Texas 2025 - 89th Regular

Texas Senate Bill SB667 Compare Versions

Version 1 (Old)

Version 2 (New)

Old	New		Differences
1		-	By: Hughes, Parker S.B. No. 667
2		-
3		-
	1	+	By: Hughes S.B. No. 667
	2	+	(In the Senate - Filed December 19, 2024; February 3, 2025,
	3	+	read first time and referred to Committee on State Affairs;
	4	+	March 24, 2025, reported adversely, with favorable Committee
	5	+	Substitute by the following vote: Yeas 9, Nays 0; March 24, 2025,
	6	+	sent to printer.)
	7	+	Click here to see the committee vote
	8	+	COMMITTEE SUBSTITUTE FOR S.B. No. 667 By: Paxton
4	9
5	10
6	11		A BILL TO BE ENTITLED
7	12		AN ACT
8	13		relating to prohibiting certain state governmental entities from
9	14		investing in certain Chinese-affiliated entities.
10	15		BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
11	16		SECTION 1. Subtitle A, Title 8, Government Code, is amended
12	17		by adding Chapter 809A to read as follows:
13	18		CHAPTER 809A. PROHIBITION ON INVESTMENT IN CERTAIN
14	19		CHINESE-AFFILIATED ENTITIES
15	20		SUBCHAPTER A. GENERAL PROVISIONS
16	21		Sec. 809A.001. DEFINITIONS. In this chapter:
17	22		(1) "Chinese-affiliated entity" means a publicly
18	23		traded entity that:
19	24		(A) is both:
20	25		(i) incorporated or headquartered in the
21	26		People's Republic of China, including in the Hong Kong special
22	27		administrative region, other than a U.S. subsidiary, as that term
23	28		is defined by 15 C.F.R. Section 772.1; and
24	29		(ii) publicly confirmed to be controlled by
25	30		the People's Republic of China, the Chinese Communist Party, or a
26	31		provincial division, municipality, governmental agency, sovereign
27	32		wealth fund, or political instrumentality of the People's Republic
28	33		of China; or
29	34		(B) is identified by one or more of the
30	35		appropriate government agencies to be required by the National
31	36		Intelligence Law of the People's Republic of China (2017), as
32	37		amended in 2018, or any successor law, to support, assist, and
33	38		cooperate with the state intelligence work of the People's Republic
34	39		of China and keep the secrets of the national intelligence work of
35	40		the People's Republic of China.
36	41		(2) "Direct holdings" means, with respect to a
37	42		restricted entity, all securities of that restricted entity held
38	43		directly by a state governmental entity in an account or fund in
39	44		which a state governmental entity owns all shares or interests.
40	45		(3) "Entity" means a for-profit sole proprietorship,
41	46		organization, association, corporation, partnership, joint
42	47		venture, limited partnership, limited liability partnership, or
43	48		limited liability company, including a wholly owned subsidiary,
44	49		majority-owned subsidiary, parent company, or affiliate of those
45	50		entities or business associations, that exists to make a profit.
46	51		(4) "Indirect holdings" means, with respect to a
47	52		restricted entity, all securities of that restricted entity held in
48	53		an account or fund, such as a mutual fund, managed by one or more
49	54		persons not employed by a state governmental entity, in which the
50	55		state governmental entity owns shares or interests together with
51	56		other investors not subject to the provisions of this chapter. The
52	57		term does not include money invested under a plan described by
53	58		Section 401(k) or 457 of the Internal Revenue Code of 1986 (26
54	59		U.S.C. Section 401(k) or 457).
55	60		(5) "Listed restricted entity" means a restricted
56	61		entity listed by the comptroller under Section 809A.051.
57	62		(6) "Restricted entity" means a Chinese-affiliated
58	63		entity or other entity associated with the People's Republic of
59	64		China that is identified or included on an entities list maintained
60	65		by the federal government for the purpose of imposing prohibitions
61	66		or restrictions on or against entities to address national security
62	67		concerns, protect human rights, or combat unfair trade practices.
