Texas 2017 - 85th Regular

Texas Senate Bill SB29 Compare Versions

Version 1 (Old)

Version 2 (New)

Old	New		Differences
1	1		By: Creighton, et al. S.B. No. 29
2		-	(In the Senate - Filed February 22, 2017; February 27, 2017,
3		-	read first time and referred to Committee on Business & Commerce;
4		-	March 15, 2017, reported favorably by the following vote: Yeas 7,
5		-	Nays 2; March 15, 2017, sent to printer.)
6		-	Click here to see the committee vote
7	2
8	3
9	4		A BILL TO BE ENTITLED
10	5		AN ACT
11	6		relating to state contracts with and investments in companies that
12	7		boycott Israel.
13	8		BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
14	9		SECTION 1. Subtitle F, Title 10, Government Code, is
15	10		amended by adding Chapter 2270 to read as follows:
16	11		CHAPTER 2270. PROHIBITION ON CONTRACTS WITH COMPANIES BOYCOTTING
17	12		ISRAEL
18	13		Sec. 2270.001. DEFINITIONS. In this chapter:
19	14		(1) "Boycott Israel" has the meaning assigned by
20	15		Section 808.001.
21	16		(2) "Company" has the meaning assigned by Section
22	17		808.001.
23	18		(3) "Governmental entity" has the meaning assigned by
24	19		Section 2251.001.
25	20		Sec. 2270.002. PROVISION REQUIRED IN CONTRACT. A
26	21		governmental entity may not enter into a contract with a company for
27	22		goods or services unless the contract contains a written
28	23		verification from the company that it:
29	24		(1) does not boycott Israel; and
30	25		(2) will not boycott Israel during the term of the
31	26		contract.
32	27		SECTION 2. Subtitle A, Title 8, Government Code, is amended
33	28		by adding Chapter 808 to read as follows:
34	29		CHAPTER 808. PROHIBITION ON INVESTMENT IN COMPANIES THAT BOYCOTT
35	30		ISRAEL
36	31		SUBCHAPTER A. GENERAL PROVISIONS
37	32		Sec. 808.001. DEFINITIONS. In this chapter:
38	33		(1) "Boycott Israel" means refusing to deal with,
39	34		terminating business activities with, or otherwise taking any
40	35		action that is intended to penalize, inflict economic harm on, or
41	36		limit commercial relations specifically with Israel, or with a
42	37		person or entity doing business in Israel or in an
43	38		Israeli-controlled territory, but does not include an action made
44	39		for ordinary business purposes.
45	40		(2) "Company" means a for-profit sole proprietorship,
46	41		organization, association, corporation, partnership, joint
47	42		venture, limited partnership, limited liability partnership, or
48	43		limited liability company, including a wholly owned subsidiary,
49	44		majority-owned subsidiary, parent company, or affiliate of those
50	45		entities or business associations that exists to make a profit.
51	46		(3) "Direct holdings" means, with respect to a
52	47		company, all securities of that company held directly by a state
53	48		governmental entity in an account or fund in which a state
54	49		governmental entity owns all shares or interests.
55	50		(4) "Indirect holdings" means, with respect to a
56	51		company, all securities of that company held in an account or fund,
57	52		such as a mutual fund, managed by one or more persons not employed
58	53		by a state governmental entity, in which the state governmental
59	54		entity owns shares or interests together with other investors not
60	55		subject to the provisions of this chapter. The term does not
61	56		include money invested under a plan described by Section 401(k) or
62	57		457 of the Internal Revenue Code of 1986.
63	58		(5) "Listed company" means a company listed by the
64	59		comptroller under Section 808.051.
65	60		(6) "State governmental entity" means:
66	61		(A) the Employees Retirement System of Texas,
67	62		including a retirement system administered by that system;
68	63		(B) the Teacher Retirement System of Texas;
69	64		(C) the Texas Municipal Retirement System;
70	65		(D) the Texas County and District Retirement
71	66		System;
72	67		(E) the Texas Emergency Services Retirement
73	68		System;
74	69		(F) The University of Texas Investment
75	70		Management Company; and
76	71		(G) the permanent school fund.
77	72		Sec. 808.002. OTHER LEGAL OBLIGATIONS. With respect to
78	73		actions taken in compliance with this chapter, including all good
79	74		faith determinations regarding companies as required by this
80	75		chapter, a state governmental entity and the comptroller are exempt
81	76		from any conflicting statutory or common law obligations, including
82	77		any obligations with respect to making investments, divesting from
83	78		any investment, preparing or maintaining any list of companies, or
84	79		choosing asset managers, investment funds, or investments for the
85	80		state governmental entity's securities portfolios.
