S.B. No. 247
 
 
 
 
AN ACT
  relating to prohibiting the investment of state funds in certain
  private business entities doing business in Sudan.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  LEGISLATIVE FINDINGS. (a)  On July 23, 2004,
  the United States Congress declared that "the atrocities unfolding
  in Darfur, Sudan, are genocide."
         (b)  On September 9, 2004, Secretary of State Colin L. Powell
  told the United States Senate Committee on Foreign Relations that
  "genocide has occurred and may still be occurring in Darfur" and
  "the Government of Sudan and the Janjaweed bear responsibility."
         (c)  On September 21, 2004, addressing the United Nations
  General Assembly, President George W. Bush affirmed the secretary
  of state's finding and stated, "At this hour, the world is
  witnessing terrible suffering and horrible crimes in the Darfur
  region of Sudan, crimes my government has concluded are genocide."
         (d)  On December 7, 2004, the United States Congress noted
  that the genocidal policy in Darfur has led to reports of
  "systematic rape of thousands of women and girls, the abduction of
  women and children, and the destruction of hundreds of ethnically
  African villages, including the poisoning of their wells and the
  plunder of their crops and cattle upon which the people of such
  villages sustain themselves."
         (e)  Also on December 7, 2004, the United States Congress
  found that "the Government of Sudan has restricted access by
  humanitarian and human rights workers to the Darfur area through
  intimidation by military and security forces, and through
  bureaucratic and administrative obstruction, in an attempt to
  inflict the most devastating harm on those individuals displaced
  from their villages and homes without any means of sustenance or
  shelter."
         (f)  On September 25, 2006, the United States Congress
  reaffirmed that "the genocide unfolding in the Darfur region of
  Sudan is characterized by acts of terrorism and atrocities directed
  against civilians, including mass murder, rape, and sexual violence
  committed by the Janjaweed and associated militias with the
  complicity and support of the National Congress Party-led faction
  of the Government of Sudan."
         (g)  On September 26, 2006, the United States House of
  Representatives stated that "an estimated 300,000 to 400,000 people
  have been killed by the Government of Sudan and its Janjaweed allies
  since the Darfur crisis began in 2003, more than 2,000,000 people
  have been displaced from their homes, and more than 250,000 people
  from Darfur remain in refugee camps in Chad."
         (h)  The Darfur crisis represents the first time the United
  States government has labeled ongoing atrocities a genocide.
         (i)  The United States government has imposed sanctions
  against the Government of Sudan since 1997.  These sanctions are
  monitored through the United States Treasury Department's Office of
  Foreign Assets Control (OFAC).
         (j)  According to a former chair of the United States
  Securities and Exchange Commission, "the fact that a foreign
  company is doing material business with a country, government, or
  entity on OFAC's sanctions list is, in the SEC staff's view,
  substantially likely to be significant to a reasonable investor's
  decision about whether to invest in that company."
         (k)  Since 1993, the United States secretary of state has
  determined that Sudan is a country the government of which has
  repeatedly provided support for acts of international terrorism,
  thereby incurring restrictions of United States assistance,
  defense exports and sales, and financial and other transactions
  with the Government of Sudan.
         (l)  A 2006 United States House of Representatives report
  states that "a company's association with sponsors of terrorism and
  human rights abuses, no matter how large or small, can have a
  materially adverse result on a public company's operations,
  financial condition, earnings, and stock prices, all of which can
  negatively affect the value of an investment."
         (m)  In response to the financial risk posed by investments
  in companies doing business with a terrorist-sponsoring state, the
  Securities and Exchange Commission established its Office of Global
  Security Risk to provide for enhanced disclosure of material
  information regarding such companies.
         (n)  The current Sudan divestment movement encompasses
  nearly 100 universities, cities, states, and private pension plans.
         (o)  Companies facing such widespread divestment present
  further material risk to remaining investors.
         (p)  It is a fundamental responsibility of the state to
  decide where, how, and by whom financial resources in its control
  should be invested, taking into account numerous pertinent factors.
         (q)  It is the prerogative and desire of the state, in
  respect to investment resources in its control and to the extent
  reasonable, with due consideration for, among other things,
  fiduciary standards imposed by law, on behalf of itself and its
  investment beneficiaries, not to participate in an ownership or
  capital-providing capacity with entities that provide significant
  practical support for genocide, including certain non-United
  States companies presently doing business in Sudan.
         (r)  It is the judgment of the legislature that this Act
