86R360 KFF-D
 
  By: Anchia H.B. No. 1170
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to prohibiting the investment of certain state retirement
  system funds in companies that manufacture firearms or firearm
  ammunition.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Subtitle A, Title 8, Government Code, is amended
  by adding Chapter 809 to read as follows:
  CHAPTER 809. PROHIBITION ON INVESTMENT IN COMPANIES THAT
  MANUFACTURE FIREARMS OR FIREARM AMMUNITION
  SUBCHAPTER A. GENERAL PROVISIONS
         Sec. 809.001.  DEFINITIONS. In this chapter:
               (1)  "Company" means a for-profit sole proprietorship,
  organization, association, corporation, partnership, joint
  venture, limited partnership, limited liability partnership, or
  limited liability company, including a wholly owned subsidiary,
  majority-owned subsidiary, parent company, or affiliate of those
  entities or business associations that exists to make a profit.
               (2)  "Direct holdings" means, with respect to a
  company, all securities of that company held directly by a state
  retirement system in an account or fund in which a state retirement
  system owns all shares or interests.
               (3)  "Firearm" has the meaning assigned by Section
  46.01, Penal Code.
               (4)  "Firearm ammunition" means ammunition or
  cartridge cases, primers, bullets, or propellant powder designed
  for use in a firearm.
               (5)  "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 state retirement system, in which the state 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.
               (6)  "Listed company" means a company listed by the
  comptroller under Section 809.051.
               (7)  "State retirement system" means:
                     (A)  the Employees Retirement System of Texas,
  including a retirement system administered by that system;
                     (B)  the Teacher Retirement System of Texas;
                     (C)  the Texas Municipal Retirement System; and
                     (D)  the Texas County and District Retirement
  System.
         Sec. 809.002.  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 state retirement system and the comptroller are exempt
  from any conflicting statutory or common law obligations, including
  any obligations 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
  state retirement system's securities portfolios.
         Sec. 809.003.  INDEMNIFICATION OF STATE GOVERNMENTAL
  ENTITIES, 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 state retirement system;
               (2)  a contractor of a state retirement system;
               (3)  a former employee, a former member of the
  governing body, or any other former officer of a state retirement
  system who was an employee, member of the governing body, or other
  officer when the act or omission on which the damages are based
  occurred;
               (4)  a former contractor of a state retirement system
  who was a contractor when the act or omission on which the damages
  are based occurred; and
               (5)  a state retirement system.
         Sec. 809.004.  NO PRIVATE CAUSE OF ACTION. (a)  A person,
  including a member, retiree, or beneficiary of a state retirement
  system to which this chapter applies, 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 state retirement system, a
  current or former employee, a member of the governing body, or any
  other officer of a state retirement system, or a contractor of a
  state 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 state
  retirement system, an employee, a member of the governing body, or
  any other officer of a state retirement system, or a contractor of a
  state retirement system, is liable for paying the costs and
  attorney's fees of a person sued in violation of this section.
         Sec. 809.005.  INAPPLICABILITY OF REQUIREMENTS INCONSISTENT
  WITH FIDUCIARY RESPONSIBILITIES AND RELATED DUTIES.  A state
  retirement system is not subject to a requirement of this chapter if
  the state retirement system determines that the requirement would
  be inconsistent with its fiduciary responsibility with respect to
  the investment of system assets or other duties imposed by law
  relating to the investment of system assets, including the duty of
  care established under Section 67, Article XVI, Texas Constitution.
         Sec. 809.006.  RELIANCE ON COMPANY RESPONSE.  The
  comptroller and a state 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. 809.051.  LISTED COMPANIES. (a)  The comptroller shall
  prepare and maintain, and provide to each state retirement system,
  a list of all companies that manufacture firearms or firearm
  ammunition. In maintaining the list, the comptroller may review
  and rely, as appropriate in the comptroller's judgment, on publicly
  available information regarding companies, including information
  provided by the state, nonprofit organizations, research firms,
  international organizations, and governmental entities.
         (b)  The comptroller shall update the list annually or more
  often as the comptroller considers necessary, but not more often
  than quarterly, based on information from, among other sources,
  those listed in Subsection (a).
         (c)  Not later than the 30th day after the date the list of
  companies that manufacture firearms or firearm ammunition is first
  provided or updated, the comptroller shall file the list with the
  presiding officer of each house of the legislature and the attorney
  general and post the list on a publicly available website.
         Sec. 809.052.  IDENTIFICATION OF INVESTMENT IN LISTED
  COMPANIES.  Not later than the 30th day after the date a state
  retirement system receives the list provided under Section 809.051,
  the state retirement system shall notify the comptroller of the
  listed companies in which the state retirement system owns direct
  holdings or indirect holdings.
