85R6593 CLG-F
	By: Parker	H.B. No. 2382

	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.