CHAPTER 806. PROHIBITION ON INVESTMENT IN SUDAN - Texas Statutes

GOVERNMENT CODE

TITLE 8. PUBLIC RETIREMENT SYSTEMS

SUBTITLE A. PROVISIONS GENERALLY APPLICABLE TO PUBLIC RETIREMENT

SYSTEMS

CHAPTER 806. PROHIBITION ON INVESTMENT IN SUDAN

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 806.001. DEFINITIONS. In this chapter:

(1) "Active business operations" means all business operations

that are not inactive business operations.

(2) "Business operations" means engaging in commerce in any form

in Sudan, including by acquiring, developing, maintaining,

owning, selling, possessing, leasing, or operating equipment,

facilities, personnel, products, services, personal property,

real property, or any other apparatus of business or commerce.

(3) "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.

(4) "Complicit" means taking actions that have directly

supported or promoted the genocidal campaign in Darfur,

including:

(A) preventing members of Darfur's victimized population from

communicating with each other;

(B) encouraging Sudanese citizens to speak out against an

internationally approved security force for Darfur; or

(C) actively working to deny, cover up, or alter the record on

human rights abuses in Darfur.

(5) "Direct holdings in a company" means all securities of that

company held directly by a state governmental entity in an

account or fund in which a state governmental entity owns all

shares or interests.

(6) "Government of Sudan" means the government in Khartoum,

Sudan, which is led by the National Congress Party, formerly

known as the National Islamic Front, or any successor government

formed on or after October 13, 2006, including the coalition

National Unity Government agreed upon in the Comprehensive Peace

Agreement for Sudan. The term does not include the regional

government of southern Sudan.

(7) "Inactive business operations" means the mere continued

holding or renewal of rights to property previously operated to

generate revenue but not presently deployed to generate revenue.

(8) "Indirect holdings in a company" means 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

governmental entity, in which the state governmental entity owns

shares or interests together with other investors not subject to

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.

(9) "Listed company" means a company listed by the comptroller

under Section 806.051.

(10) "Marginalized populations of Sudan" includes:

(A) the portion of the population in the Darfur region that has

been genocidally victimized;

(B) the portion of the population of southern Sudan victimized

by Sudan's North-South civil war;

(C) the Beja, Rashidiya, and other similarly underserved groups

of eastern Sudan;

(D) the Nubian and other similarly underserved groups in Sudan's

Abyei, Southern Blue Nile, and Nuba Mountain regions; and

(E) the Amri, Hamadab, Manasir, and other similarly underserved

groups of northern Sudan.

(11) "Military equipment" means weapons, arms, military

supplies, and equipment that readily may be used for military

purposes, including radar systems or military-grade transport

vehicles or supplies or services sold or provided directly or

indirectly to any force actively participating in armed conflict

in Sudan.

(12) "Mineral extraction activities" includes exploring,

extracting, processing, transporting, or wholesale selling or

trading of elemental minerals or associated metal alloys or

oxides (ore), including gold, copper, chromium, chromite,

diamonds, iron, iron ore, silver, tungsten, uranium, and zinc, as

well as facilitating those activities, including by providing

supplies or services in support of those activities.

(13) "Oil-related activities" includes:

(A) owning rights to oil blocks;

(B) exporting, extracting, producing, refining, processing,

exploring for, transporting, selling, or trading of oil;

(C) constructing, maintaining, or operating a pipeline,

refinery, or other oil-field infrastructure; or

(D) facilitating oil-related activities, including by providing

supplies or services in support of the activities, except that

the mere retail sale of gasoline and related consumer products is

not an oil-related activity.

(14) "Power production activities" means any business operation

that involves a project commissioned by the National Electricity

Corporation of Sudan or another similar Government of Sudan

entity whose purpose is to facilitate power generation and

delivery, including establishing power-generating plants or

hydroelectric dams, selling or installing components for the

project, and providing service contracts related to the

installation or maintenance of the project, as well as

facilitating those activities, including by providing supplies or

services in support of those activities.

(15) "Scrutinized company" means a company that:

(A) engages in scrutinized business operations described by

Section 806.002; or

(B) has been complicit in the Darfur genocide during any

preceding 20-month period.

(16) "Social development company" means a company whose primary

purpose in Sudan is to provide humanitarian goods or services,

including medicine or medical equipment, agricultural supplies or

infrastructure, educational opportunities, journalism-related

activities, information or information materials,

spiritual-related activities, services of a purely clerical or

reporting nature, food, clothing, or general consumer goods that

are unrelated to oil-related activities, mineral extraction

activities, or power production activities.

