Relating to prohibiting certain state governmental entities from investing in certain Chinese-affiliated entities, the official text

S.B. No. 667

AN ACT

relating to prohibiting certain state governmental entities from

investing in certain Chinese-affiliated entities.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Subtitle A, Title 8, Government Code, is amended

by adding Chapter 809A to read as follows:

CHAPTER 809A. PROHIBITION ON INVESTMENT IN CERTAIN

CHINESE-AFFILIATED ENTITIES

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 809A.001. DEFINITIONS. In this chapter:

(1) "Chinese-affiliated entity" means a publicly

traded entity that:

(A) is both:

(i) incorporated or headquartered in the

People's Republic of China, including in the Hong Kong special

administrative region, other than a U.S. subsidiary, as that term

is defined by 15 C.F.R. Section 772.1; and

(ii) publicly confirmed to be controlled by

the People's Republic of China, the Chinese Communist Party, or a

provincial division, municipality, governmental agency, sovereign

wealth fund, or political instrumentality of the People's Republic

of China; or

(B) is identified by one or more of the

appropriate government agencies to be required by the National

Intelligence Law of the People's Republic of China (2017), as

amended in 2018, or any successor law, to support, assist, and

cooperate with the state intelligence work of the People's Republic

of China and keep the secrets of the national intelligence work of

the People's Republic of China.

(2) "Direct holdings" means, with respect to a

restricted entity, all securities of that restricted entity held

directly by a state governmental entity in an account or fund in

which a state governmental entity owns all shares or interests.

(3) "Entity" 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.

(4) "Indirect holdings" means, with respect to a

restricted entity, all securities of that restricted entity 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 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 (26

U.S.C. Section 401(k) or 457).

(5) "Listed restricted entity" means a restricted

entity listed by the comptroller under Section 809A.051.

(6) "Restricted entity" means a Chinese-affiliated

entity or other entity associated with the People's Republic of

China that is identified or included on an entities list maintained

by the federal government for the purpose of imposing prohibitions

or restrictions on or against entities to address national security

concerns, protect human rights, or combat unfair trade practices.

The term includes an entity that:

(A) is listed on the entity list under supplement

No. 4 to 15 C.F.R. Part 744 as associated with the People's Republic

of China because there is reasonable cause to believe the entity is

involved, has been involved, or poses a significant risk of being or

becoming involved in activities contrary to the national security

or foreign policy interests of the United States of America; and

(B) is listed in the Federal Register by the

United States Secretary of Defense as a Chinese military company

operating directly or indirectly in the United States or in any

territory or possession of the United States on the most recent list

compiled under Section 1260H of the William M. (Mac) Thornberry

National Defense Authorization Act for Fiscal Year 2021 (Pub. L.

No. 116-283, reprinted in note, 10 U.S.C. Section 113), or any

successor list of Chinese military companies the secretary is

required by law to compile and publish.

(7) "State governmental entity" 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;

(D) the Texas County and District Retirement

System;

(E) the Texas Emergency Services Retirement

System; or

(F) the permanent school fund.

Sec. 809A.002. OTHER LEGAL OBLIGATIONS. With respect to

actions taken in compliance with this chapter, including all good

faith determinations regarding restricted entities as required by

this chapter, a state governmental entity 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

restricted entities, or choosing asset managers, investment funds,

or investments for the state governmental entity's securities

portfolios.

Sec. 809A.003. INDEMNIFICATION OF STATE GOVERNMENTAL

ENTITIES, EMPLOYEES, AND OTHERS. In a cause of action based on an

action, inaction, decision, divestment, investment, restricted

entity 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, a former member of the

governing body, or any other former officer of a state governmental

entity 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 governmental entity

who was a contractor when the act or omission on which the damages

are based occurred; and

(5) a state governmental entity.

Sec. 809A.004. NO PRIVATE CAUSE OF ACTION. (a) A person,

including a member, retiree, or beneficiary of a retirement system

to which this chapter applies, an association, a research firm, a

restricted entity, or any other person may not sue or pursue a

private cause of action against the state, a state governmental

entity, a current or former 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,

restricted entity 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.