63	68		The term includes an entity that:
64	69		(A) is listed on the entity list under supplement
65	70		No. 4 to 15 C.F.R. Part 744 as associated with the People's Republic
66	71		of China because there is reasonable cause to believe the entity is
67	72		involved, has been involved, or poses a significant risk of being or
68	73		becoming involved in activities contrary to the national security
69	74		or foreign policy interests of the United States of America; and
70	75		(B) is listed in the Federal Register by the
71	76		United States Secretary of Defense as a Chinese military company
72	77		operating directly or indirectly in the United States or in any
73	78		territory or possession of the United States on the most recent list
74	79		compiled under Section 1260H of the William M. (Mac) Thornberry
75	80		National Defense Authorization Act for Fiscal Year 2021 (Pub. L.
76	81		No. 116-283, reprinted in note, 10 U.S.C. Section 113), or any
77	82		successor list of Chinese military companies the secretary is
78	83		required by law to compile and publish.
79	84		(7) "State governmental entity" means:
80	85		(A) the Employees Retirement System of Texas,
81	86		including a retirement system administered by that system;
82	87		(B) the Teacher Retirement System of Texas;
83	88		(C) the Texas Municipal Retirement System;
84	89		(D) the Texas County and District Retirement
85	90		System;
86	91		(E) the Texas Emergency Services Retirement
87	92		System; or
88	93		(F) the permanent school fund.
89	94		Sec. 809A.002. OTHER LEGAL OBLIGATIONS. With respect to
90	95		actions taken in compliance with this chapter, including all good
91	96		faith determinations regarding restricted entities as required by
92	97		this chapter, a state governmental entity and the comptroller are
93	98		exempt from any conflicting statutory or common law obligations,
94	99		including any obligations with respect to making investments,
95	100		divesting from any investment, preparing or maintaining any list of
96	101		restricted entities, or choosing asset managers, investment funds,
97	102		or investments for the state governmental entity's securities
98	103		portfolios.
99	104		Sec. 809A.003. INDEMNIFICATION OF STATE GOVERNMENTAL
100	105		ENTITIES, EMPLOYEES, AND OTHERS. In a cause of action based on an
101	106		action, inaction, decision, divestment, investment, restricted
102	107		entity communication, report, or other determination made or taken
103	108		in connection with this chapter, the state shall, without regard to
104	109		whether the person performed services for compensation, indemnify
105	110		and hold harmless for actual damages, court costs, and attorney's
106	111		fees adjudged against, and defend:
107	112		(1) an employee, a member of the governing body, or any
108	113		other officer of a state governmental entity;
109	114		(2) a contractor of a state governmental entity;
110	115		(3) a former employee, a former member of the
111	116		governing body, or any other former officer of a state governmental
112	117		entity who was an employee, member of the governing body, or other
113	118		officer when the act or omission on which the damages are based
114	119		occurred;
115	120		(4) a former contractor of a state governmental entity
116	121		who was a contractor when the act or omission on which the damages
117	122		are based occurred; and
118	123		(5) a state governmental entity.
119	124		Sec. 809A.004. NO PRIVATE CAUSE OF ACTION. (a) A person,
120	125		including a member, retiree, or beneficiary of a retirement system
121	126		to which this chapter applies, an association, a research firm, a
122	127		restricted entity, or any other person may not sue or pursue a
123	128		private cause of action against the state, a state governmental
124	129		entity, a current or former employee, a member of the governing
125	130		body, or any other officer of a state governmental entity, or a
126	131		contractor of a state governmental entity, for any claim or cause of
127	132		action, including breach of fiduciary duty, or for violation of any
128	133		constitutional, statutory, or regulatory requirement in connection
129	134		with any action, inaction, decision, divestment, investment,
130	135		restricted entity communication, report, or other determination
131	136		made or taken in connection with this chapter.
132	137		(b) A person who files suit against the state, a state
133	138		governmental entity, an employee, a member of the governing body,
134	139		or any other officer of a state governmental entity, or a contractor
135	140		of a state governmental entity, is liable for paying the costs and
136	141		attorney's fees of a person sued in violation of this section.