(17) "State governmental entity" means the Employees Retirement

System of Texas or the Teacher Retirement System of Texas.

(18) "Substantial action" means adopting, publicizing, and

implementing a formal plan to cease scrutinized business

operations within one year and to refrain from any such new

business operations, undertaking significant humanitarian efforts

on behalf of one or more marginalized populations of Sudan, or,

through engagement with the Government of Sudan, materially

improving conditions for the genocidally victimized population in

Darfur.

Added by Acts 2007, 80th Leg., R.S., Ch.

1375, Sec. 2, eff. January 1, 2008.

Sec. 806.002. SCRUTINIZED BUSINESS OPERATIONS. A company

engages in scrutinized business operations if:

(1) the company has business operations that involve contracts

with or providing supplies or services to the Government of

Sudan, a company in which the Government of Sudan has any direct

or indirect equity share, a Government of Sudan-commissioned

consortium or project, or a company involved in a Government of

Sudan-commissioned consortium or project, and:

(A) more than 10 percent of the company's revenues or assets

linked to Sudan involve oil-related activities or mineral

extraction activities, less than 75 percent of the company's

revenue or assets linked to Sudan involve contracts with or

provision of oil-related or mineral extracting products or

services to the regional government of southern Sudan or a

project or consortium created exclusively by that regional

government, and the company has failed to take substantial

action; or

(B) more than 10 percent of the company's revenue or assets

linked to Sudan involve power production activities, less than 75

percent of the company's power production activities include

projects whose intent is to provide power or electricity to the

marginalized populations of Sudan, and the company has failed to

take substantial action; or

(2) the company supplies military equipment in Sudan, unless:

(A) the company clearly shows that the military equipment cannot

be used to facilitate offensive military actions in Sudan; or

(B) the company implements rigorous and verifiable safeguards to

prevent use of that equipment by forces actively participating in

armed conflict, including:

(i) using post-sale tracking of the equipment by the company;

(ii) obtaining certification from a reputable and objective

third party that the equipment is not being used by a party

participating in armed conflict in Sudan; or

(iii) selling the equipment solely to the regional government of

southern Sudan or any internationally recognized peacekeeping

force or humanitarian organization.

Added by Acts 2007, 80th Leg., R.S., Ch.

1375, Sec. 2, eff. January 1, 2008.

Sec. 806.003. SOCIAL DEVELOPMENT COMPANY. Notwithstanding any

other law, a social development company that is not complicit in

the Darfur genocide is not a scrutinized company.

Added by Acts 2007, 80th Leg., R.S., Ch.

1375, Sec. 2, eff. January 1, 2008.

Sec. 806.004. EXCEPTION. Notwithstanding any other law, a

company that the United States government affirmatively declares

to be excluded from its federal sanctions regime relating to

Sudan is not subject to divestment or investment prohibition

under this chapter.

Added by Acts 2007, 80th Leg., R.S., Ch.

1375, Sec. 2, eff. January 1, 2008.

Sec. 806.005. 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 governmental entity is 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 governmental entity's securities portfolios.

Added by Acts 2007, 80th Leg., R.S., Ch.

1375, Sec. 2, eff. January 1, 2008.

Sec. 806.006. 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 governmental entity;

(2) a contractor of a state governmental entity;

(3) a former employee, former member of the governing body, or

any other former officer of a state governmental entity who was

an employee or officer when the act or omission on which the

damages are based occurred; and

(4) a former contractor of a state governmental entity who was a

contractor when the act or omission on which the damages are

based occurred.

Added by Acts 2007, 80th Leg., R.S., Ch.

1375, Sec. 2, eff. January 1, 2008.

Sec. 806.007. NO PRIVATE CAUSE OF ACTION. (a) A person,

including a member, retiree, and beneficiary of a 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 governmental

entity, an employee, a member of the governing body, or any other

officer of a state governmental entity, or a contractor of a

state governmental entity, 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

governmental entity, an employee, a member of the governing body,

or any other officer of a state governmental entity, or a

contractor of a state governmental entity, is liable for paying

the costs and attorney's fees of a person sued in violation of

this section.

Added by Acts 2007, 80th Leg., R.S., Ch.

1375, Sec. 2, eff. January 1, 2008.