86	81		Sec. 808.003. INDEMNIFICATION OF STATE GOVERNMENTAL
87	82		ENTITIES, EMPLOYEES, AND OTHERS. In a cause of action based on an
88	83		action, inaction, decision, divestment, investment, company
89	84		communication, report, or other determination made or taken in
90	85		connection with this chapter, the state shall, without regard to
91	86		whether the person performed services for compensation, indemnify
92	87		and hold harmless for actual damages, court costs, and attorney's
93	88		fees adjudged against, and defend:
94	89		(1) an employee, a member of the governing body, or any
95	90		other officer of a state governmental entity;
96	91		(2) a contractor of a state governmental entity;
97	92		(3) a former employee, a former member of the
98	93		governing body, or any other former officer of a state governmental
99	94		entity who was an employee, member of the governing body, or other
100	95		officer when the act or omission on which the damages are based
101	96		occurred;
102	97		(4) a former contractor of a state governmental entity
103	98		who was a contractor when the act or omission on which the damages
104	99		are based occurred; and
105	100		(5) a state governmental entity.
106	101		Sec. 808.004. NO PRIVATE CAUSE OF ACTION. (a) A person,
107	102		including a member, retiree, or beneficiary of a retirement system
108	103		to which this chapter applies, an association, a research firm, a
109	104		company, or any other person may not sue or pursue a private cause
110	105		of action against the state, a state governmental entity, a current
111	106		or former employee, a member of the governing body, or any other
112	107		officer of a state governmental entity, or a contractor of a state
113	108		governmental entity, for any claim or cause of action, including
114	109		breach of fiduciary duty, or for violation of any constitutional,
115	110		statutory, or regulatory requirement in connection with any action,
116	111		inaction, decision, divestment, investment, company communication,
117	112		report, or other determination made or taken in connection with
118	113		this chapter.
119	114		(b) A person who files suit against the state, a state
120	115		governmental entity, an employee, a member of the governing body,
121	116		or any other officer of a state governmental entity, or a contractor
122	117		of a state governmental entity, is liable for paying the costs and
123	118		attorney's fees of a person sued in violation of this section.
124	119		Sec. 808.005. RELIANCE ON COMPANY RESPONSE. The
125	120		comptroller and a state governmental entity may rely on a company's
126	121		response to a notice or communication made under this chapter
127	122		without conducting any further investigation, research, or
128	123		inquiry.
129	124		SUBCHAPTER B. DUTIES REGARDING INVESTMENTS
130	125		Sec. 808.051. LISTED COMPANIES. (a) The comptroller shall
131	126		prepare and maintain, and provide to each state governmental
132	127		entity, a list of all companies that boycott Israel. In maintaining
133	128		the list, the comptroller may review and rely, as appropriate in the
134	129		comptroller's judgment, on publicly available information
135	130		regarding companies, including information provided by the state,
136	131		nonprofit organizations, research firms, international
137	132		organizations, and governmental entities.
138	133		(b) The comptroller shall update the list annually or more
139	134		often as the comptroller considers necessary, but not more often
140	135		than quarterly, based on information from, among other sources,
141	136		those listed in Subsection (a).
142	137		(c) Not later than the 30th day after the date the list of
143	138		companies that boycott Israel is first provided or updated, the
144	139		comptroller shall file the list with the presiding officer of each
145	140		house of the legislature and the attorney general and post the list
146	141		on a publicly available website.
147	142		Sec. 808.052. IDENTIFICATION OF INVESTMENT IN LISTED
148	143		COMPANIES. Not later than the 30th day after the date a state
149	144		governmental entity receives the list provided under Section
150	145		808.051, the state governmental entity shall notify the comptroller
151	146		of the listed companies in which the state governmental entity owns
152	147		direct holdings or indirect holdings.
153	148		Sec. 808.053. ACTIONS RELATING TO LISTED COMPANY. (a) For
154	149		each listed company identified under Section 808.052, the state
155	150		governmental entity shall send a written notice informing the
156	151		company of its status as a listed company and warning the company
157	152		that it may become subject to divestment by state governmental
158	153		entities.
159	154		(b) The notice must offer the company the opportunity to
160	155		clarify its Israel-related activities and must encourage the
161	156		company, not later than the 90th day after the date the company
162	157		receives notice under this section, to cease boycotting Israel in
163	158		order to avoid qualifying for divestment by state governmental
164	159		entities.
165	160		(c) If, during the time provided by Subsection (b), the
166	161		company ceases boycotting Israel, the comptroller shall remove the
167	162		company from the list maintained under Section 808.051 and this
168	163		chapter will no longer apply to the company unless it resumes
169	164		boycotting Israel.
170	165		(d) If, after the time provided by Subsection (b) expires,
171	166		the company continues to boycott Israel, the state governmental
172	167		entity shall sell, redeem, divest, or withdraw all publicly traded
173	168		securities of the company, except securities described by Section
174	169		808.055, according to the schedule provided by Section 808.054.
