entity;
(2) a contractor of a state governmental entity;
(3) a former employee, a former member of the
governing body, or any other former officer of a state governmental
entity who was an employee or officer when the act or omission on
which the damages are based occurred;
(4) a former contractor of a state governmental entity
who was a contractor when the act or omission on which the damages
are based occurred; and
(5) a state governmental entity.
Sec. 807.006. NO PRIVATE CAUSE OF ACTION. (a) A person,
including a member, retiree, or beneficiary of a retirement system
to which this chapter applies, an association, a research firm, a
company, or any other person may not sue or pursue a private cause
of action against the state, a state governmental entity, an
employee, a member of the governing body, or any other officer of a
state governmental entity, or a contractor of a state governmental
entity, for any claim or cause of action, including breach of
fiduciary duty, or for violation of any constitutional, statutory,
or regulatory requirement in connection with any action, inaction,
decision, divestment, investment, company communication, report,
or other determination made or taken in connection with this
chapter.
(b) A person who files suit against the state, a state
governmental entity, an employee, a member of the governing body,
or any other officer of a state governmental entity, or a contractor
of a state governmental entity, is liable for paying the costs and
attorney's fees of a person sued in violation of this section.
Sec. 807.007. INAPPLICABILITY OF REQUIREMENTS INCONSISTENT
WITH FIDUCIARY RESPONSIBILITIES AND RELATED DUTIES. A state
governmental entity is not subject to a requirement of this chapter
if the state governmental entity determines that the requirement
would be inconsistent with its fiduciary responsibility with
respect to the investment of entity assets or other duties imposed
by law relating to the investment of entity assets, including the
duty of care established under Section 67, Article XVI, Texas
Constitution.
Sec. 807.008. RELIANCE ON COMPANY RESPONSE. The
comptroller and a state governmental entity may rely on a company's
response to a notice or communication made under this chapter
without conducting any further investigation, research, or
inquiry.
SUBCHAPTER B. DUTIES REGARDING INVESTMENTS
Sec. 807.051. LISTED COMPANIES. (a) The comptroller shall
prepare and maintain, and provide to each state governmental
entity, a list of all scrutinized companies. In maintaining the
list, the comptroller may review and rely, as appropriate in the
comptroller's judgment, on publicly available information
regarding companies with business operations in Iran, including
information provided by the state, nonprofit organizations,
research firms, international organizations, and governmental
entities.
(b) The comptroller shall update the list annually or more
often as the comptroller considers necessary, but not more often
than quarterly, based on information from, among other sources,
those listed in Subsection (a).
(c) Not later than the 30th day after the date the list of
scrutinized companies is first provided or updated, the comptroller
shall file the list with the presiding officer of each house of the
legislature and the attorney general.
Sec. 807.052. IDENTIFICATION OF INVESTMENT IN LISTED
COMPANIES. Not later than the 14th day after the date a state
governmental entity receives the list provided under Section
807.051, the state governmental entity shall notify the comptroller
of the listed companies in which the state governmental entity owns
direct holdings or indirect holdings.
Sec. 807.053. NOTICE TO LISTED COMPANY ENGAGED IN INACTIVE
BUSINESS OPERATIONS. For each listed company identified under
Section 807.052 that is engaged in only scrutinized inactive
business operations, the state governmental entity shall send a
written notice informing the company of this chapter and
encouraging the company to continue to refrain from initiating
active business operations in Iran until it is able to avoid being
considered a listed company. The state governmental entity shall
continue the correspondence as the entity, in its sole discretion,
considers necessary, but is not required to initiate correspondence
more often than semiannually.
Sec. 807.054. ACTIONS RELATING TO LISTED COMPANY ENGAGED IN
ACTIVE BUSINESS OPERATIONS. (a) For each listed company
identified under Section 807.052 that is engaged in scrutinized
active business operations, the state governmental entity shall
send a written notice informing the company of its listed company
status and warning the company that it may become subject to
divestment by state governmental entities.
(b) The notice must offer the company the opportunity to
clarify its Iran-related activities and must encourage the company,
not later than the 90th day after the date the company receives
notice under this section, to either cease its scrutinized business
operations or convert the operations to inactive business
operations in order to avoid qualifying for divestment by state
governmental entities.
(c) If, during the time provided by Subsection (b), the
company ceases scrutinized business operations, the comptroller
shall remove the company from the list maintained under Section
807.051 and this chapter will no longer apply to the company unless
it resumes scrutinized business operations.
(d) If, during the time provided by Subsection (b), the
company converts its scrutinized active business operations to
inactive business operations, the company is subject to all
provisions of this chapter relating to inactive business
operations.
(e) If, after the time provided by Subsection (b) expires,
the company continues to have scrutinized active business
operations, the state governmental entity shall sell, redeem,
divest, or withdraw all publicly traded securities of the company,
except securities described by Section 807.056, according to the
schedule provided by Section 807.055.
