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A BILL TO BE ENTITLED
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AN ACT
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relating to prohibiting the investment of retirement system funds |
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in certain private business entities doing business in Iran. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Subtitle A, Title 8, Government Code, is amended |
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by adding Chapter 807 to read as follows: |
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CHAPTER 807. PROHIBITION ON INVESTMENT IN IRAN |
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SUBCHAPTER A. GENERAL PROVISIONS |
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Sec. 807.001. DEFINITIONS. In this chapter: |
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(1) "Active business operations" means all business |
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operations that are not inactive business operations. |
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(2) "Business operations" means engaging in commerce |
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in any form in Iran, including by acquiring, developing, |
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maintaining, owning, selling, possessing, leasing, or operating |
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equipment, facilities, personnel, products, services, personal |
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property, real property, or any other apparatus of business or |
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commerce. |
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(3) "Company" means a sole proprietorship, |
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organization, association, corporation, partnership, joint |
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venture, limited partnership, limited liability partnership, |
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limited liability company, or other entity or business association |
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whose securities are publicly traded, including a wholly owned |
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subsidiary, majority-owned subsidiary, parent company, or |
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affiliate of those entities or business associations, that exists |
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to make a profit. |
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(4) "Direct holdings" means, with respect to a |
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company, all securities of that company held directly by a state |
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governmental entity in an account or fund in which a state |
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governmental entity owns all shares or interests. |
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(5) "Inactive business operations" means the mere |
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continued holding or renewal of rights to property previously |
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operated to generate revenue but not presently deployed to generate |
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revenue. |
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(6) "Indirect holdings" means, with respect to a |
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company, all securities of that company held in an account or fund, |
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such as a mutual fund, managed by one or more persons not employed |
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by a state governmental entity, in which the state governmental |
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entity owns shares or interests together with other investors not |
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subject to the provisions of this chapter. The term does not |
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include money invested under a plan described by Section 401(k) or |
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457 of the Internal Revenue Code of 1986. |
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(7) "Listed company" means a company listed by the |
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comptroller under Section 807.051. |
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(8) "Military equipment" means weapons, arms, |
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military supplies, and equipment that readily may be used for |
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military purposes, including radar systems and military-grade |
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transport vehicles. |
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(9) "Scrutinized company" means a company that engages |
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in scrutinized business operations described by Section 807.002. |
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(10) "State governmental entity" means: |
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(A) the Employees Retirement System of Texas, |
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including a retirement system administered by that system; |
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(B) the Teacher Retirement System of Texas; |
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(C) the Texas Municipal Retirement System; |
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(D) the Texas County and District Retirement |
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System; and |
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(E) the Texas Emergency Services Retirement |
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System. |
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Sec. 807.002. SCRUTINIZED BUSINESS OPERATIONS. A company |
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engages in scrutinized business operations if: |
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(1) the company has business operations that involve |
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contracts with or providing supplies or services to the government |
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of Iran, a company in which the government of Iran has any direct or |
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indirect equity share, a consortium or project commissioned by the |
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government of Iran, or a company involved in a consortium or project |
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commissioned by the government of Iran; or |
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(2) the company supplies military equipment to Iran. |
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Sec. 807.003. EXCEPTION. Notwithstanding any provision of |
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this chapter, a company that the United States government |
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affirmatively declares to be excluded from its federal sanctions |
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regime relating to Iran is not subject to divestment or the |
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investment prohibition under this chapter. |
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Sec. 807.004. OTHER LEGAL OBLIGATIONS. With respect to |
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actions taken in compliance with this chapter, including all good |
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faith determinations regarding companies as required by this |
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chapter, a state governmental entity is exempt from any conflicting |
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statutory or common law obligations, including any obligations with |
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respect to making investments, divesting from any investment, |
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preparing or maintaining any list of companies, or choosing asset |
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managers, investment funds, or investments for the state |
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governmental entity's securities portfolios. |
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Sec. 807.005. INDEMNIFICATION OF STATE GOVERNMENTAL |
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ENTITIES, EMPLOYEES, AND OTHERS. In a cause of action based on an |
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action, inaction, decision, divestment, investment, company |
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communication, report, or other determination made or taken in |
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connection with this chapter, the state shall, without regard to |
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whether the person performed services for compensation, indemnify |
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and hold harmless for actual damages, court costs, and attorney's |
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fees adjudged against, and defend: |
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(1) an employee, a member of the governing body, or any |
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other officer of a state governmental entity; |
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(2) a contractor of a state governmental entity; |
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(3) a former employee, a former member of the |
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governing body, or any other former officer of a state governmental |
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entity who was an employee or officer when the act or omission on |
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which the damages are based occurred; |
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(4) a former contractor of a state governmental entity |
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who was a contractor when the act or omission on which the damages |
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are based occurred; and |
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(5) a state governmental entity. |
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Sec. 807.006. NO PRIVATE CAUSE OF ACTION. (a) A person, |
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including a member, retiree, or beneficiary of a retirement system |
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to which this chapter applies, an association, a research firm, a |
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company, or any other person may not sue or pursue a private cause |
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of action against the state, a state governmental entity, an |