175	170		Sec. 808.054. DIVESTMENT OF ASSETS. (a) A state
176	171		governmental entity required to sell, redeem, divest, or withdraw
177	172		all publicly traded securities of a listed company shall comply
178	173		with the following schedule:
179	174		(1) at least 50 percent of those assets must be removed
180	175		from the state governmental entity's assets under management not
181	176		later than the 180th day after the date the company receives notice
182	177		under Section 808.053 or Subsection (b) unless the state
183	178		governmental entity determines, based on a good faith exercise of
184	179		its fiduciary discretion and subject to Subdivision (2), that a
185	180		later date is more prudent; and
186	181		(2) 100 percent of those assets must be removed from
187	182		the state governmental entity's assets under management not later
188	183		than the 360th day after the date the company receives notice under
189	184		Section 808.053 or Subsection (b).
190	185		(b) If a company that ceased boycotting Israel after
191	186		receiving notice under Section 808.053 resumes its boycott, the
192	187		state governmental entity shall send a written notice to the
193	188		company informing it that the state governmental entity will sell,
194	189		redeem, divest, or withdraw all publicly traded securities of the
195	190		company according to the schedule in Subsection (a).
196	191		(c) Except as provided by Subsection (a), a state
197	192		governmental entity may delay the schedule for divestment under
198	193		that subsection only to the extent that the state governmental
199	194		entity determines, in the state governmental entity's good faith
200	195		judgment, and consistent with the entity's fiduciary duty, that
201	196		divestment from listed companies will likely result in a loss in
202	197		value or a benchmark deviation described by Section 808.056(a). If
203	198		a state governmental entity delays the schedule for divestment, the
204	199		state governmental entity shall submit a report to the presiding
205	200		officer of each house of the legislature and the attorney general
206	201		stating the reasons and justification for the state governmental
207	202		entity's delay in divestment from listed companies. The report
208	203		must include documentation supporting its determination that the
209	204		divestment would result in a loss in value or a benchmark deviation
210	205		described by Section 808.056(a), including objective numerical
211	206		estimates. The state governmental entity shall update the report
212	207		every six months.
213	208		Sec. 808.055. INVESTMENTS EXEMPTED FROM DIVESTMENT. A
214	209		state governmental entity is not required to divest from any
215	210		indirect holdings in actively or passively managed investment funds
216	211		or private equity funds. The state governmental entity shall
217	212		submit letters to the managers of each investment fund containing
218	213		listed companies requesting that they remove those companies from
219	214		the fund or create a similar actively or passively managed fund with
220	215		indirect holdings devoid of listed companies. If a manager creates
221	216		a similar fund with substantially the same management fees and same
222	217		level of investment risk and anticipated return, the state
223	218		governmental entity may replace all applicable investments with
224	219		investments in the similar fund in a time frame consistent with
225	220		prudent fiduciary standards but not later than the 450th day after
226	221		the date the fund is created.
227	222		Sec. 808.056. AUTHORIZED INVESTMENT IN LISTED COMPANIES.
228	223		(a) A state governmental entity may cease divesting from one or
229	224		more listed companies only if clear and convincing evidence shows
230	225		that:
231	226		(1) the state governmental entity has suffered or will
232	227		suffer a loss in the hypothetical value of all assets under
233	228		management by the state governmental entity as a result of having to
234	229		divest from listed companies under this chapter; or
235	230		(2) an individual portfolio that uses a
236	231		benchmark-aware strategy would be subject to an aggregate expected
237	232		deviation from its benchmark as a result of having to divest from
238	233		listed companies under this chapter.
239	234		(b) A state governmental entity may cease divesting from a
240	235		listed company as provided by this section only to the extent
241	236		necessary to ensure that the state governmental entity does not
242	237		suffer a loss in value or deviate from its benchmark as described by
243	238		Subsection (a).
244	239		(c) Before a state governmental entity may cease divesting
245	240		from a listed company under this section, the state governmental
246	241		entity must provide a written report to the comptroller, the
247	242		presiding officer of each house of the legislature, and the
248	243		attorney general setting forth the reason and justification,
249	244		supported by clear and convincing evidence, for deciding to cease
250	245		divestment or to remain invested in a listed company.
251	246		(d) The state governmental entity shall update the report
252	247		required by Subsection (c) semiannually, as applicable.
253	248		(e) This section does not apply to reinvestment in a company
254	249		that is no longer a listed company.
255	250		Sec. 808.057. PROHIBITED INVESTMENTS. Except as provided
256	251		by Section 808.056, a state governmental entity may not acquire
257	252		securities of a listed company.
258	253		SUBCHAPTER C. REPORT; ENFORCEMENT
259	254		Sec. 808.101. REPORT. Not later than January 5 of each
260	255		year, each state governmental entity shall file a publicly
261	256		available report with the presiding officer of each house of the
262	257		legislature and the attorney general that:
263	258		(1) identifies all securities sold, redeemed,
264	259		divested, or withdrawn in compliance with Section 808.054;
265	260		(2) identifies all prohibited investments under
266	261		Section 808.057; and
267	262		(3) summarizes any changes made under Section 808.055.
268	263		Sec. 808.102. ENFORCEMENT. The attorney general may bring
269	264		any action necessary to enforce this chapter.
270	265		SECTION 3. This Act takes effect September 1, 2017.
271		-	* * * * *