Texas 2017 - 85th Regular

Texas House Bill HB2382 Compare Versions

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

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1	1	85R6593 CLG-F
2	2	By: Parker H.B. No. 2382
3	3
4	4
5	5	A BILL TO BE ENTITLED
6	6	AN ACT
7	7	relating to information required to be disclosed by certain
8	8	investors of publicly traded companies whose headquarters are
9	9	located in this state; creating an offense.
10	10	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
11	11	SECTION 1. This Act shall be known as the Bring Business to
12	12	Texas and Fairness in Disclosure Act.
13	13	SECTION 2. It is the policy of this state to:
14	14	(1) foster and promote the immediate and full
15	15	disclosure of the individual ownership of persons who are activist
16	16	investors with respect to publicly traded entities whose
17	17	headquarters are located in Texas; and
18	18	(2) prohibit discrimination by a proxy advisory firm
19	19	toward any publicly traded entity whose headquarters are located in
20	20	Texas.
21	21	SECTION 3. Section 4, The Securities Act (Article 581-4,
22	22	Vernon's Texas Civil Statutes), is amended by adding Subsections R,
23	23	S, T, U, V, W, X, and Y to read as follows:
24	24	R. "Activist investor" means a person who, directly or
25	25	indirectly, or through or with an affiliate:
26	26	(1) nominates or attempts to nominate the person or
27	27	another person to the governing authority or body of a publicly
28	28	traded entity, including the board of directors of a corporation or
29	29	the general partners of a general partnership or limited
30	30	partnership;
31	31	(2) makes or attempts to make one or more shareholder
32	32	proposals or the equivalent for a publicly traded entity; or
33	33	(3) acts broadly in concert with, or on behalf of, a
34	34	person who engages in actions described by either Subdivision (1)
35	35	or (2) of this subsection.
36	36	S. "Affiliate," with respect to a person, means:
37	37	(1) a family member of a natural person; or
38	38	(2) any person who controls, is controlled by, or is
39	39	under common control with the person.
40	40	T. "Beneficial owner," with respect to a class of securities
41	41	of a publicly traded entity, means a person who has the sole or
42	42	shared power to vote or dispose of a security or who enjoys the
43	43	economic benefits of ownership of a security. The term includes a
44	44	person who enjoys the benefits of ownership of a security or the
45	45	voting power of a security, regardless of whether the security is
46	46	held in the name of another person.
47	47	U. "Governing authority" has the meaning assigned by Section
48	48	1.002, Business Organizations Code.
49	49	V. "Headquarters," with respect to a publicly traded entity,
50	50	means the location at which the president or other chief executive
51	51	officer of the entity, a general partner of the entity, or any other
52	52	senior member of the entity's management team routinely performs
53	53	duties in those respective capacities.
54	54	W. "Mutual fund" means an entity that:
55	55	(1) is engaging primarily in, or proposes to engage
56	56	primarily in, the business of investing, reinvesting, or trading in
57	57	securities;
58	58	(2) is engaging or proposes to engage in the business
59	59	of issuing face-amount certificates of the installment type;
60	60	(3) has engaged in a business described by Subdivision
61	61	(2) of this subsection and has outstanding a certificate described
62	62	by that subdivision;
63	63	(4) is engaging or proposes to engage in the business
64	64	of investing, reinvesting, owning, holding, or trading in
65	65	securities and owns or proposes to acquire investment securities
66	66	whose value exceeds 40 percent of the value of the total assets of
67	67	the issuer of the securities, not including government securities
68	68	and cash, on an unconsolidated basis; or
69	69	(5) is an investment company registered under the
70	70	Investment Company Act of 1940 (15 U.S.C. Section 80a-1 et seq.).
71	71	X. "Proxy advisory firm" means a person that provides
72	72	corporate governance ratings, proxy research, analyses, advisory
73	73	services, or other similar services to shareholders of a publicly
74	74	traded entity.
75	75	Y. "Texas-based public company" means a publicly traded
76	76	entity whose headquarters are located in this state.
