|
|
|
A BILL TO BE ENTITLED
|
|
AN ACT
|
|
relating to information required to be disclosed by certain |
|
investors of publicly traded companies whose headquarters are |
|
located in this state; creating an offense. |
|
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
|
SECTION 1. This Act shall be known as the Bring Business to |
|
Texas and Fairness in Disclosure Act. |
|
SECTION 2. It is the policy of this state to: |
|
(1) foster and promote the immediate and full |
|
disclosure of the individual ownership of persons who are activist |
|
investors with respect to publicly traded entities whose |
|
headquarters are located in Texas; and |
|
(2) prohibit discrimination by a proxy advisory firm |
|
toward any publicly traded entity whose headquarters are located in |
|
Texas. |
|
SECTION 3. Section 4, The Securities Act (Article 581-4, |
|
Vernon's Texas Civil Statutes), is amended by adding Subsections R, |
|
S, T, U, V, W, X, and Y to read as follows: |
|
R. "Activist investor" means a person who, directly or |
|
indirectly, or through or with an affiliate: |
|
(1) nominates or attempts to nominate the person or |
|
another person to the governing authority or body of a publicly |
|
traded entity, including the board of directors of a corporation or |
|
the general partners of a general partnership or limited |
|
partnership; |
|
(2) makes or attempts to make one or more shareholder |
|
proposals or the equivalent for a publicly traded entity; or |
|
(3) acts broadly in concert with, or on behalf of, a |
|
person who engages in actions described by either Subdivision (1) |
|
or (2) of this subsection. |
|
S. "Affiliate," with respect to a person, means: |
|
(1) a family member of a natural person; or |
|
(2) any person who controls, is controlled by, or is |
|
under common control with the person. |
|
T. "Beneficial owner," with respect to a class of securities |
|
of a publicly traded entity, means a person who has the sole or |
|
shared power to vote or dispose of a security or who enjoys the |
|
economic benefits of ownership of a security. The term includes a |
|
person who enjoys the benefits of ownership of a security or the |
|
voting power of a security, regardless of whether the security is |
|
held in the name of another person. |
|
U. "Governing authority" has the meaning assigned by Section |
|
1.002, Business Organizations Code. |
|
V. "Headquarters," with respect to a publicly traded entity, |
|
means the location at which the president or other chief executive |
|
officer of the entity, a general partner of the entity, or any other |
|
senior member of the entity's management team routinely performs |
|
duties in those respective capacities. |
|
W. "Mutual fund" means an entity that: |
|
(1) is engaging primarily in, or proposes to engage |
|
primarily in, the business of investing, reinvesting, or trading in |
|
securities; |
|
(2) is engaging or proposes to engage in the business |
|
of issuing face-amount certificates of the installment type; |
|
(3) has engaged in a business described by Subdivision |
|
(2) of this subsection and has outstanding a certificate described |
|
by that subdivision; |
|
(4) is engaging or proposes to engage in the business |
|
of investing, reinvesting, owning, holding, or trading in |
|
securities and owns or proposes to acquire investment securities |
|
whose value exceeds 40 percent of the value of the total assets of |
|
the issuer of the securities, not including government securities |
|
and cash, on an unconsolidated basis; or |
|
(5) is an investment company registered under the |
|
Investment Company Act of 1940 (15 U.S.C. Section 80a-1 et seq.). |
|
X. "Proxy advisory firm" means a person that provides |
|
corporate governance ratings, proxy research, analyses, advisory |
|
services, or other similar services to shareholders of a publicly |
|
traded entity. |
|
Y. "Texas-based public company" means a publicly traded |
|
entity whose headquarters are located in this state. |
|
SECTION 4. The Securities Act (Article 581-1 et seq., |
|
Vernon's Texas Civil Statutes) is amended by adding Sections 45 |
|
through 55 to read as follows: |
|
Sec. 45. BENEFICIAL OWNERSHIP; DISCLOSURE. A. This section |
|
applies only to a person who is simultaneously: |
|
(1) a beneficial owner of a security of any class of |
|
securities of a Texas-based public company; and |
|
(2) an activist investor with respect to the same |
|
Texas-based public company that is beneficially owned by the |
|
person. |
|
B. Not later than the 10th day after the date the person is or |
|
becomes both a beneficial owner and an activist investor of a |
|
Texas-based public company or September 11, 2017, whichever is |
|
later, the person shall file with the Securities Commissioner and |
|
deliver, by United States certified mail, to the company's |
|
headquarters and to the company's registered agent designated under |
|
Chapter 5, Business Organizations Code, a certified statement that: |
|
(1) contains: |
|
(A) the full name, identity, background, |
|
residence, primary phone number, and citizenship of the person; |
|
(B) the address of the principal place of |
|
business of the person and the person's primary e-mail address; |
|
(C) the nature of: |
|
(i) the beneficial ownership of the person; |
|
and |
|
(ii) the beneficial ownership of all other |
|
persons by whom or on whose behalf the beneficial ownership of the |
