Bill Text: TX HB1902 | 2017-2018 | 85th Legislature | Introduced
Bill Title: Relating to prohibiting the investment of certain retirement system funds in publicly traded business entities that donate to Planned Parenthood.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced - Dead) 2017-03-14 - Referred to State Affairs [HB1902 Detail]
Download: Texas-2017-HB1902-Introduced.html
85R84 TSR-D | ||
By: Sanford | H.B. No. 1902 |
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relating to prohibiting the investment of certain retirement system | ||
funds in publicly traded business entities that donate to Planned | ||
Parenthood. | ||
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: | ||
SECTION 1. Subtitle A, Title 8, Government Code, is amended | ||
by adding Chapter 808 to read as follows: | ||
CHAPTER 808. PROHIBITION ON INVESTMENT IN COMPANIES THAT DONATE TO | ||
PLANNED PARENTHOOD | ||
SUBCHAPTER A. GENERAL PROVISIONS | ||
Sec. 808.001. DEFINITIONS. In this chapter: | ||
(1) "Board" means the State Pension Review Board. | ||
(2) "Company" means a sole proprietorship, | ||
organization, association, corporation, partnership, joint | ||
venture, limited partnership, limited liability partnership, | ||
limited liability company, or other entity or business association | ||
whose securities are publicly traded, including a wholly owned | ||
subsidiary, majority-owned subsidiary, parent company, or | ||
affiliate of those entities or business associations, that exists | ||
to make a profit. | ||
(3) "Direct holdings" means, with respect to a | ||
company, all securities of that company held directly by a | ||
retirement system in an account or fund in which a retirement system | ||
owns all shares or interests. | ||
(4) "Indirect holdings" means, with respect to a | ||
company, all securities of that company held in an account or fund, | ||
such as a mutual fund, managed by one or more persons not employed | ||
by a retirement system, in which the retirement system owns shares | ||
or interests together with other investors not subject to the | ||
provisions of this chapter. The term does not include money | ||
invested under a plan described by Section 401(k) or 457 of the | ||
Internal Revenue Code of 1986. | ||
(5) "Listed company" means a company listed by the | ||
board under Section 808.051. | ||
(6) "Planned Parenthood" means the Planned Parenthood | ||
Federation of America. | ||
(7) "Retirement system" means the Employees | ||
Retirement System of Texas or the Teacher Retirement System of | ||
Texas. | ||
(8) "Scrutinized company" means a company that donates | ||
money or property directly to Planned Parenthood. The term does not | ||
include a company whose only donations to Planned Parenthood | ||
consist of making contributions to Planned Parenthood to match | ||
contributions made by employees or retirees of the company. | ||
Sec. 808.002. OTHER LEGAL OBLIGATIONS. With respect to | ||
actions taken in compliance with this chapter, including all good | ||
faith determinations regarding companies as required by this | ||
chapter, a retirement system is exempt from any conflicting | ||
statutory or common law obligations, including any obligation with | ||
respect to making investments, divesting from any investment, | ||
preparing or maintaining any list of companies, or choosing asset | ||
managers, investment funds, or investments for the retirement | ||
system's securities portfolios. | ||
Sec. 808.003. INDEMNIFICATION OF RETIREMENT SYSTEMS, | ||
EMPLOYEES, AND OTHERS. In a cause of action based on an action, | ||
inaction, decision, divestment, investment, company communication, | ||
report, or other determination made or taken in connection with | ||
this chapter, the state shall, without regard to whether the person | ||
performed services for compensation, indemnify and hold harmless | ||
for actual damages, court costs, and attorney's fees adjudged | ||
against, and defend: | ||
(1) an employee, a member of the governing body, or any | ||
other officer of a retirement system; | ||
(2) a contractor of a retirement system; | ||
(3) a former employee, a former member of the | ||
governing body, or any other former officer of a retirement system | ||
who was an employee or officer when the act or omission on which the | ||
damages are based occurred; | ||
(4) a former contractor of a retirement system who was | ||
a contractor when the act or omission on which the damages are based | ||
occurred; and | ||
(5) a retirement system. | ||
Sec. 808.004. NO PRIVATE CAUSE OF ACTION. (a) A person, | ||
including a member, retiree, or beneficiary of a retirement system, | ||
an association, a research firm, a company, or any other person may | ||