SUBCHAPTER B. DUTIES REGARDING INVESTMENTS

Sec. 806.051. LISTED COMPANIES. (a) The comptroller shall

prepare and maintain, and provide to each state governmental

entity, a list of all scrutinized companies. In maintaining the

list of scrutinized companies, the comptroller may review and

rely, as appropriate in the comptroller's judgment, on publicly

available information regarding companies with business

operations in Sudan, including information provided by the state,

nonprofit organizations, research firms, international

organizations, and governmental entities.

(b) The comptroller shall update the list of scrutinized

companies 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

scrutinized companies is first provided or updated, the

comptroller shall file the list of scrutinized companies with the

presiding officer of each house of the legislature and the

attorney general.

Added by Acts 2007, 80th Leg., R.S., Ch.

1375, Sec. 2, eff. January 1, 2008.

Sec. 806.052. IDENTIFICATION OF INVESTMENT IN LISTED COMPANIES.

Not later than the 14th day after the date a state governmental

entity receives the list provided under Section 806.051(c), the

state governmental entity shall notify the comptroller of the

listed companies in which the state governmental entity owns

direct or indirect holdings.

Added by Acts 2007, 80th Leg., R.S., Ch.

1375, Sec. 2, eff. January 1, 2008.

Sec. 806.053. NOTICE TO LISTED COMPANY ENGAGED IN INACTIVE

BUSINESS OPERATIONS. For each listed company identified under

Section 806.052 that is engaged in only inactive scrutinized

business operations, the state governmental entity shall send a

written notice informing the company of this chapter and

encouraging the company to continue to refrain from initiating

active business operations in Sudan until it is able to avoid

being considered a listed company. The state governmental entity

shall continue the correspondence as the entity considers

necessary, but is not required to initiate correspondence more

often than semiannually.

Added by Acts 2007, 80th Leg., R.S., Ch.

1375, Sec. 2, eff. January 1, 2008.

Sec. 806.054. ACTIONS RELATING TO LISTED COMPANY ENGAGED IN

ACTIVE BUSINESS OPERATIONS. (a) For each listed company

identified under Section 806.052 that is engaged in scrutinized

active business operations, the state governmental entity shall

send a written notice informing the company of its listed company

status and warning the company that it may become subject to

divestment by state governmental entities.

(b) The notice shall offer the company the opportunity to

clarify its Sudan-related activities and shall encourage the

company, not later than the 90th day after the date the company

receives notice under this section, to either cease its

scrutinized business operations or convert such operations to

inactive business operations in order to avoid qualifying for

divestment by state governmental entities.

(c) If, during the time provided by Subsection (b), the company

ceases scrutinized business operations, the comptroller shall

remove the company from the list of scrutinized companies and

this chapter will no longer apply to the company unless it

resumes scrutinized business operations.

(d) If, during the time provided by Subsection (b), the company

converts its scrutinized active business operations to inactive

business operations, the company is subject to all provisions of

this chapter relating to inactive business operations.

(e) If, after the time provided by Subsection (b) expires, the

listed company continues to have scrutinized active business

operations, the state governmental entity shall sell, redeem,

divest, or withdraw all publicly traded securities of the

company, except securities described by Section 806.057,

according to the schedule provided by Section 806.056.

Added by Acts 2007, 80th Leg., R.S., Ch.

1375, Sec. 2, eff. January 1, 2008.

Sec. 806.055. ACTIONS RELATING TO LISTED COMPANY COMPLICIT IN

GENOCIDE. (a) For each company identified under Section 806.052

that has been complicit, the state governmental entity shall send

a written notice informing the company of its listed company

status and warning the company that it may become subject to

divestment by the state governmental entity.

(b) The notice must require the listed company to refrain from

taking any further action that would make it complicit.

(c) If, after receiving the notice under Subsection (a), the

listed company takes additional action that makes the company

complicit, the state governmental entity shall sell, redeem,

divest, or withdraw all publicly traded securities of the

company, except securities described by Section 806.057,

according to the schedule provided by Section 806.056.

Added by Acts 2007, 80th Leg., R.S., Ch.

1375, Sec. 2, eff. January 1, 2008.

Sec. 806.056. DIVESTMENT OF ASSETS. (a) A state governmental

entity 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 shall be removed from

the state governmental entity's assets under management not later

than the 270th day after the date the company receives notice

under Section 806.054 or 806.055 or Subsection (b); and

(2) 100 percent of those assets shall be removed from the state

governmental entity's assets under management not later than the

450th day after the date the company receives notice under

Section 806.054 or 806.055 or Subsection (b).