Sec. 807.055. DIVESTMENT OF ASSETS. (a) A state
governmental entity required to sell, redeem, divest, or withdraw
all publicly traded securities of a listed company shall comply
with the following schedule:
(1) at least 50 percent of those assets must be removed
from the state governmental entity's assets under management not
later than the 270th day after the date the company receives notice
under Section 807.054 or Subsection (b) unless the state
governmental entity determines, based on a good faith exercise of
its fiduciary discretion and subject to Subdivision (2), that a
later date is more prudent; and
(2) 100 percent of those assets must be removed from
the state governmental entity's assets under management not later
than the 450th day after the date the company receives notice under
Section 807.054 or Subsection (b).
(b) If a company that ceased scrutinized active business
operations after receiving notice under Section 807.054 resumes
scrutinized active business operations, the state governmental
entity shall send a written notice to the company informing it that
the state governmental entity will sell, redeem, divest, or
withdraw all publicly traded securities of the scrutinized company
according to the schedule in Subsection (a).
(c) Except as provided by Subsection (a), a state
governmental entity may delay the schedule for divestment under
that subsection only to the extent that the state governmental
entity determines, in the state governmental entity's good faith
judgment, that divestment from listed companies will likely result
in a loss in value or a benchmark deviation described by Section
807.057(a). If a state governmental entity delays the schedule for
divestment, the state governmental entity shall submit a report to
the presiding officer of each house of the legislature and the
attorney general stating the reasons and justification for the
state governmental entity's delay in divestment from listed
companies. The report must include documentation supporting its
determination that the divestment would result in a loss in value or
benchmark deviation described by Section 807.057(a), including
objective numerical estimates. The state governmental entity shall
update the report every six months.
Sec. 807.056. INVESTMENTS EXEMPTED FROM DIVESTMENT. A
state governmental entity is not required to divest from any
indirect holdings in actively or passively managed investment funds
or private equity funds. The state governmental entity shall
submit letters to the managers of investment funds containing
listed companies requesting that they consider removing those
companies from the fund or create a similar actively or passively
managed fund with indirect holdings devoid of listed companies. If
the manager creates a similar fund with substantially the same
management fees and same level of investment risk and anticipated
return, the state governmental entity may replace all applicable
investments with investments in the similar fund in a time frame
consistent with prudent fiduciary standards.
Sec. 807.057. AUTHORIZED INVESTMENT IN LISTED COMPANIES.
(a) A state governmental entity may cease divesting from or may
reinvest in one or more listed companies if clear and convincing
evidence shows that:
(1) the state governmental entity has suffered or will
suffer a loss in the hypothetical value of all assets under
management by the state governmental entity as a result of having to
divest from listed companies under this chapter; or
(2) an individual portfolio that uses a
benchmark-aware strategy would be subject to an aggregate expected
deviation from its benchmark as a result of having to divest from
listed companies under this chapter.
(b) A state governmental entity may cease divesting from or
may reinvest in a listed company as provided by this section only to
the extent necessary to ensure that the state governmental entity
does not suffer a loss in value or deviate from its benchmark as
described by Subsection (a).
(c) Before a state governmental entity may cease divesting
from or may reinvest in a listed company under this section, the
state governmental entity must provide a written report to the
presiding officer of each house of the legislature and the attorney
general setting forth the reason and justification, supported by
clear and convincing evidence, for its decisions to cease
divestment, to reinvest, or to remain invested in a listed company.
(d) The state governmental entity shall update the report
required by Subsection (c) semiannually, as applicable.
(e) This section does not apply to reinvestment in a company
that is no longer a listed company.
Sec. 807.058. PROHIBITED INVESTMENTS. Except as provided
by Sections 807.003 and 807.057, a state governmental entity may
not acquire securities of a listed company.
SUBCHAPTER C. EXPIRATION; REPORT; ENFORCEMENT
Sec. 807.101. EXPIRATION OF CHAPTER. This chapter expires
on the earlier of:
(1) the date the United States revokes its sanctions
against the government of Iran; or
(2) the date the United States Congress or the
president of the United States, through legislation or executive
order, declares that mandatory divestment of the type provided for
in this chapter interferes with the conduct of United States
foreign policy.
Sec. 807.102. REPORT. Not later than December 31 of each
year, each state governmental entity shall file a publicly
available report with the presiding officer of each house of the
legislature and the attorney general, that:
(1) identifies all securities sold, redeemed,
divested, or withdrawn in compliance with Section 807.055;
(2) identifies all prohibited investments under
Section 807.058; and
(3) summarizes any changes made under Section 807.056.
Sec. 807.103. ENFORCEMENT. The attorney general may bring
any action necessary to enforce this chapter.
SECTION 2. Not later than January 1, 2014, the comptroller
of public accounts shall prepare and provide to each state
governmental entity, as defined by Section 807.001, Government
Code, as added by this Act, the list of scrutinized companies
required by Section 807.051, Government Code, as added by this Act.
SECTION 3. This Act takes effect January 1, 2014.