77	77	SECTION 4. The Securities Act (Article 581-1 et seq.,
78	78	Vernon's Texas Civil Statutes) is amended by adding Sections 45
79	79	through 55 to read as follows:
80	80	Sec. 45. BENEFICIAL OWNERSHIP; DISCLOSURE. A. This section
81	81	applies only to a person who is simultaneously:
82	82	(1) a beneficial owner of a security of any class of
83	83	securities of a Texas-based public company; and
84	84	(2) an activist investor with respect to the same
85	85	Texas-based public company that is beneficially owned by the
86	86	person.
87	87	B. Not later than the 10th day after the date the person is or
88	88	becomes both a beneficial owner and an activist investor of a
89	89	Texas-based public company or September 11, 2017, whichever is
90	90	later, the person shall file with the Securities Commissioner and
91	91	deliver, by United States certified mail, to the company's
92	92	headquarters and to the company's registered agent designated under
93	93	Chapter 5, Business Organizations Code, a certified statement that:
94	94	(1) contains:
95	95	(A) the full name, identity, background,
96	96	residence, primary phone number, and citizenship of the person;
97	97	(B) the address of the principal place of
98	98	business of the person and the person's primary e-mail address;
99	99	(C) the nature of:
100	100	(i) the beneficial ownership of the person;
101	101	and
102	102	(ii) the beneficial ownership of all other
103	103	persons by whom or on whose behalf the beneficial ownership of the
104	104	person has been or is to be effected;
105	105	(D) all plans, intentions, motives, strategies,
106	106	and objectives of the person with respect to becoming an activist
107	107	investor and following through with:
108	108	(i) director, general partner, or other
109	109	similar governing person nominations; or
110	110	(ii) shareholder proposals or the
111	111	equivalent;
112	112	(E) all notes, e-mails, memoranda, letters,
113	113	communications, proposals, analyses, spreadsheets, presentations,
114	114	instruments, and any other documents, whether in written, digital,
115	115	or magnetic format, relating to the items listed in Paragraph D of
116	116	this subdivision; and
117	117	(F) all costs and expenses paid, incurred,
118	118	authorized, and anticipated by the person in connection with the
119	119	items listed in Paragraph D of this subdivision; and
120	120	(2) is signed by the senior executive officer of the
121	121	person certifying that the information disclosed in Subdivision (1)
122	122	of this subsection is correct and complete.
123	123	C. The following persons shall disclose the information
124	124	required by Subsection B of this section in the same manner and to
125	125	the same extent as a person is required to disclose the information
126	126	under that subsection:
127	127	(1) any beneficial owner of the person; and
128	128	(2) all beneficial owners of the beneficial owner
129	129	described by Subdivision (1) of this subsection until the last
130	130	person named is a natural person.
131	131	D. All information disclosed under Subsection B of this
132	132	section is considered public information for all purposes.
133	133	E. This section shall be liberally construed in favor of
134	134	requiring the disclosure of information required by this section.
135	135	Sec. 46. NONPROFIT CORPORATION THAT BENEFICIALLY OWNS
136	136	TEXAS-BASED PUBLIC COMPANY; ADDITIONAL DISCLOSURES. A. This
137	137	subsection applies only to a nonprofit corporation that is the last
138	138	named beneficial owner of a person required to make a disclosure
139	139	under Section 45B of this Act. A donor who makes financial
140	140	contributions to a nonprofit corporation shall disclose the
141	141	information required by Section 45B of this Act in the same manner
142	142	and to the same extent as a person required to disclose the
143	143	information under that section if the financial contributions are
144	144	in an amount equal to the lesser of:
145	145	(1) one percent of the aggregate contributions made to
146	146	the corporation in the preceding 12 months; or
147	147	(2) $100,000.
