By: Kolkhorst S.B. No. 1158
(In the Senate - Filed March 8, 2021; March 18, 2021, read
first time and referred to Committee on State Affairs;
April 15, 2021, reported adversely, with favorable Committee
Substitute by the following vote: Yeas 6, Nays 3; April 15, 2021,
sent to printer.)
Click here to see the committee vote
COMMITTEE SUBSTITUTE FOR S.B. No. 1158 By: Birdwell
A BILL TO BE ENTITLED
AN ACT
relating to state contracts with and investments in social media
companies that censor political speech.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subtitle A, Title 8, Government Code, is amended
by adding Chapter 809 to read as follows:
CHAPTER 809. PROHIBITION ON INVESTMENT IN SOCIAL MEDIA COMPANIES
THAT CENSOR POLITICAL SPEECH
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 809.001. DEFINITIONS. In this chapter:
(1) "Company" means a for-profit sole proprietorship,
organization, association, corporation, partnership, joint
venture, limited partnership, limited liability partnership, or
limited liability company, including a wholly owned subsidiary,
majority-owned subsidiary, parent company, or affiliate of those
entities or business associations, that exists to make a profit.
(2) "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.
(3) "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.
(4) "Listed company" means a company listed by the
attorney general under Section 809.051.
(5) "Political speech" means speech relating to the
state, government, public administration, government policymaking,
including speech by a governmental entity or candidates for public
office, and social issues.
(6) "Social media website" means an Internet website
or application that is open to the public and enables users to
communicate with each other by posting information, comments,
messages, or images. The term does not include a website or
application:
(A) with 75 million or fewer users;
(B) that has been affiliated with a religion or
political party;
(C) that is primarily used as an e-mail service;
or
(D) that consists primarily of content, such as
news, sports, or entertainment content, that:
(i) is curated by the owner or operator of
the website or application and is not user-generated; and
(ii) provides the basis for any chat,
comment, or interactive functionality on the website or
application.
(7) "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;
(E) the Texas Emergency Services Retirement
System; and
(F) the permanent school fund.
(8) "User" means a person that posts, uploads,
transmits, or otherwise publishes content through a social media
website.
Sec. 809.002. 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 state governmental entity and the comptroller are 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. 809.003. 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, member of the governing body, or other
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. 809.004. 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, a current
or former 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. 809.005. 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.
SUBCHAPTER B. DUTIES REGARDING INVESTMENTS
Sec. 809.051. LISTED COMPANIES. (a) The attorney general
shall prepare and maintain, and provide to each state governmental
entity, a list of companies that own a social media website that
censors political speech by:
(1) removing, banning, or demonetizing a user on the
basis that the user posted, uploaded, transmitted, or published
political speech; or
(2) otherwise restricts a user's ability to post,
upload, transmit, or publish political speech.
(b) In maintaining the list, the attorney general may review
and rely, as appropriate in the attorney general's judgment, on
publicly available information regarding companies that own a
social media website, including information provided by the state,
nonprofit organizations, research firms, international
organizations, and governmental entities.
(c) The attorney general may not include an Internet service
provider on a list prepared under this section.
(d) The attorney general shall update the list annually or
more often as the attorney general considers necessary, but not
more often than quarterly, based on information from, among other
sources, those listed in Subsection (b).
(e) Not later than the 30th day after the date the list of
companies is first provided or updated, the attorney general shall
file the list with the presiding officer of each house of the
legislature and post the list on a publicly available website.
Sec. 809.052. IDENTIFICATION OF INVESTMENT IN LISTED
COMPANIES. Not later than the 30th day after the date a state
governmental entity receives the list provided under Section
809.051, the state governmental entity shall notify the attorney
general of the listed companies in which the state governmental
entity owns direct holdings or indirect holdings.
Sec. 809.053. ACTIONS RELATING TO LISTED COMPANY. (a) For
each listed company identified under Section 809.052, the state
governmental entity shall send a written notice:
(1) informing the company of its status as a listed
company;
(2) warning the company that it may become subject to
divestment by state governmental entities after the expiration of
the period described by Subsection (b); and
(3) offering the company the opportunity to clarify
its activities related to censorship of political speech.
(b) Not later than the 90th day after the date the company
receives notice under Subsection (a), the company must cease
censoring political speech in order to avoid qualifying for
divestment by state governmental entities.
(c) If, during the time provided by Subsection (b), the
company ceases censoring political speech, the attorney general
shall remove the company from the list maintained under Section
809.051 and this chapter will no longer apply to the company unless
it resumes censoring political speech.
(d) If, after the time provided by Subsection (b) expires,
the company continues to censor political speech, the state
governmental entity shall sell, redeem, divest, or withdraw all
publicly traded securities of the company, except securities
described by Section 809.055, according to the schedule provided by
Section 809.054.
Sec. 809.054. 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 180th day after the date the company receives notice
under Section 809.053 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 360th day after the date the company receives notice under
Section 809.053 or Subsection (b).
(b) If a company that ceased censoring political speech
after receiving notice under Section 809.053 resumes censoring
political speech, 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 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, and consistent with the entity's fiduciary duty, that
divestment from listed companies will likely result in a loss in
value or a benchmark deviation described by Section 809.056(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 a benchmark deviation
described by Section 809.056(a), including objective numerical
estimates. The state governmental entity shall update the report
every six months.
Sec. 809.055. 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 each investment fund containing
listed companies requesting that they remove those companies from
the fund or create a similar actively or passively managed fund with
indirect holdings devoid of listed companies. If a 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 but not later than the 450th day after
the date the fund is created.
Sec. 809.056. AUTHORIZED INVESTMENT IN LISTED COMPANIES.
(a) A state governmental entity may cease divesting from one or
more listed companies only 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 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 a listed company under this section, the state governmental
entity must provide a written report to the comptroller, 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 deciding to cease
divestment 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. 809.057. PROHIBITED INVESTMENTS. Except as provided
by Section 809.056, a state governmental entity may not acquire
securities of a listed company.
SUBCHAPTER C. REPORT; ENFORCEMENT
Sec. 809.101. REPORT. Not later than January 15 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 809.054;
(2) identifies all prohibited investments under
Section 809.057; and
(3) summarizes any changes made under Section 809.055.
Sec. 809.102. ENFORCEMENT. The attorney general may bring
any action necessary to enforce this chapter.
SECTION 2. This Act takes effect September 1, 2021.
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