  should remain in effect only insofar as it continues to be
  consistent with, and does not unduly interfere with, the foreign
  policy of the United States as determined by the United States
  government.
         (s)  This Act is not intended to interfere with the
  performance of the fiduciary duties of a manager of funds subject to
  this Act.
         (t)  It is the judgment of the legislature that mandatory
  divestment of public funds from certain companies is a measure that
  should be employed sparingly and judiciously.  A congressional and
  presidential declaration of genocide satisfies this high
  threshold.
         SECTION 2.  Subtitle A, Title 8, Government Code, is amended
  by adding Chapter 806 to read as follows:
  CHAPTER 806.  PROHIBITION ON INVESTMENT IN SUDAN
  SUBCHAPTER A.  GENERAL PROVISIONS
         Sec. 806.001.  DEFINITIONS.  In this chapter:
               (1)  "Active business operations" means all business
  operations that are not inactive business operations.
               (2)  "Business operations" means engaging in commerce
  in any form in Sudan, including by acquiring, developing,
  maintaining, owning, selling, possessing, leasing, or operating
  equipment, facilities, personnel, products, services, personal
  property, real property, or any other apparatus of business or
  commerce.
               (3)  "Company" means a sole proprietorship,
  organization, association, corporation, partnership, joint
  venture, limited partnership, limited liability partnership,
  limited liability company, or other entity or business association
  whose securities are publicly traded, including a wholly owned
  subsidiary, majority-owned subsidiary, parent company, or
  affiliate of those entities or business associations, that exists
  to make a profit.
               (4)  "Complicit" means taking actions that have
  directly supported or promoted the genocidal campaign in Darfur,
  including:
                     (A)  preventing members of Darfur's victimized
  population from communicating with each other;
                     (B)  encouraging Sudanese citizens to speak out
  against an internationally approved security force for Darfur; or
                     (C)  actively working to deny, cover up, or alter
  the record on human rights abuses in Darfur.
               (5)  "Direct holdings in a company" means 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.
               (6)  "Government of Sudan" means the government in
  Khartoum, Sudan, which is led by the National Congress Party,
  formerly known as the National Islamic Front, or any successor
  government formed on or after October 13, 2006, including the
  coalition National Unity Government agreed upon in the
  Comprehensive Peace Agreement for Sudan.  The term does not include
  the regional government of southern Sudan.
               (7)  "Inactive business operations" means the mere
  continued holding or renewal of rights to property previously
  operated to generate revenue but not presently deployed to generate
  revenue.
               (8)  "Indirect holdings in a company" means 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
  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.
               (9)  "Listed company" means a company listed by the
  comptroller under Section 806.051.
               (10)  "Marginalized populations of Sudan" includes:
                     (A)  the portion of the population in the Darfur
  region that has been genocidally victimized;
                     (B)  the portion of the population of southern
  Sudan victimized by Sudan's North-South civil war;
                     (C)  the Beja, Rashidiya, and other similarly
  underserved groups of eastern Sudan;
                     (D)  the Nubian and other similarly underserved
  groups in Sudan's Abyei, Southern Blue Nile, and Nuba Mountain
  regions; and
                     (E)  the Amri, Hamadab, Manasir, and other
  similarly underserved groups of northern Sudan.
               (11)  "Military equipment" means weapons, arms,
  military supplies, and equipment that readily may be used for
  military purposes, including radar systems or military-grade
  transport vehicles or supplies or services sold or provided
  directly or indirectly to any force actively participating in armed
  conflict in Sudan.
               (12)  "Mineral extraction activities" includes
  exploring, extracting, processing, transporting, or wholesale
  selling or trading of elemental minerals or associated metal alloys
  or oxides (ore), including gold, copper, chromium, chromite,
  diamonds, iron, iron ore, silver, tungsten, uranium, and zinc, as
  well as facilitating those activities, including by providing
  supplies or services in support of those activities.
               (13)  "Oil-related activities" includes:
                     (A)  owning rights to oil blocks;
                     (B)  exporting, extracting, producing, refining,
  processing, exploring for, transporting, selling, or trading of
  oil;
                     (C)  constructing, maintaining, or operating a
  pipeline, refinery, or other oil-field infrastructure; or
                     (D)  facilitating oil-related activities,
  including by providing supplies or services in support of the
  activities, except that the mere retail sale of gasoline and
  related consumer products is not an oil-related activity.
               (14)  "Power production activities" means any business
