BILL ANALYSIS
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Senate Research Center |
S.B. 1817 |
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88R7555 RDS-D |
By: Bettencourt et al. |
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State Affairs |
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4/13/2023 |
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As Filed |
AUTHOR'S / SPONSOR'S STATEMENT OF INTENT
It has been one year since Russia invaded Ukraine. Due to Russia's country-wide assault on Ukraine last February, 33 states so far have taken action to either sanction or divest from Russia. Texas took action, too. All 31 Senators signed on to a letter to the Lieutenant Governor requesting an interim charge to study the feasibility of the state comptroller to prepare and maintain a list of all companies that invest in the Russian Federation. In response, Comptroller Hegar requested the Texas Treasury Safekeeping Trust Company to review its investments in Russia and begin divestment.
Previously, at the end of 2021, the Trust had determined two things:
1. There were no direct securities traded or any direct investments in Russian companies or in a dedicated manager that invests in Russia.
2. The Trust had $18.6 million in indirect exposure�money placed with outside managers who had invested a portion of their funds in Russia.
At the comptroller's request, total indirect exposure decreased by 93% to only $1.2 million. As of May 2022, Russian exposure was 0% direct and 0.001% indirect. The Trust considers this impact on the state economy and the fiscal profile "insignificant" and having "no effective impact on investment opportunities."
S.B. 1817 would ensure that the State of Texas joins the other states from around the country in divesting state investment funds from Russia. The bill would ban state investment funds from being invested in businesses that have any form of commerce in the Russian Federation, including 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 would be banned.
S.B. 1817 would add companies that conduct operations within the Russian Federation to the list of scrutinized businesses maintained by the Comptroller�s Office. Upon notification to the company, no later than the 90th day after the date the company receives a notice from the comptroller, they must either cease all scrutinized business operations or convert such operations to inactive business operations to avoid qualifying for divestment by state-run investing entities in the State of Texas.
As proposed, S.B. 1817 amends current law relating to investments in certain companies doing business in the Russian Federation.
RULEMAKING AUTHORITY
This bill does not expressly grant any additional rulemaking authority to a state officer, institution, or agency.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Section 2270.0001(9), Government Code, to redefine "scrutinized company."
SECTION 2. Amends Section 2270.0002, Government Code, as follows:
Sec. 2270.0002. EXCEPTION. Provides that a company that the United States government affirmatively declares to be excluded from its federal sanctions regime relating to certain entities, including the Russian Federation, notwithstanding any other law, is not subject to divestment or investment prohibition under Chapter 2270 (Prohibition on Investing Public Money in Certain Investments).
SECTION 3. Amends Chapter 2270, Government Code, by adding Subchapter D-1, as follows:
SUBCHAPTER D-1. GENERAL PROVISIONS RELATING TO INVESTMENTS IN RUSSIAN FEDERATION
Sec. 2270.0161. DEFINITION. Defines "business operations."
Sec. 2270.0162. SCRUTINIZED BUSINESS OPERATIONS IN RUSSIAN FEDERATION. Provides that a company engages in scrutinized business operations in the Russian Federation if the company has business operations that involve contracts with or providing supplies or services to the government of the Russian Federation, a company in which the government of the Russian Federation has any direct or indirect equity share, a consortium or project commissioned by the government of the Russian Federation, or a company involved in a consortium or project commissioned by the government of the Russian Federation.
SECTION 4. Amends Sections 2270.0201(a) and (b), Government Code, as follows:
(a) Requires the Comptroller of Public Accounts of the State of Texas (comptroller) to prepare and maintain a list of all scrutinized companies. Requires that the list be categorized according to:
(1) makes no changes to this subdivision;
(2)-(3) makes nonsubstantive changes to these subdivisions;
(4) companies that are scrutinized companies under Section 2270.0001(9)(D).
(b) Authorizes the comptroller, in maintaining the list of scrutinized companies under Subsection (a), to review and rely, as appropriate in the comptroller's judgment, on publicly available information regarding companies with business operations in Sudan, in Iran, with designated foreign terrorist organizations, or in the� Russian Federation, as applicable, including information provided by the state, nonprofit organizations, research firms, international organizations, and governmental entities.
SECTION 5. Amends Section 2270.0203, Government Code, as follows:
Sec. 2270.0203. NOTICE TO LISTED COMPANY ENGAGED IN INACTIVE BUSINESS OPERATIONS.� Requires the investing entity to send a written notice, for each listed company identified under Section 2270.0202 (Identification of Investment in Listed Companies) that is engaged in only inactive scrutinized business operations, informing the company of this chapter and encouraging the company to continue to refrain from initiating active business operations in Sudan, in Iran, with designated foreign terrorist organizations, and in the Russian Federation until it is able to avoid being considered a listed company. Makes a nonsubstantive change.
SECTION 6. Amends Section 2270.0204(b), Government Code, as follows:
(b) Requires that the notice offer the company the opportunity to clarify its Sudan-related, Iran-related, designated foreign terrorist organization-related, or Russian Federation-related activities, as applicable, and to encourage the company, not later than the 90th day after the date the company receives notice under Section 2270.0204 (Actions Relating to Listed Company Engaged in Active Business Operations), to either cease all scrutinized business operations as described by Sections 2270.0052 (Scrutinized Business Operations in Sudan), 2270.0102 (Scrutinized Business Operations in Iran), 2270.0152 (Scrutinized Business Operations with Designated Foreign Terrorist Organization), and 2270.0162, or convert such operations to inactive business operations in order to avoid qualifying for divestment by investing entities.
SECTION 7. Requires the comptroller, not later than the 180th day after the effective date of this Act, to include the companies described by Section 2270.0201(a)(4), Government Code, as added by this Act, on the list under Section 2270.0201(a) (relating to requiring the comptroller to prepare and maintain a list of certain scrutinized companies), Government Code.
SECTION 8. Effective date: upon passage or September 1, 2023.