|
person has been or is to be effected; |
|
(D) all plans, intentions, motives, strategies, |
|
and objectives of the person with respect to becoming an activist |
|
investor and following through with: |
|
(i) director, general partner, or other |
|
similar governing person nominations; or |
|
(ii) shareholder proposals or the |
|
equivalent; |
|
(E) all notes, e-mails, memoranda, letters, |
|
communications, proposals, analyses, spreadsheets, presentations, |
|
instruments, and any other documents, whether in written, digital, |
|
or magnetic format, relating to the items listed in Paragraph D of |
|
this subdivision; and |
|
(F) all costs and expenses paid, incurred, |
|
authorized, and anticipated by the person in connection with the |
|
items listed in Paragraph D of this subdivision; and |
|
(2) is signed by the senior executive officer of the |
|
person certifying that the information disclosed in Subdivision (1) |
|
of this subsection is correct and complete. |
|
C. The following persons shall disclose the information |
|
required by Subsection B of this section in the same manner and to |
|
the same extent as a person is required to disclose the information |
|
under that subsection: |
|
(1) any beneficial owner of the person; and |
|
(2) all beneficial owners of the beneficial owner |
|
described by Subdivision (1) of this subsection until the last |
|
person named is a natural person. |
|
D. All information disclosed under Subsection B of this |
|
section is considered public information for all purposes. |
|
E. This section shall be liberally construed in favor of |
|
requiring the disclosure of information required by this section. |
|
Sec. 46. NONPROFIT CORPORATION THAT BENEFICIALLY OWNS |
|
TEXAS-BASED PUBLIC COMPANY; ADDITIONAL DISCLOSURES. A. This |
|
subsection applies only to a nonprofit corporation that is the last |
|
named beneficial owner of a person required to make a disclosure |
|
under Section 45B of this Act. A donor who makes financial |
|
contributions to a nonprofit corporation shall disclose the |
|
information required by Section 45B of this Act in the same manner |
|
and to the same extent as a person required to disclose the |
|
information under that section if the financial contributions are |
|
in an amount equal to the lesser of: |
|
(1) one percent of the aggregate contributions made to |
|
the corporation in the preceding 12 months; or |
|
(2) $100,000. |
|
B. A nonprofit corporation required to disclose information |
|
under Section 45 of this Act shall disclose: |
|
(1) the corporation's annual financial statements for |
|
each of the preceding three fiscal years; |
|
(2) the corporation's year-to-date financial |
|
statements for the fiscal year in which the nonprofit corporation |
|
becomes an activist investor; |
|
(3) a good faith estimate of the total amount the |
|
nonprofit corporation expects to spend in the corporation's current |
|
fiscal year to further the corporation's activist investor |
|
activities directly and through other persons the corporation may |
|
have an ownership interest in or with which the corporation is |
|
affiliated; and |
|
(4) the total compensation paid by the nonprofit |
|
corporation to its 10 most highly compensated employees for each of |
|
the preceding five fiscal years. |
|
C. A nonprofit corporation shall disclose the information |
|
required by Subsection B of this section in the same manner and to |
|
the same extent the corporation is required to disclose information |
|
under Section 45 of this Act. |
|
D. This section shall be liberally construed in favor of |
|
requiring disclosure of the information required by this section. |
|
Sec. 47. CHANGE TO CERTAIN DISCLOSED INFORMATION; |
|
AMENDMENT. If, during the time a person described by Section 45A of |
|
this Act is an activist investor of the Texas-based public company, |
|
any change occurs in the information contained in the certified |
|
statement the person filed under Section 45 of this Act, the person |
|
shall: |
|
(1) file an amendment to the certified statement with |
|
the Securities Commissioner not later than the 10th day after the |
|
date the change occurs; and |
|
(2) deliver, by United States certified mail, a |
|
correct and complete copy of the amendment to the security issuer's |
|
headquarters in this state. |
|
Sec. 48. ACTIONS TO AVOID MAKING CERTAIN REQUIRED |
|
DISCLOSURES PROHIBITED. A. This section does not apply to a mutual |
|
fund. |
|
B. A person may not act at the direction of, for the benefit |
|
of, or otherwise on behalf of another person with the intent or |
|
effect of avoiding a disclosure required by Section 45 or 46 of |
|
this Act. |
|
C. If the board of directors or other governing authority of |
|
a corporation, limited liability company, partnership, or other |
|
Texas-based public company reasonably believes that one or more |
|
persons are acting in concert with, at the direction of, or on |
|
behalf of another person with the intent or effect of avoiding a |
|
disclosure required by Section 45 or 46 of this Act, the governing |
|
authority of the company shall notify the Securities Commissioner |
|
of that conduct. |
|
D. If the Securities Commissioner determines that a person |
|
is violating Subsection B of this section, the Securities |
|
Commissioner shall require the person to disclose the information |
