85R84 TSR-D
By: Sanford H.B. No. 1902
A BILL TO BE ENTITLED
AN ACT
relating to prohibiting the investment of certain retirement system
funds in publicly traded business entities that donate to Planned
Parenthood.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subtitle A, Title 8, Government Code, is amended
by adding Chapter 808 to read as follows:
CHAPTER 808. PROHIBITION ON INVESTMENT IN COMPANIES THAT DONATE TO
PLANNED PARENTHOOD
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 808.001. DEFINITIONS. In this chapter:
(1) "Board" means the State Pension Review Board.
(2) "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.
(3) "Direct holdings" means, with respect to a
company, all securities of that company held directly by a
retirement system in an account or fund in which a retirement system
owns all shares or interests.
(4) "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 retirement system, in which the retirement system 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.
(5) "Listed company" means a company listed by the
board under Section 808.051.
(6) "Planned Parenthood" means the Planned Parenthood
Federation of America.
(7) "Retirement system" means the Employees
Retirement System of Texas or the Teacher Retirement System of
Texas.
(8) "Scrutinized company" means a company that donates
money or property directly to Planned Parenthood. The term does not
include a company whose only donations to Planned Parenthood
consist of making contributions to Planned Parenthood to match
contributions made by employees or retirees of the company.
Sec. 808.002. 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 retirement system is exempt from any conflicting
statutory or common law obligations, including any obligation 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 retirement
system's securities portfolios.
Sec. 808.003. INDEMNIFICATION OF RETIREMENT SYSTEMS,
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 retirement system;
(2) a contractor of a retirement system;
(3) a former employee, a former member of the
governing body, or any other former officer of a retirement system
who was an employee or officer when the act or omission on which the
damages are based occurred;
(4) a former contractor of a retirement system who was
a contractor when the act or omission on which the damages are based
occurred; and
(5) a retirement system.
Sec. 808.004. NO PRIVATE CAUSE OF ACTION. (a) A person,
including a member, retiree, or beneficiary of a retirement system,
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
retirement system, an employee, a member of the governing body, or
any other officer of a retirement system, or a contractor of a
retirement system, 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 retirement
system, an employee, a member of the governing body, or any other
officer of a retirement system, or a contractor of a retirement
system, is liable for paying the costs and attorney's fees of a
person sued in violation of this section.
Sec. 808.005. INAPPLICABILITY OF REQUIREMENTS INCONSISTENT
WITH FIDUCIARY RESPONSIBILITIES AND RELATED DUTIES. A retirement
system is not subject to a requirement of this chapter if the
retirement system determines that the requirement would be
inconsistent with its fiduciary responsibility with respect to the
investment of the system's assets or other duties imposed by law
relating to the investment of the system's assets, including the
duty of care established under Section 67, Article XVI, Texas
Constitution.
Sec. 808.006. RELIANCE ON COMPANY RESPONSE. The board and a
retirement system 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. 808.051. LISTED COMPANIES. (a) The board shall
prepare and maintain, and provide to each retirement system, a list
of all scrutinized companies. In maintaining the list, the board
may review and rely on, as appropriate in the board's judgment,
publicly available information regarding companies that donate
directly to Planned Parenthood, including information provided by
the state, nonprofit organizations, research firms, international
organizations, and governmental entities.
(b) The board shall update the list annually or more often
as the board considers necessary, but not more often than
quarterly.
(c) Not later than the 30th day after the date the list of
scrutinized companies is first provided or updated, the board shall
file the list with the presiding officer of each house of the
legislature and the attorney general.
Sec. 808.052. IDENTIFICATION OF INVESTMENT IN LISTED
COMPANIES. Not later than the 30th day after the date a retirement
system receives the list provided under Section 808.051, the
retirement system shall notify the board of the listed companies in
which the retirement system owns direct holdings or indirect
holdings.