148	148	B. A nonprofit corporation required to disclose information
149	149	under Section 45 of this Act shall disclose:
150	150	(1) the corporation's annual financial statements for
151	151	each of the preceding three fiscal years;
152	152	(2) the corporation's year-to-date financial
153	153	statements for the fiscal year in which the nonprofit corporation
154	154	becomes an activist investor;
155	155	(3) a good faith estimate of the total amount the
156	156	nonprofit corporation expects to spend in the corporation's current
157	157	fiscal year to further the corporation's activist investor
158	158	activities directly and through other persons the corporation may
159	159	have an ownership interest in or with which the corporation is
160	160	affiliated; and
161	161	(4) the total compensation paid by the nonprofit
162	162	corporation to its 10 most highly compensated employees for each of
163	163	the preceding five fiscal years.
164	164	C. A nonprofit corporation shall disclose the information
165	165	required by Subsection B of this section in the same manner and to
166	166	the same extent the corporation is required to disclose information
167	167	under Section 45 of this Act.
168	168	D. This section shall be liberally construed in favor of
169	169	requiring disclosure of the information required by this section.
170	170	Sec. 47. CHANGE TO CERTAIN DISCLOSED INFORMATION;
171	171	AMENDMENT. If, during the time a person described by Section 45A of
172	172	this Act is an activist investor of the Texas-based public company,
173	173	any change occurs in the information contained in the certified
174	174	statement the person filed under Section 45 of this Act, the person
175	175	shall:
176	176	(1) file an amendment to the certified statement with
177	177	the Securities Commissioner not later than the 10th day after the
178	178	date the change occurs; and
179	179	(2) deliver, by United States certified mail, a
180	180	correct and complete copy of the amendment to the security issuer's
181	181	headquarters in this state.
182	182	Sec. 48. ACTIONS TO AVOID MAKING CERTAIN REQUIRED
183	183	DISCLOSURES PROHIBITED. A. This section does not apply to a mutual
184	184	fund.
185	185	B. A person may not act at the direction of, for the benefit
186	186	of, or otherwise on behalf of another person with the intent or
187	187	effect of avoiding a disclosure required by Section 45 or 46 of
188	188	this Act.
189	189	C. If the board of directors or other governing authority of
190	190	a corporation, limited liability company, partnership, or other
191	191	Texas-based public company reasonably believes that one or more
192	192	persons are acting in concert with, at the direction of, or on
193	193	behalf of another person with the intent or effect of avoiding a
194	194	disclosure required by Section 45 or 46 of this Act, the governing
195	195	authority of the company shall notify the Securities Commissioner
196	196	of that conduct.
197	197	D. If the Securities Commissioner determines that a person
198	198	is violating Subsection B of this section, the Securities
199	199	Commissioner shall require the person to disclose the information
200	200	required by Section 45 of this Act.
201	201	Sec. 49. DEFENSE TO DISCLOSURE REQUIREMENT; INJUNCTIVE
202	202	RELIEF. A person who in good faith believes the person has a valid
203	203	defense to a disclosure requirement of Section 45 or 46 of this Act
204	204	may bring a court action on an expedited basis to seek injunctive
205	205	relief.
206	206	Sec. 50. CONFIDENTIALITY AGREEMENTS PROHIBITED. A person
207	207	who is required to disclose information under Section 45, 46, or 48
208	208	of this Act may not request or require that any person entitled to
209	209	receive the information:
210	210	(1) sign a confidentiality agreement; or
211	211	(2) otherwise treat the information as private or
212	212	confidential.
213	213	Sec. 51. NOTICE TO CERTAIN INVESTORS OF ACTIVIST INVESTORS
214	214	OF TEXAS-BASED PUBLIC COMPANIES. A. This section applies only to
215	215	a person who has the capability to become an activist investor of a
216	216	Texas-based public company and who solicits or accepts money from
217	217	one or more investors.
218	218	B. Before accepting money from an investor and at least once
219	219	each calendar year, a person shall provide to the investor:
220	220	(1) a written statement stating that the person may
221	221	become an activist investor of a Texas-based public company; and
222	222	(2) a legible copy of the most recent version of this
223	223	section and Sections 4, 45, 46, 47, 48, 49, 50, 52, 53, and 54 of
224	224	this Act.
