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Texas House Bill HB1170

Texas 2019 - 86th Regular

Texas House Bill HB1170 Compare Versions

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11 86R360 KFF-D
22 By: Anchia H.B. No. 1170
33
44
55 A BILL TO BE ENTITLED
66 AN ACT
77 relating to prohibiting the investment of certain state retirement
88 system funds in companies that manufacture firearms or firearm
99 ammunition.
1010 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1111 SECTION 1. Subtitle A, Title 8, Government Code, is amended
1212 by adding Chapter 809 to read as follows:
1313 CHAPTER 809. PROHIBITION ON INVESTMENT IN COMPANIES THAT
1414 MANUFACTURE FIREARMS OR FIREARM AMMUNITION
1515 SUBCHAPTER A. GENERAL PROVISIONS
1616 Sec. 809.001. DEFINITIONS. In this chapter:
1717 (1) "Company" means a for-profit sole proprietorship,
1818 organization, association, corporation, partnership, joint
1919 venture, limited partnership, limited liability partnership, or
2020 limited liability company, including a wholly owned subsidiary,
2121 majority-owned subsidiary, parent company, or affiliate of those
2222 entities or business associations that exists to make a profit.
2323 (2) "Direct holdings" means, with respect to a
2424 company, all securities of that company held directly by a state
2525 retirement system in an account or fund in which a state retirement
2626 system owns all shares or interests.
2727 (3) "Firearm" has the meaning assigned by Section
2828 46.01, Penal Code.
2929 (4) "Firearm ammunition" means ammunition or
3030 cartridge cases, primers, bullets, or propellant powder designed
3131 for use in a firearm.
3232 (5) "Indirect holdings" means, with respect to a
3333 company, all securities of that company held in an account or fund,
3434 such as a mutual fund, managed by one or more persons not employed
3535 by a state retirement system, in which the state retirement system
3636 owns shares or interests together with other investors not subject
3737 to the provisions of this chapter. The term does not include money
3838 invested under a plan described by Section 401(k) or 457 of the
3939 Internal Revenue Code of 1986.
4040 (6) "Listed company" means a company listed by the
4141 comptroller under Section 809.051.
4242 (7) "State retirement system" means:
4343 (A) the Employees Retirement System of Texas,
4444 including a retirement system administered by that system;
4545 (B) the Teacher Retirement System of Texas;
4646 (C) the Texas Municipal Retirement System; and
4747 (D) the Texas County and District Retirement
4848 System.
4949 Sec. 809.002. OTHER LEGAL OBLIGATIONS. With respect to
5050 actions taken in compliance with this chapter, including all good
5151 faith determinations regarding companies as required by this
5252 chapter, a state retirement system and the comptroller are exempt
5353 from any conflicting statutory or common law obligations, including
5454 any obligations with respect to making investments, divesting from
5555 any investment, preparing or maintaining any list of companies, or
5656 choosing asset managers, investment funds, or investments for the
5757 state retirement system's securities portfolios.
5858 Sec. 809.003. INDEMNIFICATION OF STATE GOVERNMENTAL
5959 ENTITIES, EMPLOYEES, AND OTHERS. In a cause of action based on an
6060 action, inaction, decision, divestment, investment, company
6161 communication, report, or other determination made or taken in
6262 connection with this chapter, the state shall, without regard to
6363 whether the person performed services for compensation, indemnify
6464 and hold harmless for actual damages, court costs, and attorney's
6565 fees adjudged against, and defend:
6666 (1) an employee, a member of the governing body, or any
6767 other officer of a state retirement system;
6868 (2) a contractor of a state retirement system;
6969 (3) a former employee, a former member of the
7070 governing body, or any other former officer of a state retirement
7171 system who was an employee, member of the governing body, or other
7272 officer when the act or omission on which the damages are based
7373 occurred;
7474 (4) a former contractor of a state retirement system
7575 who was a contractor when the act or omission on which the damages
7676 are based occurred; and
7777 (5) a state retirement system.
7878 Sec. 809.004. NO PRIVATE CAUSE OF ACTION. (a) A person,
7979 including a member, retiree, or beneficiary of a state retirement
8080 system to which this chapter applies, an association, a research
8181 firm, a company, or any other person may not sue or pursue a private
8282 cause of action against the state, a state retirement system, a
8383 current or former employee, a member of the governing body, or any
8484 other officer of a state retirement system, or a contractor of a
8585 state retirement system, for any claim or cause of action,
8686 including breach of fiduciary duty, or for violation of any
8787 constitutional, statutory, or regulatory requirement in connection
8888 with any action, inaction, decision, divestment, investment,
8989 company communication, report, or other determination made or taken
9090 in connection with this chapter.
