Bill Text: TX SB2337 | 2025-2026 | 89th Legislature | Enrolled

---

Bill Title: Relating to the regulation of the provision of proxy advisory services.

Sponsorship: Partisan Bill (Republican 3)

Status: (Passed) 2025-06-20 - Effective on 9/1/25 [SB2337 Detail]

Download: Texas-2025-SB2337-Enrolled.html

---

S.B. No. 2337

AN ACT
relating to the regulation of the provision of proxy advisory
services.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. The legislature finds that:
(1) when shareholders in this state hire professionals
to provide advice in the exercise of their rights as shareholders,
the shareholders expect that service to be performed in their
financial interest as shareholders, and professionals who are hired
by shareholders to provide that service and who deviate from that
expectation must clearly disclose that fact;
(2) there is a particular need for disclosures for
proxy voting advice because that advice is often:
(A) provided for hundreds or thousands of
shareholder votes each year; and
(B) based on lengthy policies that contain
general statements but do not explain whether or how the policy
provisions will maximize returns for investors for any particular
company or shareholder vote;
(3) proxy advisors:
(A) have recommended votes based on
environmental, social, or governance (ESG) investing, diversity,
equity, or inclusion (DEI), and social credit or sustainability
scores; and
(B) have not conducted financial analyses before
making the recommendations described by Paragraph (A) of this
subdivision despite having proxy voting policies claiming that the
purpose of the recommendation is maximizing and protecting
shareholder value;
(4) requiring proxy advisors to provide clear, factual
disclosures when the advisors recommend casting a vote for
nonfinancial reasons or provide conflicting advice to multiple
clients who seek to maximize financial returns is necessary in
order to prevent fraudulent or deceptive acts and practices in this
state; and
(5) a company that is the subject of a shareholder
proposal may have information regarding whether the proposal is in
the shareholder's financial interests or regarding the costs of the
proposal, and notice would allow the company to provide relevant
information to shareholders that may prevent fraudulent or
deceptive practices associated with proxy advisors making
recommendations for nonfinancial reasons.
SECTION 2. Title 1, Business Organizations Code, is amended
by adding Chapter 6A to read as follows:
CHAPTER 6A. PROXY ADVISORY SERVICES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 6A.001. DEFINITIONS. In this chapter:
(1) "Company" means a publicly traded, for-profit
corporation, limited liability company, partnership, or other
business entity that is organized or created under the laws of this
state, has its principal place of business in this state, or is a
foreign entity that has made a company proposal to become a domestic
entity, whether by merger, conversion, or otherwise.
(2) "Company proposal" means a proposal made by a
company that is included in the company's proxy statement,
including a proposal regarding director nominations or elections,
executive compensation, corporate transactions and structure,
auditor selection, or similar measures.
(3) "Proxy advisor" means a person who, for
compensation, provides a proxy advisory service to shareholders of
a company or to other persons with authority to vote on behalf of
shareholders of a company.
(4) "Proxy advisory service" means any of the
following services that are provided in connection with or in
relation to a company:
(A) advice or a recommendation on how to vote on a
proxy proposal or company proposal;
(B) proxy statement research and analysis
regarding a proxy proposal or company proposal;
(C) a rating or research regarding corporate
governance; or
(D) development of proxy voting recommendations
or policies, including establishing default recommendations or
policies.
(5) "Proxy proposal" means a proposal made by a
company's shareholder that is included in the company's proxy
statement, including the nomination of a director.
(6) "Shareholder" includes a shareholder, unitholder,
limited partner, or other equity owner of a company.
SUBCHAPTER B. DISCLOSURE REQUIREMENTS FOR PROXY ADVISORS
Sec. 6A.101. DISCLOSURE OF NONFINANCIAL PROXY VOTING
SERVICES TO PREVENT FRAUD OR DECEIT. (a) For purposes of this
section, a proxy advisory service is not provided solely in the
financial interest of the shareholders of a company if the service:
(1) is wholly or partly based on, or otherwise takes
into account, one or more nonfinancial factors, including a
commitment, initiative, policy, target, or subjective or
value-based standard based on:
(A) an environmental, social, or governance
(ESG) goal, factor, or investment principle;
(B) diversity, equity, or inclusion (DEI),
including any attempt to provide preferential treatment based on
characteristics protected under Section 21.051, Labor Code;
(C) a social credit or sustainability factor or
score; or
(D) membership in or commitment to an
organization or group that wholly or partly bases its evaluation or
assessment of a company's value over any period on nonfinancial
factors;
(2) involves providing a voting recommendation with
respect to a shareholder-sponsored proposal that:
(A) is inconsistent with the voting
recommendation of the board of directors or a board committee
composed of a majority of independent directors; and
(B) subject to Subsection (c), does not include a
written economic analysis of the financial impact on shareholders
of the proposal;
(3) is not based solely on financial factors and
subordinates the financial interests of shareholders to other
objectives, including sacrificing investment returns or
undertaking additional investment risk to promote nonfinancial
factors; or
(4) advises against a company proposal to elect a
