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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 certain retirement system |
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funds in publicly traded business entities that donate to Planned |
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Parenthood. |
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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 808 to read as follows: |
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CHAPTER 808. PROHIBITION ON INVESTMENT IN COMPANIES THAT DONATE TO |
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PLANNED PARENTHOOD |
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SUBCHAPTER A. GENERAL PROVISIONS |
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Sec. 808.001. DEFINITIONS. In this chapter: |
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(1) "Board" means the State Pension Review Board. |
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(2) "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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(3) "Direct holdings" means, with respect to a |
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company, all securities of that company held directly by a |
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retirement system in an account or fund in which a retirement system |
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owns all shares or interests. |
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(4) "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 retirement system, in which the retirement system owns shares |
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or interests together with other investors not subject to the |
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provisions of this chapter. The term does not include money |
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invested under a plan described by Section 401(k) or 457 of the |
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Internal Revenue Code of 1986. |
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(5) "Listed company" means a company listed by the |
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board under Section 808.051. |
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(6) "Planned Parenthood" means the Planned Parenthood |
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Federation of America. |
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(7) "Retirement system" means the Employees |
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Retirement System of Texas or the Teacher Retirement System of |
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Texas. |
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(8) "Scrutinized company" means a company that donates |
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money or property directly to Planned Parenthood. The term does not |
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include a company whose only donations to Planned Parenthood |
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consist of making contributions to Planned Parenthood to match |
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contributions made by employees or retirees of the company. |
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Sec. 808.002. 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 retirement system is exempt from any conflicting |
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statutory or common law obligations, including any obligation 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 retirement |
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system's securities portfolios. |
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Sec. 808.003. INDEMNIFICATION OF RETIREMENT SYSTEMS, |
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EMPLOYEES, AND OTHERS. In a cause of action based on an action, |
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inaction, decision, divestment, investment, company communication, |
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report, or other determination made or taken in connection with |
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this chapter, the state shall, without regard to whether the person |
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performed services for compensation, indemnify and hold harmless |
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for actual damages, court costs, and attorney's fees adjudged |
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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 retirement system; |
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(2) a contractor of a retirement system; |
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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 retirement system |
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who was an employee or officer when the act or omission on which the |
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damages are based occurred; |
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(4) a former contractor of a retirement system who was |
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a contractor when the act or omission on which the damages are based |
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occurred; and |
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(5) a retirement system. |
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Sec. 808.004. 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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an association, a research firm, a company, or any other person may |
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not sue or pursue a private cause of action against the state, a |
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retirement system, an employee, a member of the governing body, or |
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any other officer of a retirement system, or a contractor of a |
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retirement system, for any claim or cause of action, including |
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breach of fiduciary duty, or for violation of any constitutional, |
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statutory, or regulatory requirement in connection with any action, |
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inaction, decision, divestment, investment, company communication, |
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report, or other determination made or taken in connection with |
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this chapter. |
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(b) A person who files suit against the state, a retirement |
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system, an employee, a member of the governing body, or any other |
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officer of a retirement system, or a contractor of a retirement |
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system, is liable for paying the costs and attorney's fees of a |
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person sued in violation of this section. |
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Sec. 808.005. INAPPLICABILITY OF REQUIREMENTS INCONSISTENT |
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WITH FIDUCIARY RESPONSIBILITIES AND RELATED DUTIES. A retirement |
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system is not subject to a requirement of this chapter if the |
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retirement system determines that the requirement would be |
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inconsistent with its fiduciary responsibility with respect to the |
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investment of the system's assets or other duties imposed by law |
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relating to the investment of the system's 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. 808.006. RELIANCE ON COMPANY RESPONSE. The board and a |
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retirement system may rely on a company's response to a notice or |
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communication made under this chapter without conducting any |
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further investigation, research, or inquiry. |
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SUBCHAPTER B. DUTIES REGARDING INVESTMENTS |
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Sec. 808.051. LISTED COMPANIES. (a) The board shall |
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prepare and maintain, and provide to each retirement system, a list |
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of all scrutinized companies. In maintaining the list, the board |
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may review and rely on, as appropriate in the board's judgment, |
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publicly available information regarding companies that donate |
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directly to Planned Parenthood, including information provided by |
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the state, nonprofit organizations, research firms, international |
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organizations, and governmental entities. |
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(b) The board shall update the list annually or more often |
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as the board considers necessary, but not more often than |
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quarterly. |
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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 board shall |
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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. 808.052. IDENTIFICATION OF INVESTMENT IN LISTED |
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COMPANIES. Not later than the 30th day after the date a retirement |
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system receives the list provided under Section 808.051, the |
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retirement system shall notify the board of the listed companies in |
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which the retirement system owns direct holdings or indirect |
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holdings. |
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Sec. 808.053. ACTIONS RELATING TO DONATIONS BY LISTED |