225	225	Sec. 52. DISCLOSURES REQUIRED BY CERTAIN PROXY ADVISORY
226	226	FIRMS. A. This section applies to a proxy advisory firm that
227	227	publishes or otherwise provides an analysis or a recommendation to
228	228	one or more shareholders of a Texas-based public company
229	229	concerning:
230	230	(1) a nominee to the governing authority or body of
231	231	another publicly traded entity, including the board of directors of
232	232	a corporation and the general partners of a partnership; or
233	233	(2) a shareholder proposal submitted by an activist
234	234	investor.
235	235	B. At the same time a proxy advisory firm provides to the
236	236	shareholders of a Texas-based public company an analysis or
237	237	recommendation described by Subsection A of this section, the firm
238	238	shall file with the Securities Commissioner and deliver to the
239	239	company's headquarters and to the company's registered agent, in
240	240	the manner prescribed by Subsection C of this section:
241	241	(1) all financial statements of the proxy advisory
242	242	firm for each of the preceding five years, including an audited
243	243	balance sheet, income statement, and cash flow statement; and
244	244	(2) a written statement that:
245	245	(A) contains:
246	246	(i) the names of all beneficial owners of
247	247	the proxy advisory firm, until each beneficial owner named is a
248	248	natural person; and
249	249	(ii) all notes, e-mails, memoranda,
250	250	letters, communications, proposals, analyses, spreadsheets,
251	251	presentations, instruments, and any other documents, whether in
252	252	written, digital, or magnetic format, relating to the discussions
253	253	and deliberations that resulted in the proxy advisory firm's
254	254	analysis or recommendation regarding the activist investor's
255	255	governing authority nominee or shareholder proposal; and
256	256	(B) is signed by the senior executive officer of
257	257	the proxy advisory firm certifying that the information provided in
258	258	this subsection is correct and complete.
259	259	C. A notice to a Texas-based public company required under
260	260	Subsection B of this section must be delivered by:
261	261	(1) United States certified mail; or
262	262	(2) a nationally recognized overnight courier service
263	263	with confirmation of receipt.
264	264	Sec. 53. DISCLOSURE REQUIREMENTS APPLICABLE TO OTHER PROXY
265	265	ADVISORY FIRMS. If the Securities Commissioner determines that a
266	266	proxy advisory firm has lowered its rating of a Texas-based public
267	267	company as a result of the requirements of Sections 45, 46, 47, 48,
268	268	49, 50, 51, 52, 54, and 55 of this Act, the disclosure requirements
269	269	of Section 52 of this Act apply to the firm.
270	270	Sec. 54. CRIMINAL PENALTY. A. A person commits an offense
271	271	if the person does not comply with the requirements of Sections 45,
272	272	46, 47, and 48 of this Act. An offense under this subsection is a
273	273	Class C misdemeanor.
274	274	B. Any criminal penalty under this section shall be imposed
275	275	against the senior executive officer of the person that did not
276	276	make the required disclosure, in the executive officer's personal
277	277	capacity.
278	278	C. This section may be enforced by the attorney general or by
279	279	the district attorney of the county in this state in which the
280	280	headquarters of the security's issuer is located.
281	281	Sec. 55. PRIVATE CAUSE OF ACTION. A. This section applies
282	282	to a Texas-based public company entitled to receive a disclosure
283	283	under Sections 45, 46, 48, 52, and 53 of this Act.
284	284	B. A Texas-based public company or a person acting on behalf
285	285	of the company may bring an action, on an expedited basis, in a
286	286	court in this state against a person that does not comply with the
287	287	disclosures described by Subsection A of this section for:
288	288	(1) injunctive relief; and
289	289	(2) recovery of the company's reasonable attorney's
290	290	fees.
291	291	C. A civil penalty or remedy in addition to the injunctive
292	292	relief provided by Subsection B of this section may not be imposed
293	293	or awarded against a person for a violation that arises out of the
294	294	same conduct described by that subsection.
295	295	SECTION 5. This Act takes effect September 1, 2017.