governing person unless the proxy advisor affirmatively states that
the proxy advisory service solely considered the financial interest
of the shareholders in making such advice.
(b) If a proxy advisor provides a proxy advisory service
that is not provided solely in the financial interest of the
shareholders of a company, the advisor shall:
(1) include a disclosure to each shareholder or entity
or other person acting on behalf of a shareholder receiving the
service that:
(A) conspicuously states that the service is not
being provided solely in the financial interest of the company's
shareholders because it is based wholly or partly on one or more
nonfinancial factors; and
(B) explains, with particularity, the basis of
the proxy advisor's advice concerning each recommendation and that
the advice subordinates the financial interests of shareholders to
other objectives, including sacrificing investment returns or
undertaking additional investment risk to promote one or more
nonfinancial factors;
(2) immediately provide a copy of the notice under
Subdivision (1) to the company that is the subject of the service;
and
(3) publicly and conspicuously disclose on the home or
front page of the proxy advisor's publicly accessible Internet
website that the advisor's proxy advisory services include advice
and recommendations that are not based solely on the financial
interest of shareholders.
(c) A written economic analysis provided under Subsection
(a)(2)(B) must include:
(1) the short-term and long-term economic benefits and
costs of implementing any shareholder-sponsored proposal, as
written;
(2) an analysis of whether the proposal is consistent
with the investment objectives and policies of the client;
(3) the projected quantifiable impact of the proposal,
if adopted, on the investment returns of the client; and
(4) an explanation of the methods and processes used
to prepare the economic analysis.
Sec. 6A.102. DISCLOSURES IF PROVIDING CONFLICTING VOTER
ADVICE OR RECOMMENDATIONS. (a) For purposes of this section,
"materially different," with respect to advice or a recommendation
on how to vote on a company proposal or proxy proposal, means
simultaneously advising or recommending that:
(1) one or more clients vote for the proposal and one
or more clients vote against the proposal;
(2) one or more clients vote for a nominee for a
company's governing authority and one or more clients vote against
or abstain from voting for the same nominee; or
(3) one or more clients vote for or against the
proposal in opposition to the recommendation of the company's
management.
(b) If a proxy advisor provides to different clients who
have not expressly requested services for a nonfinancial purpose
either advice or a recommendation on how to vote on a proxy or
company proposal that is materially different, the advisor shall:
(1) if applicable, comply with disclosure
requirements for nonfinancial proxy advisory services under
Section 6A.101(b);
(2) notify the following persons, in writing or by
electronic means, of the conflicting advice or recommendation:
(A) each shareholder receiving the advice or
recommendation;
(B) each entity or other person receiving the
advice or recommendation on behalf of a shareholder;
(C) the company that is the subject of the
company or proxy proposal; and
(D) the attorney general; and
(3) disclose which of the conflicting advice or
recommendations is:
(A) provided solely in the financial interest of
the shareholders; and
(B) supported by any specific financial analysis
performed or relied on by the advisor.
SUBCHAPTER C. ENFORCEMENT
Sec. 6A.201. DECEPTIVE TRADE PRACTICE. A violation of this
chapter is a deceptive trade practice under Subchapter E, Chapter
17, Business & Commerce Code, and is actionable under Section 17.47
of that code.
Sec. 6A.202. DECLARATORY JUDGMENT OR INJUNCTIVE RELIEF.
(a) In this section, "affected party" includes:
(1) the recipient of proxy advisory services provided
by the proxy advisor;
(2) the company that is the subject of the proxy
advisory services; or
(3) any shareholder of the company described by
Subdivision (2).
(b) An affected party may bring an action seeking a
declaratory judgment or injunctive relief under Chapter 37, Civil
Practice and Remedies Code, against a proxy advisor who violates
this chapter. Not later than the seventh day after the date on
which an action is brought under this subsection, the plaintiff
shall provide notice to the attorney general, who may intervene in
the action.
SECTION 3. The changes in law made by this Act apply only to
a proxy advisory service provided on or after the effective date of
this Act.
SECTION 4. This Act takes effect July 1, 2025, if it
receives a vote of two-thirds of all the members elected to each
house, as provided by Section 39, Article III, Texas Constitution.
If this Act does not receive the vote necessary for effect on that
date, this Act takes effect September 1, 2025.
______________________________ ______________________________
President of the Senate Speaker of the House
I hereby certify that S.B. No. 2337 passed the Senate on
May 8, 2025, by the following vote: Yeas 20, Nays 11;
May 25, 2025, Senate refused to concur in House amendments and
requested appointment of Conference Committee; May 30, 2025, House
granted request of the Senate; May 31, 2025, Senate adopted
Conference Committee Report by the following vote: Yeas 21,
Nays 10.
______________________________
Secretary of the Senate
I hereby certify that S.B. No. 2337 passed the House, with
amendments, on May 28, 2025, by the following vote: Yeas 92,
Nays 50, two present not voting; May 30, 2025, House granted
request of the Senate for appointment of Conference Committee;
May 31, 2025, House adopted Conference Committee Report by the
following vote: Yeas 82, Nays 41, three present not voting.
______________________________
Chief Clerk of the House
Approved:
______________________________
Date
______________________________
Governor