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employee, a member of the governing body, or any other officer of a |
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state governmental entity, or a contractor of a state governmental |
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entity, for any claim or cause of action, including breach of |
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fiduciary duty, or for violation of any constitutional, statutory, |
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or regulatory requirement in connection with any action, inaction, |
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decision, divestment, investment, company communication, report, |
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or other determination made or taken in connection with this |
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chapter. |
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(b) A person who files suit against the state, a state |
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governmental entity, an employee, a member of the governing body, |
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or any other officer of a state governmental entity, or a contractor |
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of a state governmental entity, is liable for paying the costs and |
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attorney's fees of a person sued in violation of this section. |
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Sec. 807.007. INAPPLICABILITY OF REQUIREMENTS INCONSISTENT |
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WITH FIDUCIARY RESPONSIBILITIES AND RELATED DUTIES. A state |
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governmental entity is not subject to a requirement of this chapter |
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if the state governmental entity determines that the requirement |
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would be inconsistent with its fiduciary responsibility with |
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respect to the investment of entity assets or other duties imposed |
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by law relating to the investment of entity assets, including the |
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duty of care established under Section 67, Article XVI, Texas |
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Constitution. |
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Sec. 807.008. RELIANCE ON COMPANY RESPONSE. The |
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comptroller and a state governmental entity may rely on a company's |
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response to a notice or communication made under this chapter |
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without conducting any further investigation, research, or |
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inquiry. |
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SUBCHAPTER B. DUTIES REGARDING INVESTMENTS |
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Sec. 807.051. LISTED COMPANIES. (a) The comptroller shall |
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prepare and maintain, and provide to each state governmental |
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entity, a list of all scrutinized companies. In maintaining the |
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list, the comptroller may review and rely, as appropriate in the |
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comptroller's judgment, on publicly available information |
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regarding companies with business operations in Iran, including |
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information provided by the state, nonprofit organizations, |
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research firms, international organizations, and governmental |
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entities. |
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(b) The comptroller shall update the list annually or more |
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often as the comptroller considers necessary, but not more often |
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than quarterly, based on information from, among other sources, |
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those listed in Subsection (a). |
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(c) Not later than the 30th day after the date the list of |
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scrutinized companies is first provided or updated, the comptroller |
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shall file the list with the presiding officer of each house of the |
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legislature and the attorney general. |
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Sec. 807.052. IDENTIFICATION OF INVESTMENT IN LISTED |
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COMPANIES. Not later than the 14th day after the date a state |
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governmental entity receives the list provided under Section |
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807.051, the state governmental entity shall notify the comptroller |
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of the listed companies in which the state governmental entity owns |
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direct holdings or indirect holdings. |
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Sec. 807.053. NOTICE TO LISTED COMPANY ENGAGED IN INACTIVE |
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BUSINESS OPERATIONS. For each listed company identified under |
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Section 807.052 that is engaged in only scrutinized inactive |
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business operations, the state governmental entity shall send a |
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written notice informing the company of this chapter and |
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encouraging the company to continue to refrain from initiating |
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active business operations in Iran until it is able to avoid being |
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considered a listed company. The state governmental entity shall |
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continue the correspondence as the entity, in its sole discretion, |
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considers necessary, but is not required to initiate correspondence |
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more often than semiannually. |
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Sec. 807.054. ACTIONS RELATING TO LISTED COMPANY ENGAGED IN |
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ACTIVE BUSINESS OPERATIONS. (a) For each listed company |
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identified under Section 807.052 that is engaged in scrutinized |
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active business operations, the state governmental entity shall |
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send a written notice informing the company of its listed company |
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status and warning the company that it may become subject to |
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divestment by state governmental entities. |
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(b) The notice must offer the company the opportunity to |
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clarify its Iran-related activities and must encourage the company, |
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not later than the 90th day after the date the company receives |
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notice under this section, to either cease its scrutinized business |
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operations or convert the operations to inactive business |
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operations in order to avoid qualifying for divestment by state |
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governmental entities. |
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(c) If, during the time provided by Subsection (b), the |
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company ceases scrutinized business operations, the comptroller |
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shall remove the company from the list maintained under Section |
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807.051 and this chapter will no longer apply to the company unless |
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it resumes scrutinized business operations. |
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(d) If, during the time provided by Subsection (b), the |
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company converts its scrutinized active business operations to |
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inactive business operations, the company is subject to all |
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provisions of this chapter relating to inactive business |
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operations. |
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(e) If, after the time provided by Subsection (b) expires, |
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the company continues to have scrutinized active business |
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operations, the state governmental entity shall sell, redeem, |
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divest, or withdraw all publicly traded securities of the company, |
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except securities described by Section 807.056, according to the |
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schedule provided by Section 807.055. |
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Sec. 807.055. DIVESTMENT OF ASSETS. (a) A state |
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governmental entity required to sell, redeem, divest, or withdraw |
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all publicly traded securities of a listed company shall comply |
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with the following schedule: |
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(1) at least 50 percent of those assets must be removed |
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from the state governmental entity's assets under management not |
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later than the 270th day after the date the company receives notice |
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under Section 807.054 or Subsection (b) unless the state |