9191 (b) A person who files suit against the state, a state
9292 retirement system, an employee, a member of the governing body, or
9393 any other officer of a state retirement system, or a contractor of a
9494 state retirement system, is liable for paying the costs and
9595 attorney's fees of a person sued in violation of this section.
9696 Sec. 809.005. INAPPLICABILITY OF REQUIREMENTS INCONSISTENT
9797 WITH FIDUCIARY RESPONSIBILITIES AND RELATED DUTIES. A state
9898 retirement system is not subject to a requirement of this chapter if
9999 the state retirement system determines that the requirement would
100100 be inconsistent with its fiduciary responsibility with respect to
101101 the investment of system assets or other duties imposed by law
102102 relating to the investment of system assets, including the duty of
103103 care established under Section 67, Article XVI, Texas Constitution.
104104 Sec. 809.006. RELIANCE ON COMPANY RESPONSE. The
105105 comptroller and a state retirement system may rely on a company's
106106 response to a notice or communication made under this chapter
107107 without conducting any further investigation, research, or
108108 inquiry.
109109 SUBCHAPTER B. DUTIES REGARDING INVESTMENTS
110110 Sec. 809.051. LISTED COMPANIES. (a) The comptroller shall
111111 prepare and maintain, and provide to each state retirement system,
112112 a list of all companies that manufacture firearms or firearm
113113 ammunition. In maintaining the list, the comptroller may review
114114 and rely, as appropriate in the comptroller's judgment, on publicly
115115 available information regarding companies, including information
116116 provided by the state, nonprofit organizations, research firms,
117117 international organizations, and governmental entities.
118118 (b) The comptroller shall update the list annually or more
119119 often as the comptroller considers necessary, but not more often
120120 than quarterly, based on information from, among other sources,
121121 those listed in Subsection (a).
122122 (c) Not later than the 30th day after the date the list of
123123 companies that manufacture firearms or firearm ammunition is first
124124 provided or updated, the comptroller shall file the list with the
125125 presiding officer of each house of the legislature and the attorney
126126 general and post the list on a publicly available website.
127127 Sec. 809.052. IDENTIFICATION OF INVESTMENT IN LISTED
128128 COMPANIES. Not later than the 30th day after the date a state
129129 retirement system receives the list provided under Section 809.051,
130130 the state retirement system shall notify the comptroller of the
131131 listed companies in which the state retirement system owns direct
132132 holdings or indirect holdings.
133133 Sec. 809.053. ACTIONS RELATING TO LISTED COMPANY. (a) For
134134 each listed company identified under Section 809.052, the state
135135 retirement system shall send a written notice informing the company
136136 of its status as a listed company and warning the company that it
137137 may become subject to divestment by state retirement systems.
138138 (b) Not later than the 90th day after the date the company
139139 receives notice under Subsection (a), the company must cease
140140 manufacturing firearms or firearm ammunition, as applicable, in
141141 order to avoid qualifying for divestment by state retirement
142142 systems.
143143 (c) If, during the time provided by Subsection (b), the
144144 company ceases manufacturing firearms or firearm ammunition, as
145145 applicable, the comptroller shall remove the company from the list
146146 maintained under Section 809.051 and this chapter will no longer
147147 apply to the company unless it resumes manufacturing firearms or
148148 firearm ammunition, as applicable.
149149 (d) If, after the period provided by Subsection (b) expires,
150150 the company continues manufacturing firearms or firearm
151151 ammunition, as applicable, the state retirement system shall sell,
152152 redeem, divest, or withdraw all publicly traded securities of the
153153 company, except securities described by Section 809.055, according
154154 to the schedule provided by Section 809.054.
155155 Sec. 809.054. DIVESTMENT OF ASSETS. (a) A state retirement
156156 system required to sell, redeem, divest, or withdraw all publicly
157157 traded securities of a listed company shall comply with the
158158 following schedule:
159159 (1) at least 50 percent of those assets must be removed
160160 from the state retirement system's assets under management not
161161 later than the 180th day after the date the company receives notice
162162 under Section 809.053 or Subsection (b) unless the state retirement
163163 system determines, based on a good faith exercise of its fiduciary
164164 discretion and subject to Subdivision (2), that a later date is more
165165 prudent; and
166166 (2) 100 percent of those assets must be removed from
167167 the state retirement system's assets under management not later
168168 than the 360th day after the date the company receives notice under
169169 Section 809.053 or Subsection (b).
170170 (b) If a company that ceased manufacturing firearms or
171171 firearm ammunition, as applicable, after receiving notice under
172172 Section 809.053 resumes its manufacturing of firearms or firearm
173173 ammunition, as applicable, the state retirement system shall send a
174174 written notice to the company informing it that the state
175175 retirement system will sell, redeem, divest, or withdraw all
176176 publicly traded securities of the company according to the schedule
177177 in Subsection (a).