(b) If a company that ceased scrutinized active business

operations after receiving notice under Section 806.054 resumes

scrutinized active business operations, the state governmental

entity shall send a written notice to the company informing it

that the state governmental entity will sell, redeem, divest, or

withdraw all publicly traded securities of the scrutinized

company according to the schedule in Subsection (a).

(c) A state governmental entity may delay the schedule for

divestment under Subsection (a) only to the extent that the state

governmental entity determines, in the state governmental

entity's good faith judgment, that divestment from listed

companies will likely result in a loss in value described by

Section 806.058(a). If a state governmental entity delays the

schedule for divestment, the state governmental entity 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 governmental entity'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 described by Section 806.058(a),

including objective numerical estimates. The state governmental

entity shall update the report every six months.

Added by Acts 2007, 80th Leg., R.S., Ch.

1375, Sec. 2, eff. January 1, 2008.

Sec. 806.057. INVESTMENTS EXEMPTED FROM DIVESTMENT. A state

governmental entity is not required to divest from any indirect

holdings in actively managed investment funds or private equity

funds. The state governmental entity 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 actively managed fund with indirect

holdings devoid of listed companies. If the manager creates a

similar fund with substantially the same management fees and same

level of investment risk, the state governmental entity shall

replace all applicable investments with investments in the

similar fund in an expedited time frame consistent with prudent

fiduciary standards.

Added by Acts 2007, 80th Leg., R.S., Ch.

1375, Sec. 2, eff. January 1, 2008.

Sec. 806.058. AUTHORIZED INVESTMENT IN LISTED COMPANIES. (a) A

state governmental entity may cease divesting from or may

reinvest in one or more listed companies if clear and convincing

evidence shows that the value for all assets under management by

the state governmental entity becomes equal to or less than 99.7

percent of the hypothetical value of all assets under management

by the state governmental entity had the state governmental

entity not divested from listed companies under this chapter.

(b) A state governmental entity may invest in a listed company

as provided by this section only to the extent necessary to

ensure that the value of the assets managed by the state

governmental entity does not fall below the value described by

Subsection (a).

(c) Before a state governmental entity may invest in a listed

company under this section, the state governmental entity 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 decisions to cease divestment, to reinvest, or

to remain invested in a listed company.

(d) The state governmental entity shall update the report

required by Subsection (c) semiannually, as applicable.

(e) This section does not apply to reinvestment in a company

that has ceased to be a listed company.

Added by Acts 2007, 80th Leg., R.S., Ch.

1375, Sec. 2, eff. January 1, 2008.

Sec. 806.059. PROHIBITED INVESTMENTS. Except as provided by

Sections 806.004 and 806.058, a state governmental entity may not

acquire securities of a listed company.

Added by Acts 2007, 80th Leg., R.S., Ch.

1375, Sec. 2, eff. January 1, 2008.

SUBCHAPTER C. EXPIRATION; REPORT; ENFORCEMENT

Sec. 806.101. EXPIRATION OF CHAPTER. This chapter expires on

the earliest of:

(1) the date on which the United States Congress or the

president of the United States declares that the Darfur genocide

has been halted for at least 12 months;

(2) the date on which the United States revokes its sanctions

against the Government of Sudan; or

(3) the date on which the United States Congress or the

president of the United States, through legislation or executive

order, declares that mandatory divestment of the type provided

for in this chapter interferes with the conduct of United States

foreign policy.

Added by Acts 2007, 80th Leg., R.S., Ch.

1375, Sec. 2, eff. January 1, 2008.

Sec. 806.102. REPORT. Not later than December 31 of each year,

each state governmental entity shall file a publicly available

report with the presiding officer of each house of the

legislature, the attorney general, and the United States

presidential special envoy to Sudan that:

(1) identifies all investments sold, redeemed, divested, or

withdrawn in compliance with Section 806.056;

(2) identifies all prohibited investments under Section 806.059;

and

(3) summarizes any changes made under Section 806.057.

Added by Acts 2007, 80th Leg., R.S., Ch.

1375, Sec. 2, eff. January 1, 2008.

Sec. 806.103. ENFORCEMENT. The attorney general may bring any

action necessary to enforce this chapter.

Added by Acts 2007, 80th Leg., R.S., Ch.

1375, Sec. 2, eff. January 1, 2008.