85R8520 CLG-F

By: Hancock S.B. No. 2206

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.

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. Section 4, The Securities Act (Article 581-4, Vernon's Texas Civil Statutes), is amended by adding Subsections R, S, T, U, V, W, and X 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. "Texas-based public company" means a publicly traded entity whose headquarters are located in this state.

SECTION 3. The Securities Act (Article 581-1 et seq., Vernon's Texas Civil Statutes) is amended by adding Sections 45, 46, 47, and 48 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 telephone 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 the beneficial ownership of the person; and

(D) for all other persons by whom or on whose behalf the beneficial ownership of the person has been or is to be effected, the information described by Paragraphs (A) and (B) 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.

Sec. 46. 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. 47. 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 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 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. 48. PRIVATE CAUSE OF ACTION. A. A Texas-based public company entitled to receive a disclosure under Section 45 of this Act 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 disclosure required by that section for:

(1) injunctive relief; and

(2) recovery of the company's reasonable attorney's fees.

B. A civil penalty or remedy in addition to the injunctive relief provided by Subsection A 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 4. This Act takes effect September 1, 2017.