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governmental entity determines, based on a good faith exercise of |
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its fiduciary discretion and subject to Subdivision (2), that a |
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later date is more prudent; and |
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(2) 100 percent of those assets must be removed from |
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the state governmental entity's assets under management not later |
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than the 450th day after the date the company receives notice under |
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Section 807.054 or Subsection (b). |
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(b) If a company that ceased scrutinized active business |
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operations after receiving notice under Section 807.054 resumes |
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scrutinized active business operations, the state governmental |
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entity shall send a written notice to the company informing it that |
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the state governmental entity will sell, redeem, divest, or |
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withdraw all publicly traded securities of the scrutinized company |
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according to the schedule in Subsection (a). |
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(c) Except as provided by Subsection (a), a state |
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governmental entity may delay the schedule for divestment under |
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that subsection only to the extent that the state governmental |
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entity determines, in the state governmental entity's good faith |
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judgment, that divestment from listed companies will likely result |
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in a loss in value or a benchmark deviation described by Section |
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807.057(a). If a state governmental entity delays the schedule for |
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divestment, the state governmental entity shall submit a report to |
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the presiding officer of each house of the legislature and the |
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attorney general stating the reasons and justification for the |
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state governmental entity's delay in divestment from listed |
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companies. The report must include documentation supporting its |
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determination that the divestment would result in a loss in value or |
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benchmark deviation described by Section 807.057(a), including |
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objective numerical estimates. The state governmental entity shall |
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update the report every six months. |
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Sec. 807.056. INVESTMENTS EXEMPTED FROM DIVESTMENT. A |
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state governmental entity is not required to divest from any |
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indirect holdings in actively or passively managed investment funds |
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or private equity funds. The state governmental entity shall |
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submit letters to the managers of investment funds containing |
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listed companies requesting that they consider removing those |
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companies from the fund or create a similar actively or passively |
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managed fund with indirect holdings devoid of listed companies. If |
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the manager creates a similar fund with substantially the same |
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management fees and same level of investment risk and anticipated |
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return, the state governmental entity may replace all applicable |
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investments with investments in the similar fund in a time frame |
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consistent with prudent fiduciary standards. |
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Sec. 807.057. AUTHORIZED INVESTMENT IN LISTED COMPANIES. |
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(a) A state governmental entity may cease divesting from or may |
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reinvest in one or more listed companies if clear and convincing |
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evidence shows that: |
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(1) the state governmental entity has suffered or will |
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suffer a loss in the hypothetical value of all assets under |
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management by the state governmental entity as a result of having to |
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divest from listed companies under this chapter; or |
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(2) an individual portfolio that uses a |
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benchmark-aware strategy would be subject to an aggregate expected |
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deviation from its benchmark as a result of having to divest from |
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listed companies under this chapter. |
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(b) A state governmental entity may cease divesting from or |
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may reinvest in a listed company as provided by this section only to |
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the extent necessary to ensure that the state governmental entity |
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does not suffer a loss in value or deviate from its benchmark as |
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described by Subsection (a). |
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(c) Before a state governmental entity may cease divesting |
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from or may reinvest in a listed company under this section, the |
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state governmental entity must provide a written report to the |
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presiding officer of each house of the legislature and the attorney |
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general setting forth the reason and justification, supported by |
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clear and convincing evidence, for its decisions to cease |
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divestment, to reinvest, or to remain invested in a listed company. |
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(d) The state governmental entity shall update the report |
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required by Subsection (c) semiannually, as applicable. |
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(e) This section does not apply to reinvestment in a company |
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that is no longer a listed company. |
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Sec. 807.058. PROHIBITED INVESTMENTS. Except as provided |
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by Sections 807.003 and 807.057, a state governmental entity may |
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not acquire securities of a listed company. |
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SUBCHAPTER C. EXPIRATION; REPORT; ENFORCEMENT |
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Sec. 807.101. EXPIRATION OF CHAPTER. This chapter expires |
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on the earlier of: |
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(1) the date the United States revokes its sanctions |
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against the government of Iran; or |
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(2) the date the United States Congress or the |
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president of the United States, through legislation or executive |
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order, declares that mandatory divestment of the type provided for |
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in this chapter interferes with the conduct of United States |
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foreign policy. |
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Sec. 807.102. REPORT. Not later than December 31 of each |
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year, each state governmental entity shall file a publicly |
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available report with the presiding officer of each house of the |
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legislature and the attorney general, that: |
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(1) identifies all securities sold, redeemed, |
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divested, or withdrawn in compliance with Section 807.055; |
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(2) identifies all prohibited investments under |
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Section 807.058; and |
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(3) summarizes any changes made under Section 807.056. |
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Sec. 807.103. ENFORCEMENT. The attorney general may bring |
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any action necessary to enforce this chapter. |
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SECTION 2. Not later than January 1, 2014, the comptroller |
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of public accounts shall prepare and provide to each state |
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governmental entity, as defined by Section 807.001, Government |
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Code, as added by this Act, the list of scrutinized companies |
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required by Section 807.051, Government Code, as added by this Act. |
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SECTION 3. This Act takes effect January 1, 2014. |