|
required by Section 45 of this Act. |
|
Sec. 49. DEFENSE TO DISCLOSURE REQUIREMENT; INJUNCTIVE |
|
RELIEF. A person who in good faith believes the person has a valid |
|
defense to a disclosure requirement of Section 45 or 46 of this Act |
|
may bring a court action on an expedited basis to seek injunctive |
|
relief. |
|
Sec. 50. CONFIDENTIALITY AGREEMENTS PROHIBITED. A person |
|
who is required to disclose information under Section 45, 46, or 48 |
|
of this Act may not request or require that any person entitled to |
|
receive the information: |
|
(1) sign a confidentiality agreement; or |
|
(2) otherwise treat the information as private or |
|
confidential. |
|
Sec. 51. NOTICE TO CERTAIN INVESTORS OF ACTIVIST INVESTORS |
|
OF TEXAS-BASED PUBLIC COMPANIES. A. This section applies only to |
|
a person who has the capability to become an activist investor of a |
|
Texas-based public company and who solicits or accepts money from |
|
one or more investors. |
|
B. Before accepting money from an investor and at least once |
|
each calendar year, a person shall provide to the investor: |
|
(1) a written statement stating that the person may |
|
become an activist investor of a Texas-based public company; and |
|
(2) a legible copy of the most recent version of this |
|
section and Sections 4, 45, 46, 47, 48, 49, 50, 52, 53, and 54 of |
|
this Act. |
|
Sec. 52. DISCLOSURES REQUIRED BY CERTAIN PROXY ADVISORY |
|
FIRMS. A. This section applies to a proxy advisory firm that |
|
publishes or otherwise provides an analysis or a recommendation to |
|
one or more shareholders of a Texas-based public company |
|
concerning: |
|
(1) a nominee to the governing authority or body of |
|
another publicly traded entity, including the board of directors of |
|
a corporation and the general partners of a partnership; or |
|
(2) a shareholder proposal submitted by an activist |
|
investor. |
|
B. At the same time a proxy advisory firm provides to the |
|
shareholders of a Texas-based public company an analysis or |
|
recommendation described by Subsection A of this section, the firm |
|
shall file with the Securities Commissioner and deliver to the |
|
company's headquarters and to the company's registered agent, in |
|
the manner prescribed by Subsection C of this section: |
|
(1) all financial statements of the proxy advisory |
|
firm for each of the preceding five years, including an audited |
|
balance sheet, income statement, and cash flow statement; and |
|
(2) a written statement that: |
|
(A) contains: |
|
(i) the names of all beneficial owners of |
|
the proxy advisory firm, until each beneficial owner named is a |
|
natural person; and |
|
(ii) all notes, e-mails, memoranda, |
|
letters, communications, proposals, analyses, spreadsheets, |
|
presentations, instruments, and any other documents, whether in |
|
written, digital, or magnetic format, relating to the discussions |
|
and deliberations that resulted in the proxy advisory firm's |
|
analysis or recommendation regarding the activist investor's |
|
governing authority nominee or shareholder proposal; and |
|
(B) is signed by the senior executive officer of |
|
the proxy advisory firm certifying that the information provided in |
|
this subsection is correct and complete. |
|
C. A notice to a Texas-based public company required under |
|
Subsection B of this section must be delivered by: |
|
(1) United States certified mail; or |
|
(2) a nationally recognized overnight courier service |
|
with confirmation of receipt. |
|
Sec. 53. DISCLOSURE REQUIREMENTS APPLICABLE TO OTHER PROXY |
|
ADVISORY FIRMS. If the Securities Commissioner determines that a |
|
proxy advisory firm has lowered its rating of a Texas-based public |
|
company as a result of the requirements of Sections 45, 46, 47, 48, |
|
49, 50, 51, 52, 54, and 55 of this Act, the disclosure requirements |
|
of Section 52 of this Act apply to the firm. |
|
Sec. 54. CRIMINAL PENALTY. A. A person commits an offense |
|
if the person does not comply with the requirements of Sections 45, |
|
46, 47, and 48 of this Act. An offense under this subsection is a |
|
Class C misdemeanor. |
|
B. Any criminal penalty under this section shall be imposed |
|
against the senior executive officer of the person that did not |
|
make the required disclosure, in the executive officer's personal |
|
capacity. |
|
C. This section may be enforced by the attorney general or by |
|
the district attorney of the county in this state in which the |
|
headquarters of the security's issuer is located. |
|
Sec. 55. PRIVATE CAUSE OF ACTION. A. This section applies |
|
to a Texas-based public company entitled to receive a disclosure |
|
under Sections 45, 46, 48, 52, and 53 of this Act. |
|
B. A Texas-based public company or a person acting on behalf |
|
of the company may bring an action, on an expedited basis, in a |
|
court in this state against a person that does not comply with the |
|
disclosures described by Subsection A of this section for: |
|
(1) injunctive relief; and |
|
(2) recovery of the company's reasonable attorney's |
|
fees. |
|
C. A civil penalty or remedy in addition to the injunctive |
|
relief provided by Subsection B of this section may not be imposed |
|
or awarded against a person for a violation that arises out of the |
|
same conduct described by that subsection. |
|
SECTION 5. This Act takes effect September 1, 2017. |