         Sec. 809.053.  ACTIONS RELATING TO LISTED COMPANY. (a)  For
  each listed company identified under Section 809.052, the state
  retirement system shall send a written notice informing the company
  of its status as a listed company and warning the company that it
  may become subject to divestment by state retirement systems.
         (b)  Not later than the 90th day after the date the company
  receives notice under Subsection (a), the company must cease
  manufacturing firearms or firearm ammunition, as applicable, in
  order to avoid qualifying for divestment by state retirement
  systems.
         (c)  If, during the time provided by Subsection (b), the
  company ceases manufacturing firearms or firearm ammunition, as
  applicable, the comptroller shall remove the company from the list
  maintained under Section 809.051 and this chapter will no longer
  apply to the company unless it resumes manufacturing firearms or
  firearm ammunition, as applicable.
         (d)  If, after the period provided by Subsection (b) expires,
  the company continues manufacturing firearms or firearm
  ammunition, as applicable, the state retirement system shall sell,
  redeem, divest, or withdraw all publicly traded securities of the
  company, except securities described by Section 809.055, according
  to the schedule provided by Section 809.054.
         Sec. 809.054.  DIVESTMENT OF ASSETS. (a) A state retirement
  system required to sell, redeem, divest, or withdraw all publicly
  traded securities of a listed company shall comply with the
  following schedule:
               (1)  at least 50 percent of those assets must be removed
  from the state retirement system's assets under management not
  later than the 180th day after the date the company receives notice
  under Section 809.053 or Subsection (b) unless the state retirement
  system determines, based on a good faith exercise of its fiduciary
  discretion and subject to Subdivision (2), that a later date is more
  prudent; and
               (2)  100 percent of those assets must be removed from
  the state retirement system's assets under management not later
  than the 360th day after the date the company receives notice under
  Section 809.053 or Subsection (b).
         (b)  If a company that ceased manufacturing firearms or
  firearm ammunition, as applicable, after receiving notice under
  Section 809.053 resumes its manufacturing of firearms or firearm
  ammunition, as applicable, the state retirement system shall send a
  written notice to the company informing it that the state
  retirement system will sell, redeem, divest, or withdraw all
  publicly traded securities of the company according to the schedule
  in Subsection (a).
         (c)  Except as provided by Subsection (a), a state retirement
  system may delay the schedule for divestment under that subsection
  only to the extent that the state retirement system determines, in
  the state retirement system's good faith judgment, and consistent
  with the system's fiduciary duty, that divestment from listed
  companies will likely result in a loss in value or a benchmark
  deviation described by Section 809.056(a).  If a state retirement
  system delays the schedule for divestment, the state 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 state retirement system's delay in divestment
  from listed companies.  The report must include documentation
  supporting its determination that the divestment would result in a
  loss in value or a benchmark deviation described by Section
  809.056(a), including objective numerical estimates.  The state
  retirement system shall update the report every six months.
         Sec. 809.055.  INVESTMENTS EXEMPTED FROM DIVESTMENT. A
  state retirement system is not required to divest from any indirect
  holdings in actively or passively managed investment funds or
  private equity funds. The state retirement system shall submit
  letters to the managers of each investment fund containing listed
  companies requesting that they remove those companies from the fund
  or create a similar actively or passively managed fund with
  indirect holdings devoid of listed companies. If a manager creates
  a similar fund with substantially the same management fees and same
  level of investment risk and anticipated return, the state
  retirement system may replace all applicable investments with
  investments in the similar fund in a time frame consistent with
  prudent fiduciary standards but not later than the 450th day after
  the date the fund is created.
         Sec. 809.056.  AUTHORIZED INVESTMENT IN LISTED COMPANIES.
  (a)  A state retirement system may cease divesting from one or more
  listed companies only if clear and convincing evidence shows that:
               (1)  the state retirement system has suffered or will
  suffer a loss in the hypothetical value of all assets under
  management by the state 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 state retirement system may cease divesting from a
  listed company as provided by this section only to the extent
  necessary to ensure that the state retirement system does not
  suffer a loss in value or deviate from its benchmark as described by
  Subsection (a).
         (c)  Before a state retirement system may cease divesting
  from a listed company under this section, the state retirement
  system must provide a written report to the comptroller, 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 deciding to cease
  divestment or to remain invested in a listed company.
         (d)  The state 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. 809.057.  PROHIBITED INVESTMENTS. Except as provided
  by Section 809.056, a state retirement system may not acquire
  securities of a listed company.
  SUBCHAPTER C. REPORT; ENFORCEMENT
         Sec. 809.101.  REPORT. Not later than January 5 of each
  year, each state 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 809.054;
               (2)  identifies all prohibited investments under
  Section 809.057; and
               (3)  summarizes any changes made under Section 809.055.
         Sec. 809.102.  ENFORCEMENT. The attorney general may bring
  any action necessary to enforce this chapter.
         SECTION 2.  This Act takes effect September 1, 2019.