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COMPANY. (a) The board shall send a written notice to each listed |
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company identified under Section 808.052 informing the company of |
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its listed company status and warning the company that it may become |
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subject to divestment by the retirement system. |
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(b) The notice must encourage the company to cease making |
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further direct donations to Planned Parenthood, for a period of |
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time provided by board rule, in order to avoid qualifying for |
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divestment by the retirement system. |
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(c) If the company timely responds to the notice that the |
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company has ceased donating directly to Planned Parenthood, the |
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board shall remove the company from the list maintained under |
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Section 808.051 and investment in the company will no longer be |
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prohibited under this chapter unless the company resumes donating |
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directly to Planned Parenthood. |
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(d) If the company continues to donate directly to Planned |
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Parenthood, the board shall notify each affected retirement system |
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that the system is required to sell, redeem, or otherwise divest |
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itself of all publicly traded securities of the company, except |
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securities described by Section 808.055, according to the schedule |
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adopted by the board under Section 808.054. |
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Sec. 808.054. DIVESTMENT OF ASSETS. (a) The board by rule |
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shall adopt a schedule for divestment from listed companies. |
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(b) A retirement system required to sell, redeem, or |
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otherwise divest itself of all publicly traded securities of a |
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listed company shall comply with the schedule adopted by the board |
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under Subsection (a) unless the retirement system determines, based |
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on a good faith exercise of its fiduciary discretion, that a |
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different schedule is more prudent or that divestment from the |
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listed company will likely result in a loss in value or a benchmark |
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deviation described by Section 808.056(a). |
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(c) If a retirement system delays divestment under the |
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schedule adopted by the board under Subsection (a), the retirement |
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system shall submit a report to the presiding officer of each house |
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of the legislature and the attorney general stating the reasons and |
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justification for the retirement system's delay in divestment from |
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a listed company. The report must include documentation supporting |
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its determination that the divestment would result in a loss in |
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value or benchmark deviation described by Section 808.056(a), |
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including objective numerical estimates. The retirement system |
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shall update the report every six months. |
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Sec. 808.055. INVESTMENTS EXEMPTED FROM DIVESTMENT. A |
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retirement system is not required to divest from any indirect |
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holdings in actively or passively managed investment funds or |
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private equity funds. The retirement system shall submit letters |
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to the managers of investment funds containing listed companies |
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requesting that they consider removing those companies from the |
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fund or create a similar fund with holdings devoid of listed |
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companies. If the manager creates such a similar fund with |
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substantially the same management fees and same level of investment |
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risk and anticipated return, the retirement system may replace all |
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applicable investments with investments in the similar fund in a |
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time frame consistent with prudent fiduciary standards. |
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Sec. 808.056. AUTHORIZED INVESTMENT IN LISTED COMPANIES. |
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(a) A retirement system may cease divesting from or may reinvest in |
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one or more listed companies if clear and convincing evidence shows |
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that: |
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(1) the retirement system has suffered or will suffer |
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a loss in the hypothetical value of all assets under management by |
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the retirement system as a result of having to divest from listed |
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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 retirement system may cease divesting from or may |
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reinvest in a listed company as provided by this section only to the |
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extent necessary to ensure that the retirement system does not |
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suffer a loss in value or deviate from its benchmark as described by |
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Subsection (a). |
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(c) Before a retirement system may cease divesting from or |
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may reinvest in a listed company under this section, the retirement |
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system must provide a written report to the presiding officer of |
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each house of the legislature and the attorney general setting |
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forth the reason and justification, supported by clear and |
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convincing evidence, for its decision to cease divestment, to |
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reinvest, or to remain invested in a listed company. |
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(d) The retirement system shall update the report required |
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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. 808.057. PROHIBITED INVESTMENTS. Except as provided |
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by Section 808.056, a retirement system may not acquire securities |
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of a listed company. |
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SUBCHAPTER C. REPORT; ENFORCEMENT |
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Sec. 808.101. REPORT. Not later than December 31 of each |
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year, each retirement system shall file a publicly available report |
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with the presiding officer of each house of the legislature and the |
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attorney general that: |
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(1) identifies all securities sold, redeemed, |
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divested, or withdrawn in compliance with Section 808.054; |
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(2) identifies all prohibited investments under |
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Section 808.057; and |
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(3) summarizes any changes made under Section 808.055. |
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Sec. 808.102. ENFORCEMENT. The attorney general may bring |
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any action necessary to enforce this chapter. |
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SECTION 2. (a) Not later than November 1, 2017, the State |
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Pension Review Board shall adopt rules necessary to implement |
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Chapter 808, Government Code, as added by this Act. |
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(b) Not later than January 1, 2018, the State Pension Review |
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Board shall prepare and provide to each retirement system, as |
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defined by Section 808.001, Government Code, as added by this Act, |
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the initial list of scrutinized companies required by Section |
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808.051, Government Code, as added by this Act. |
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SECTION 3. This Act takes effect September 1, 2017. |