  operation that involves a project commissioned by the National
  Electricity Corporation of Sudan or another similar Government of
  Sudan entity whose purpose is to facilitate power generation and
  delivery, including establishing power-generating plants or
  hydroelectric dams, selling or installing components for the
  project, and providing service contracts related to the
  installation or maintenance of the project, as well as facilitating
  those activities, including by providing supplies or services in
  support of those activities.
               (15)  "Scrutinized company" means a company that:
                     (A)  engages in scrutinized business operations
  described by Section 806.002; or
                     (B)  has been complicit in the Darfur genocide
  during any preceding 20-month period.
               (16)  "Social development company" means a company
  whose primary purpose in Sudan is to provide humanitarian goods or
  services, including medicine or medical equipment, agricultural
  supplies or infrastructure, educational opportunities,
  journalism-related activities, information or information
  materials, spiritual-related activities, services of a purely
  clerical or reporting nature, food, clothing, or general consumer
  goods that are unrelated to oil-related activities, mineral
  extraction activities, or power production activities.
               (17)  "State governmental entity" means the Employees
  Retirement System of Texas or the Teacher Retirement System of
  Texas.
               (18)  "Substantial action" means adopting,
  publicizing, and implementing a formal plan to cease scrutinized
  business operations within one year and to refrain from any such new
  business operations, undertaking significant humanitarian efforts
  on behalf of one or more marginalized populations of Sudan, or,
  through engagement with the Government of Sudan, materially
  improving conditions for the genocidally victimized population in
  Darfur.
         Sec. 806.002.  SCRUTINIZED BUSINESS OPERATIONS. A company
  engages in scrutinized business operations if:
               (1)  the company has business operations that involve
  contracts with or providing supplies or services to the Government
  of Sudan, a company in which the Government of Sudan has any direct
  or indirect equity share, a Government of Sudan-commissioned
  consortium or project, or a company involved in a Government of
  Sudan-commissioned consortium or project, and:
                     (A)  more than 10 percent of the company's
  revenues or assets linked to Sudan involve oil-related activities
  or mineral extraction activities, less than 75 percent of the
  company's revenue or assets linked to Sudan involve contracts with
  or provision of oil-related or mineral extracting products or
  services to the regional government of southern Sudan or a project
  or consortium created exclusively by that regional government, and
  the company has failed to take substantial action; or
                     (B)  more than 10 percent of the company's revenue
  or assets linked to Sudan involve power production activities, less
  than 75 percent of the company's power production activities
  include projects whose intent is to provide power or electricity to
  the marginalized populations of Sudan, and the company has failed
  to take substantial action; or
               (2)  the company supplies military equipment in Sudan,
  unless:
                     (A)  the company clearly shows that the military
  equipment cannot be used to facilitate offensive military actions
  in Sudan; or
                     (B)  the company implements rigorous and
  verifiable safeguards to prevent use of that equipment by forces
  actively participating in armed conflict, including:
                           (i)  using post-sale tracking of the
  equipment by the company;
                           (ii)  obtaining certification from a
  reputable and objective third party that the equipment is not being
  used by a party participating in armed conflict in Sudan; or
                           (iii)  selling the equipment solely to the
  regional government of southern Sudan or any internationally
  recognized peacekeeping force or humanitarian organization.
         Sec. 806.003.  SOCIAL DEVELOPMENT COMPANY. Notwithstanding
  any other law, a social development company that is not complicit in
  the Darfur genocide is not a scrutinized company.
         Sec. 806.004.  EXCEPTION. Notwithstanding any other law, a
  company that the United States government affirmatively declares to
  be excluded from its federal sanctions regime relating to Sudan is
  not subject to divestment or investment prohibition under this
  chapter.
         Sec. 806.005.  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 is 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. 806.006.  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, former member of the governing
  body, or any other former officer of a state governmental entity who
  was an employee or officer when the act or omission on which the
  damages are based occurred; and
               (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.
         Sec. 806.007.  NO PRIVATE CAUSE OF ACTION. (a)  A person,
  including a member, retiree, and 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, 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, 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.