178178 (c) Except as provided by Subsection (a), a state retirement
179179 system may delay the schedule for divestment under that subsection
180180 only to the extent that the state retirement system determines, in
181181 the state retirement system's good faith judgment, and consistent
182182 with the system's fiduciary duty, that divestment from listed
183183 companies will likely result in a loss in value or a benchmark
184184 deviation described by Section 809.056(a). If a state retirement
185185 system delays the schedule for divestment, the state retirement
186186 system shall submit a report to the presiding officer of each house
187187 of the legislature and the attorney general stating the reasons and
188188 justification for the state retirement system's delay in divestment
189189 from listed companies. The report must include documentation
190190 supporting its determination that the divestment would result in a
191191 loss in value or a benchmark deviation described by Section
192192 809.056(a), including objective numerical estimates. The state
193193 retirement system shall update the report every six months.
194194 Sec. 809.055. INVESTMENTS EXEMPTED FROM DIVESTMENT. A
195195 state retirement system is not required to divest from any indirect
196196 holdings in actively or passively managed investment funds or
197197 private equity funds. The state retirement system shall submit
198198 letters to the managers of each investment fund containing listed
199199 companies requesting that they remove those companies from the fund
200200 or create a similar actively or passively managed fund with
201201 indirect holdings devoid of listed companies. If a manager creates
202202 a similar fund with substantially the same management fees and same
203203 level of investment risk and anticipated return, the state
204204 retirement system may replace all applicable investments with
205205 investments in the similar fund in a time frame consistent with
206206 prudent fiduciary standards but not later than the 450th day after
207207 the date the fund is created.
208208 Sec. 809.056. AUTHORIZED INVESTMENT IN LISTED COMPANIES.
209209 (a) A state retirement system may cease divesting from one or more
210210 listed companies only if clear and convincing evidence shows that:
211211 (1) the state retirement system has suffered or will
212212 suffer a loss in the hypothetical value of all assets under
213213 management by the state retirement system as a result of having to
214214 divest from listed companies under this chapter; or
215215 (2) an individual portfolio that uses a
216216 benchmark-aware strategy would be subject to an aggregate expected
217217 deviation from its benchmark as a result of having to divest from
218218 listed companies under this chapter.
219219 (b) A state retirement system may cease divesting from a
220220 listed company as provided by this section only to the extent
221221 necessary to ensure that the state retirement system does not
222222 suffer a loss in value or deviate from its benchmark as described by
223223 Subsection (a).
224224 (c) Before a state retirement system may cease divesting
225225 from a listed company under this section, the state retirement
226226 system must provide a written report to the comptroller, the
227227 presiding officer of each house of the legislature, and the
228228 attorney general setting forth the reason and justification,
229229 supported by clear and convincing evidence, for deciding to cease
230230 divestment or to remain invested in a listed company.
231231 (d) The state retirement system shall update the report
232232 required by Subsection (c) semiannually, as applicable.
233233 (e) This section does not apply to reinvestment in a company
234234 that is no longer a listed company.
235235 Sec. 809.057. PROHIBITED INVESTMENTS. Except as provided
236236 by Section 809.056, a state retirement system may not acquire
237237 securities of a listed company.
238238 SUBCHAPTER C. REPORT; ENFORCEMENT
239239 Sec. 809.101. REPORT. Not later than January 5 of each
240240 year, each state retirement system shall file a publicly available
241241 report with the presiding officer of each house of the legislature
242242 and the attorney general that:
243243 (1) identifies all securities sold, redeemed,
244244 divested, or withdrawn in compliance with Section 809.054;
245245 (2) identifies all prohibited investments under
246246 Section 809.057; and
247247 (3) summarizes any changes made under Section 809.055.
248248 Sec. 809.102. ENFORCEMENT. The attorney general may bring
249249 any action necessary to enforce this chapter.
250250 SECTION 2. This Act takes effect September 1, 2019.