not sue or pursue a private cause of action against the state, a | ||
retirement system, an employee, a member of the governing body, or | ||
any other officer of a retirement system, or a contractor of a | ||
retirement system, for any claim or cause of action, including | ||
breach of fiduciary duty, or for violation of any constitutional, | ||
statutory, or regulatory requirement in connection with any action, | ||
inaction, decision, divestment, investment, company communication, | ||
report, or other determination made or taken in connection with | ||
this chapter. | ||
(b) A person who files suit against the state, a retirement | ||
system, an employee, a member of the governing body, or any other | ||
officer of a retirement system, or a contractor of a retirement | ||
system, is liable for paying the costs and attorney's fees of a | ||
person sued in violation of this section. | ||
Sec. 808.005. INAPPLICABILITY OF REQUIREMENTS INCONSISTENT | ||
WITH FIDUCIARY RESPONSIBILITIES AND RELATED DUTIES. A retirement | ||
system is not subject to a requirement of this chapter if the | ||
retirement system determines that the requirement would be | ||
inconsistent with its fiduciary responsibility with respect to the | ||
investment of the system's assets or other duties imposed by law | ||
relating to the investment of the system's assets, including the | ||
duty of care established under Section 67, Article XVI, Texas | ||
Constitution. | ||
Sec. 808.006. RELIANCE ON COMPANY RESPONSE. The board and a | ||
retirement system may rely on a company's response to a notice or | ||
communication made under this chapter without conducting any | ||
further investigation, research, or inquiry. | ||
SUBCHAPTER B. DUTIES REGARDING INVESTMENTS | ||
Sec. 808.051. LISTED COMPANIES. (a) The board shall | ||
prepare and maintain, and provide to each retirement system, a list | ||
of all scrutinized companies. In maintaining the list, the board | ||
may review and rely on, as appropriate in the board's judgment, | ||
publicly available information regarding companies that donate | ||
directly to Planned Parenthood, including information provided by | ||
the state, nonprofit organizations, research firms, international | ||
organizations, and governmental entities. | ||
(b) The board shall update the list annually or more often | ||
as the board considers necessary, but not more often than | ||
quarterly. | ||
(c) Not later than the 30th day after the date the list of | ||
scrutinized companies is first provided or updated, the board shall | ||
file the list with the presiding officer of each house of the | ||
legislature and the attorney general. | ||
Sec. 808.052. IDENTIFICATION OF INVESTMENT IN LISTED | ||
COMPANIES. Not later than the 30th day after the date a retirement | ||
system receives the list provided under Section 808.051, the | ||
retirement system shall notify the board of the listed companies in | ||
which the retirement system owns direct holdings or indirect | ||
holdings. | ||
Sec. 808.053. ACTIONS RELATING TO DONATIONS BY LISTED | ||
COMPANY. (a) The board shall send a written notice to each listed | ||
company identified under Section 808.052 informing the company of | ||
its listed company status and warning the company that it may become | ||
subject to divestment by the retirement system. | ||
(b) The notice must encourage the company to cease making | ||
further direct donations to Planned Parenthood, for a period of | ||
time provided by board rule, in order to avoid qualifying for | ||
divestment by the retirement system. | ||
(c) If the company timely responds to the notice that the | ||
company has ceased donating directly to Planned Parenthood, the | ||
board shall remove the company from the list maintained under | ||
Section 808.051 and investment in the company will no longer be | ||
prohibited under this chapter unless the company resumes donating | ||
directly to Planned Parenthood. | ||
(d) If the company continues to donate directly to Planned | ||
Parenthood, the board shall notify each affected retirement system | ||
that the system is required to sell, redeem, or otherwise divest | ||
itself of all publicly traded securities of the company, except | ||
securities described by Section 808.055, according to the schedule | ||
adopted by the board under Section 808.054. | ||
Sec. 808.054. DIVESTMENT OF ASSETS. (a) The board by rule | ||
shall adopt a schedule for divestment from listed companies. | ||
(b) A retirement system required to sell, redeem, or | ||
otherwise divest itself of all publicly traded securities of a | ||
listed company shall comply with the schedule adopted by the board | ||
under Subsection (a) unless the retirement system determines, based | ||