  [Sections 806.008-806.050 reserved for expansion]
  SUBCHAPTER B.  DUTIES REGARDING INVESTMENTS
         Sec. 806.051.  LISTED COMPANIES.  (a)  The comptroller shall
  prepare and maintain, and provide to each state governmental
  entity, a list of all scrutinized companies.  In maintaining the
  list of scrutinized companies, the comptroller may review and rely,
  as appropriate in the comptroller's judgment, on publicly available
  information regarding companies with business operations in Sudan,
  including information provided by the state, nonprofit
  organizations, research firms, international organizations, and
  governmental entities.
         (b)  The comptroller shall update the list of scrutinized
  companies annually or more often as the comptroller considers
  necessary, but not more often than quarterly, based on information
  from, among other sources, those listed in Subsection (a).
         (c)  Not later than the 30th day after the date the list of
  scrutinized companies is first provided or updated, the comptroller
  shall file the list of scrutinized companies with the presiding
  officer of each house of the legislature and the attorney general.
         Sec. 806.052.  IDENTIFICATION OF INVESTMENT IN LISTED
  COMPANIES. Not later than the 14th day after the date a state
  governmental entity receives the list provided under Section
  806.051(c), the state governmental entity shall notify the
  comptroller of the listed companies in which the state governmental
  entity owns direct or indirect holdings.
         Sec. 806.053.  NOTICE TO LISTED COMPANY ENGAGED IN INACTIVE
  BUSINESS OPERATIONS. For each listed company identified under
  Section 806.052 that is engaged in only inactive scrutinized
  business operations, the state governmental entity shall send a
  written notice informing the company of this chapter and
  encouraging the company to continue to refrain from initiating
  active business operations in Sudan until it is able to avoid being
  considered a listed company. The state governmental entity shall
  continue the correspondence as the entity considers necessary, but
  is not required to initiate correspondence more often than
  semiannually.
         Sec. 806.054.  ACTIONS RELATING TO LISTED COMPANY ENGAGED IN
  ACTIVE BUSINESS OPERATIONS. (a)  For each listed company
  identified under Section 806.052 that is engaged in scrutinized
  active business operations, the state governmental entity shall
  send a written notice informing the company of its listed company
  status and warning the company that it may become subject to
  divestment by state governmental entities.
         (b)  The notice shall offer the company the opportunity to
  clarify its Sudan-related activities and shall encourage the
  company, not later than the 90th day after the date the company
  receives notice under this section, to either cease its scrutinized
  business operations or convert such operations to inactive business
  operations in order to avoid qualifying for divestment by state
  governmental entities.
         (c)  If, during the time provided by Subsection (b), the
  company ceases scrutinized business operations, the comptroller
  shall remove the company from the list of scrutinized companies and
  this chapter will no longer apply to the company unless it resumes
  scrutinized business operations.
         (d)  If, during the time provided by Subsection (b), the
  company converts its scrutinized active business operations to
  inactive business operations, the company is subject to all
  provisions of this chapter relating to inactive business
  operations.
         (e)  If, after the time provided by Subsection (b) expires,
  the listed company continues to have scrutinized active business
  operations, the state governmental entity shall sell, redeem,
  divest, or withdraw all publicly traded securities of the company,
  except securities described by Section 806.057, according to the
  schedule provided by Section 806.056.
         Sec. 806.055.  ACTIONS RELATING TO LISTED COMPANY COMPLICIT
  IN GENOCIDE. (a)  For each company identified under Section
  806.052 that has been complicit, the state governmental entity
  shall send a written notice informing the company of its listed
  company status and warning the company that it may become subject to
  divestment by the state governmental entity.
         (b)  The notice must require the listed company to refrain
  from taking any further action that would make it complicit.
         (c)  If, after receiving the notice under Subsection (a), the
  listed company takes additional action that makes the company
  complicit, the state governmental entity shall sell, redeem,
  divest, or withdraw all publicly traded securities of the company,
  except securities described by Section 806.057, according to the
  schedule provided by Section 806.056.
         Sec. 806.056.  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 shall be
  removed from the state governmental entity's assets under
  management not later than the 270th day after the date the company
  receives notice under Section 806.054 or 806.055 or Subsection (b);
  and
               (2)  100 percent of those assets shall be removed from
  the state governmental entity's assets under management not later
  than the 450th day after the date the company receives notice under
  Section 806.054 or 806.055 or Subsection (b).