137	142		Sec. 809A.005. INAPPLICABILITY OF REQUIREMENTS
138	143		INCONSISTENT WITH FIDUCIARY RESPONSIBILITIES AND RELATED DUTIES. A
139	144		state governmental entity is not subject to a requirement of this
140	145		chapter if the state governmental entity determines that the
141	146		requirement would be inconsistent with its fiduciary
142	147		responsibility with respect to the investment of its assets or
143	148		other duties imposed by law relating to the investment of its
144	149		assets, including the duty of care established under Section 67,
145	150		Article XVI, Texas Constitution.
146	151		Sec. 809A.006. RELIANCE ON FEDERAL DETERMINATION AND
147	152		RESTRICTED ENTITY RESPONSE. The comptroller may rely on the
148	153		following, in the following order of priority, without conducting
149	154		any further investigation, research, or inquiry:
150	155		(1) a determination by a federal agency or officer
151	156		made under a federal law, regulation, or executive order regarding
152	157		whether an entity is a restricted entity; and
153	158		(2) a restricted entity's response to a communication
154	159		made under this chapter.
155	160		SUBCHAPTER B. DUTIES REGARDING INVESTMENTS
156	161		Sec. 809A.051. LISTED RESTRICTED ENTITIES. (a) The
157	162		comptroller shall prepare and maintain, and provide to each state
158	163		governmental entity, a list of all restricted entities. In
159	164		maintaining the list, the comptroller may:
160	165		(1) review and rely, as appropriate in the
161	166		comptroller's judgment, on publicly available information
162	167		regarding restricted entities, including information provided or
163	168		made available by federal, state, or local governments, nonprofit
164	169		organizations, research firms, and international organizations;
165	170		and
166	171		(2) request written verification from a restricted
167	172		entity that it does not meet any of the criteria in Section
168	173		809A.001(6) and rely, as appropriate in the comptroller's judgment
169	174		and without conducting further investigation, research, or
170	175		inquiry, on the entity's written response to the request.
171	176		(b) A restricted entity that fails to provide to the
172	177		comptroller a written verification under Subsection (a)(2) before
173	178		the 61st day after receiving the request from the comptroller is
174	179		presumed to be a restricted entity.
175	180		(c) The comptroller shall update the list annually or more
176	181		often as the comptroller considers necessary, but not more often
177	182		than quarterly, based on information from, among other sources,
178	183		those listed in Subsection (a).
179	184		(d) Not later than the 30th day after the date the list of
180	185		restricted entities is first provided or updated, the comptroller
181	186		shall file the list with the presiding officer of each house of the
182	187		legislature and the attorney general and post the list on a publicly
183	188		available Internet website.
184	189		Sec. 809A.052. IDENTIFICATION OF INVESTMENT IN LISTED
185	190		RESTRICTED ENTITIES. Not later than the 30th day after the date a
186	191		state governmental entity receives the list provided under Section
187	192		809A.051, the state governmental entity shall notify the
188	193		comptroller of the restricted entities in which the state
189	194		governmental entity owns direct holdings or indirect holdings.
190	195		Sec. 809A.053. NOTICE OF DIVESTMENT TO LISTED RESTRICTED
191	196		ENTITY. For each listed restricted entity identified under Section
192	197		809A.052, the state governmental entity shall send a written
193	198		notice:
194	199		(1) informing the restricted entity of its status as a
195	200		restricted entity; and
196	201		(2) warning the restricted entity that it may become
197	202		subject to divestment by the state governmental entity.
198	203		Sec. 809A.054. DIVESTMENT OF ASSETS. (a) A state
199	204		governmental entity required to sell, redeem, divest, or withdraw
200	205		all publicly traded securities of a listed restricted entity shall
201	206		comply with the following schedule:
202	207		(1) at least 50 percent of those assets must be removed
203	208		from the state governmental entity's assets under management not
204	209		later than the 180th day after the date the restricted entity
205	210		receives notice under Section 809A.053 unless the state
206	211		governmental entity determines, based on a good faith exercise of
207	212		its fiduciary discretion and subject to Subdivision (2), that a
208	213		later date is more prudent; and
209	214		(2) 100 percent of those assets must be removed from
210	215		the state governmental entity's assets under management not later
211	216		than the 360th day after the date the restricted entity receives
212	217		notice under Section 809A.053.