on a good faith exercise of its fiduciary discretion, that a | ||
different schedule is more prudent or that divestment from the | ||
listed company will likely result in a loss in value or a benchmark | ||
deviation described by Section 808.056(a). | ||
(c) If a retirement system delays divestment under the | ||
schedule adopted by the board under Subsection (a), the retirement | ||
system shall submit a report to the presiding officer of each house | ||
of the legislature and the attorney general stating the reasons and | ||
justification for the retirement system's delay in divestment from | ||
a listed company. The report must include documentation supporting | ||
its determination that the divestment would result in a loss in | ||
value or benchmark deviation described by Section 808.056(a), | ||
including objective numerical estimates. The retirement system | ||
shall update the report every six months. | ||
Sec. 808.055. INVESTMENTS EXEMPTED FROM DIVESTMENT. A | ||
retirement system is not required to divest from any indirect | ||
holdings in actively or passively managed investment funds or | ||
private equity funds. The retirement system shall submit letters | ||
to the managers of investment funds containing listed companies | ||
requesting that they consider removing those companies from the | ||
fund or create a similar fund with holdings devoid of listed | ||
companies. If the manager creates such a similar fund with | ||
substantially the same management fees and same level of investment | ||
risk and anticipated return, the retirement system may replace all | ||
applicable investments with investments in the similar fund in a | ||
time frame consistent with prudent fiduciary standards. | ||
Sec. 808.056. AUTHORIZED INVESTMENT IN LISTED COMPANIES. | ||
(a) A retirement system may cease divesting from or may reinvest in | ||
one or more listed companies if clear and convincing evidence shows | ||
that: | ||
(1) the retirement system has suffered or will suffer | ||
a loss in the hypothetical value of all assets under management by | ||
the retirement system as a result of having to divest from listed | ||
companies under this chapter; or | ||
(2) an individual portfolio that uses a | ||
benchmark-aware strategy would be subject to an aggregate expected | ||
deviation from its benchmark as a result of having to divest from | ||
listed companies under this chapter. | ||
(b) A retirement system may cease divesting from or may | ||
reinvest in a listed company as provided by this section only to the | ||
extent necessary to ensure that the retirement system does not | ||
suffer a loss in value or deviate from its benchmark as described by | ||
Subsection (a). | ||
(c) Before a retirement system may cease divesting from or | ||
may reinvest in a listed company under this section, the retirement | ||
system must provide a written report to the presiding officer of | ||
each house of the legislature and the attorney general setting | ||
forth the reason and justification, supported by clear and | ||
convincing evidence, for its decision to cease divestment, to | ||
reinvest, or to remain invested in a listed company. | ||
(d) The retirement system shall update the report required | ||
by Subsection (c) semiannually, as applicable. | ||
(e) This section does not apply to reinvestment in a company | ||
that is no longer a listed company. | ||
Sec. 808.057. PROHIBITED INVESTMENTS. Except as provided | ||
by Section 808.056, a retirement system may not acquire securities | ||
of a listed company. | ||
SUBCHAPTER C. REPORT; ENFORCEMENT | ||
Sec. 808.101. REPORT. Not later than December 31 of each | ||
year, each retirement system shall file a publicly available report | ||
with the presiding officer of each house of the legislature and the | ||
attorney general that: | ||
(1) identifies all securities sold, redeemed, | ||
divested, or withdrawn in compliance with Section 808.054; | ||
(2) identifies all prohibited investments under | ||
Section 808.057; and | ||
(3) summarizes any changes made under Section 808.055. | ||
Sec. 808.102. ENFORCEMENT. The attorney general may bring | ||
any action necessary to enforce this chapter. | ||
SECTION 2. (a) Not later than November 1, 2017, the State | ||
Pension Review Board shall adopt rules necessary to implement | ||
Chapter 808, Government Code, as added by this Act. | ||
(b) Not later than January 1, 2018, the State Pension Review | ||
Board shall prepare and provide to each retirement system, as | ||
defined by Section 808.001, Government Code, as added by this Act, | ||
the initial list of scrutinized companies required by Section | ||
808.051, Government Code, as added by this Act. | ||
SECTION 3. This Act takes effect September 1, 2017. |