Sec. 808.053. ACTIONS RELATING TO DONATIONS BY LISTED
COMPANY. (a) The board shall send a written notice to each listed
company identified under Section 808.052 informing the company of
its listed company status and warning the company that it may become
subject to divestment by the retirement system.
(b) The notice must encourage the company to cease making
further direct donations to Planned Parenthood, for a period of
time provided by board rule, in order to avoid qualifying for
divestment by the retirement system.
(c) If the company timely responds to the notice that the
company has ceased donating directly to Planned Parenthood, the
board shall remove the company from the list maintained under
Section 808.051 and investment in the company will no longer be
prohibited under this chapter unless the company resumes donating
directly to Planned Parenthood.
(d) If the company continues to donate directly to Planned
Parenthood, the board shall notify each affected retirement system
that the system is required to sell, redeem, or otherwise divest
itself of all publicly traded securities of the company, except
securities described by Section 808.055, according to the schedule
adopted by the board under Section 808.054.
Sec. 808.054. DIVESTMENT OF ASSETS. (a) The board by rule
shall adopt a schedule for divestment from listed companies.
(b) A retirement system required to sell, redeem, or
otherwise divest itself of all publicly traded securities of a
listed company shall comply with the schedule adopted by the board
under Subsection (a) unless the retirement system determines, based
on a good faith exercise of its fiduciary discretion, that a
different schedule is more prudent or that divestment from the
listed company will likely result in a loss in value or a benchmark
deviation described by Section 808.056(a).
(c) If a retirement system delays divestment under the
schedule adopted by the board under Subsection (a), the retirement
system 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 retirement system's delay in divestment from
a listed company. The report must include documentation supporting
its determination that the divestment would result in a loss in
value or benchmark deviation described by Section 808.056(a),
including objective numerical estimates. The retirement system
shall update the report every six months.
Sec. 808.055. INVESTMENTS EXEMPTED FROM DIVESTMENT. A
retirement system is not required to divest from any indirect
holdings in actively or passively managed investment funds or
private equity funds. The retirement system 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 fund with holdings devoid of listed
companies. If the manager creates such a similar fund with
substantially the same management fees and same level of investment
risk and anticipated return, the retirement system may replace all
applicable investments with investments in the similar fund in a
time frame consistent with prudent fiduciary standards.
Sec. 808.056. AUTHORIZED INVESTMENT IN LISTED COMPANIES.
(a) A retirement system may cease divesting from or may reinvest in
one or more listed companies if clear and convincing evidence shows
that:
(1) the retirement system has suffered or will suffer
a loss in the hypothetical value of all assets under management by
the retirement system 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 retirement system 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 retirement system does not
suffer a loss in value or deviate from its benchmark as described by
Subsection (a).
(c) Before a retirement system may cease divesting from or
may reinvest in a listed company under this section, the retirement
system 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 decision to cease divestment, to
reinvest, or to remain invested in a listed company.
(d) The retirement system 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. 808.057. PROHIBITED INVESTMENTS. Except as provided
by Section 808.056, a retirement system may not acquire securities
of a listed company.
SUBCHAPTER C. REPORT; ENFORCEMENT
Sec. 808.101. REPORT. Not later than December 31 of each
year, each retirement system 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 808.054;
(2) identifies all prohibited investments under
Section 808.057; and
(3) summarizes any changes made under Section 808.055.
Sec. 808.102. ENFORCEMENT. The attorney general may bring
any action necessary to enforce this chapter.
SECTION 2. (a) Not later than November 1, 2017, the State
Pension Review Board shall adopt rules necessary to implement
Chapter 808, Government Code, as added by this Act.
(b) Not later than January 1, 2018, the State Pension Review
Board shall prepare and provide to each retirement system, as
defined by Section 808.001, Government Code, as added by this Act,
the initial list of scrutinized companies required by Section
808.051, Government Code, as added by this Act.
SECTION 3. This Act takes effect September 1, 2017.