213	218		(b) Except as provided by Subsection (a), a state
214	219		governmental entity may delay the schedule for divestment under
215	220		that subsection only to the extent that the state governmental
216	221		entity determines, in the state governmental entity's good faith
217	222		judgment, and consistent with the state governmental entity's
218	223		fiduciary duty, that divestment from listed restricted entities
219	224		will likely result in a loss in value or a benchmark deviation
220	225		described by Section 809A.056(a). If a state governmental entity
221	226		delays the schedule for divestment, the state governmental entity
222	227		shall submit a report to the presiding officer of each house of the
223	228		legislature and the attorney general stating the reason and
224	229		justification for the state governmental entity's delay in
225	230		divestment from listed restricted entities. The report must
226	231		include documentation supporting its determination that the
227	232		divestment would result in a loss in value or a benchmark deviation
228	233		described by Section 809A.056(a), including objective numerical
229	234		estimates. The state governmental entity shall update the report
230	235		every six months.
231	236		Sec. 809A.055. INVESTMENTS EXEMPTED FROM DIVESTMENT. A
232	237		state governmental entity is not required to divest from any
233	238		indirect holdings in actively or passively managed investment funds
234	239		or private equity funds. The state governmental entity shall
235	240		submit letters to the managers of each investment fund containing
236	241		listed restricted entities requesting that they remove those
237	242		restricted entities from the fund or create a similar actively or
238	243		passively managed fund with indirect holdings devoid of listed
239	244		restricted entities. If a manager creates a similar fund with
240	245		substantially the same management fees and same level of investment
241	246		risk and anticipated return, the state governmental entity may
242	247		replace all applicable investments with investments in the similar
243	248		fund in a time frame consistent with prudent fiduciary standards
244	249		but not later than the 450th day after the date the fund is created.
245	250		Sec. 809A.056. AUTHORIZED INVESTMENT IN LISTED RESTRICTED
246	251		ENTITIES. (a) A state governmental entity may cease divesting from
247	252		one or more listed restricted entities only if clear and convincing
248	253		evidence shows that:
249	254		(1) the state governmental entity has suffered or will
250	255		suffer a loss in the hypothetical value of all assets under
251	256		management by the state governmental entity as a result of having to
252	257		divest from listed restricted entities under this chapter; or
253	258		(2) an individual portfolio that uses a
254	259		benchmark-aware strategy would be subject to an aggregate expected
255	260		deviation from its benchmark as a result of having to divest from
256	261		listed restricted entities under this chapter.
257	262		(b) A state governmental entity may cease divesting from a
258	263		listed restricted entity as provided by this section only to the
259	264		extent necessary to ensure that the state governmental entity does
260	265		not suffer a loss in value or deviate from its benchmark as
261	266		described by Subsection (a).
262	267		(c) Before a state governmental entity may cease divesting
263	268		from a listed restricted entity under this section, the state
264	269		governmental entity must provide a written report to the
265	270		comptroller, the presiding officer of each house of the
266	271		legislature, and the attorney general setting forth the reason and
267	272		justification, supported by clear and convincing evidence, for
268	273		deciding to cease divestment or to remain invested in a listed
269	274		restricted entity.
270	275		(d) The state governmental entity shall update the report
271	276		required by Subsection (c) semiannually, as applicable.
272	277		Sec. 809A.057. PROHIBITED INVESTMENTS. Except as provided
273	278		by Section 809A.056, a state governmental entity may not acquire
274	279		securities of a listed restricted entity.
275	280		SUBCHAPTER C. REPORT; ENFORCEMENT
276	281		Sec. 809A.101. REPORT. Not later than January 5 of each
277	282		year, each state governmental entity shall file a publicly
278	283		available report with the presiding officer of each house of the
279	284		legislature and the attorney general that:
280	285		(1) identifies all securities sold, redeemed,
281	286		divested, or withdrawn in compliance with Section 809A.054;
282	287		(2) identifies all prohibited investments under
283	288		Section 809A.057; and
284	289		(3) summarizes any changes made under Section
285	290		809A.055.
286	291		Sec. 809A.102. ENFORCEMENT. The attorney general may bring
287	292		any action necessary to enforce this chapter.
288	293		SECTION 2. This Act takes effect September 1, 2025.
	294	+	* * * * *