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.