         (b)  If a company that ceased scrutinized active business
  operations after receiving notice under Section 806.054 resumes
  scrutinized active business operations, 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 scrutinized company
  according to the schedule in Subsection (a).
         (c)  A state governmental entity may delay the schedule for
  divestment under Subsection (a) only to the extent that the state
  governmental entity determines, in the state governmental entity's
  good faith judgment, that divestment from listed companies will
  likely result in a loss in value described by Section 806.058(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 described by
  Section 806.058(a), including objective numerical estimates. The
  state governmental entity shall update the report every six months.
         Sec. 806.057.  INVESTMENTS EXEMPTED FROM DIVESTMENT. A
  state governmental entity is not required to divest from any
  indirect holdings in actively managed investment funds or private
  equity funds. The state governmental entity shall submit letters
  to the managers of investment funds containing listed companies
  requesting that they consider removing those companies from the
  fund or create a similar actively managed fund with indirect
  holdings devoid of listed companies. If the manager creates a
  similar fund with substantially the same management fees and same
  level of investment risk, the state governmental entity shall
  replace all applicable investments with investments in the similar
  fund in an expedited time frame consistent with prudent fiduciary
  standards.
         Sec. 806.058.  AUTHORIZED INVESTMENT IN LISTED COMPANIES.
  (a)  A state governmental entity may cease divesting from or may
  reinvest in one or more listed companies if clear and convincing
  evidence shows that the value for all assets under management by the
  state governmental entity becomes equal to or less than 99.7
  percent of the hypothetical value of all assets under management by
  the state governmental entity had the state governmental entity not
  divested from listed companies under this chapter.
         (b)  A state governmental entity may invest in a listed
  company as provided by this section only to the extent necessary to
  ensure that the value of the assets managed by the state
  governmental entity does not fall below the value described by
  Subsection (a).
         (c)  Before a state governmental entity may invest in a
  listed company under this section, the state governmental entity
  must provide a written report to 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 its decisions to cease divestment, to reinvest, 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 has ceased to be a listed company.
         Sec. 806.059.  PROHIBITED INVESTMENTS. Except as provided
  by Sections 806.004 and 806.058, a state governmental entity may
  not acquire securities of a listed company.
  [Sections 806.060-806.100 reserved for expansion]
  SUBCHAPTER C. EXPIRATION; REPORT; ENFORCEMENT
         Sec. 806.101.  EXPIRATION OF CHAPTER. This chapter expires
  on the earliest of:
               (1)  the date on which the United States Congress or the
  president of the United States declares that the Darfur genocide
  has been halted for at least 12 months;
               (2)  the date on which the United States revokes its
  sanctions against the Government of Sudan; or
               (3)  the date on which the United States Congress or the
  president of the United States, through legislation or executive
  order, declares that mandatory divestment of the type provided for
  in this chapter interferes with the conduct of United States
  foreign policy.
         Sec. 806.102.  REPORT. Not later than December 31 of each
  year, each state governmental entity shall file a publicly
  available report with the presiding officer of each house of the
  legislature, the attorney general, and the United States
  presidential special envoy to Sudan that:
               (1)  identifies all investments sold, redeemed,
  divested, or withdrawn in compliance with Section 806.056;
               (2)  identifies all prohibited investments under
  Section 806.059; and
               (3)  summarizes any changes made under Section 806.057.
         Sec. 806.103.  ENFORCEMENT. The attorney general may bring
  any action necessary to enforce this chapter.
         SECTION 3.  Not later than January 1, 2008, the comptroller
  of public accounts shall prepare and provide to each state
  governmental entity, as defined by Section 806.001, Government
  Code, as added by this Act, the list of scrutinized companies
  required by Section 806.051, Government Code, as added by this Act.
         SECTION 4.  This Act takes effect January 1, 2008.
 
 
 
 
 
  ______________________________ ______________________________
     President of the Senate Speaker of the House     
 
         I hereby certify that S.B. No. 247 passed the Senate on
  March 20, 2007, by the following vote:  Yeas 29, Nays 0.
 
 
  ______________________________
  Secretary of the Senate    
 
         I hereby certify that S.B. No. 247 passed the House on
  May 16, 2007, by the following vote:  Yeas 146, Nays 0, one present
  not voting.
 
 
  ______________________________
  Chief Clerk of the House   
 
 
 
  Approved:
 
  ______________________________ 
              Date
 
 
  ______________________________ 
            Governor