Sec. 809A.005. INAPPLICABILITY OF REQUIREMENTS

INCONSISTENT WITH FIDUCIARY RESPONSIBILITIES AND RELATED DUTIES. A

state governmental entity is not subject to a requirement of this

chapter if the state governmental entity determines that the

requirement would be inconsistent with its fiduciary

responsibility with respect to the investment of its assets or

other duties imposed by law relating to the investment of its

assets, including the duty of care established under Section 67,

Article XVI, Texas Constitution.

Sec. 809A.006. RELIANCE ON FEDERAL DETERMINATION AND

RESTRICTED ENTITY RESPONSE. The comptroller may rely on the

following, in the following order of priority, without conducting

any further investigation, research, or inquiry:

(1) a determination by a federal agency or officer

made under a federal law, regulation, or executive order regarding

whether an entity is a restricted entity; and

(2) a restricted entity's response to a communication

made under this chapter.

SUBCHAPTER B. DUTIES REGARDING INVESTMENTS

Sec. 809A.051. LISTED RESTRICTED ENTITIES. (a) The

comptroller shall prepare and maintain, and provide to each state

governmental entity, a list of all restricted entities. In

maintaining the list, the comptroller may:

(1) review and rely, as appropriate in the

comptroller's judgment, on publicly available information

regarding restricted entities, including information provided or

made available by federal, state, or local governments, nonprofit

organizations, research firms, and international organizations;

and

(2) request written verification from a restricted

entity that it does not meet any of the criteria in Section

809A.001(6) and rely, as appropriate in the comptroller's judgment

and without conducting further investigation, research, or

inquiry, on the entity's written response to the request.

(b) A restricted entity that fails to provide to the

comptroller a written verification under Subsection (a)(2) before

the 61st day after receiving the request from the comptroller is

presumed to be a restricted entity.

(c) 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).

(d) Not later than the 30th day after the date the list of

restricted entities 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 Internet website.

Sec. 809A.052. IDENTIFICATION OF INVESTMENT IN LISTED

RESTRICTED ENTITIES. Not later than the 30th day after the date a

state governmental entity receives the list provided under Section

809A.051, the state governmental entity shall notify the

comptroller of the restricted entities in which the state

governmental entity owns direct holdings or indirect holdings.

Sec. 809A.053. NOTICE OF DIVESTMENT TO LISTED RESTRICTED

ENTITY. For each listed restricted entity identified under Section

809A.052, the state governmental entity shall send a written

notice:

(1) informing the restricted entity of its status as a

restricted entity; and

(2) warning the restricted entity that it may become

subject to divestment by the state governmental entity.

Sec. 809A.054. DIVESTMENT OF ASSETS. (a) A state

governmental entity required to sell, redeem, divest, or withdraw

all publicly traded securities of a listed restricted entity shall

comply with the following schedule:

(1) at least 50 percent of those assets must be removed

from the state governmental entity's assets under management not

later than the 180th day after the date the restricted entity

receives notice under Section 809A.053 unless the state

governmental entity 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 governmental entity's assets under management not later

than the 360th day after the date the restricted entity receives

notice under Section 809A.053.

(b) Except as provided by Subsection (a), a state

governmental entity may delay the schedule for divestment under

that subsection only to the extent that the state governmental

entity determines, in the state governmental entity's good faith

judgment, and consistent with the state governmental entity's

fiduciary duty, that divestment from listed restricted entities

will likely result in a loss in value or a benchmark deviation

described by Section 809A.056(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 reason and

justification for the state governmental entity's delay in

divestment from listed restricted entities. 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 809A.056(a), including objective numerical

estimates. The state governmental entity shall update the report

every six months.

Sec. 809A.055. INVESTMENTS EXEMPTED FROM DIVESTMENT. A

state governmental entity is not required to divest from any

indirect holdings in actively or passively managed investment funds

or private equity funds. The state governmental entity shall

submit letters to the managers of each investment fund containing

listed restricted entities requesting that they remove those

restricted entities from the fund or create a similar actively or

passively managed fund with indirect holdings devoid of listed

restricted entities. If a manager creates a similar fund with

substantially the same management fees and same level of investment

risk and anticipated return, the state governmental entity 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. 809A.056. AUTHORIZED INVESTMENT IN LISTED RESTRICTED

ENTITIES. (a) A state governmental entity may cease divesting from

one or more listed restricted entities only if clear and convincing

evidence shows that:

(1) the state governmental entity has suffered or will

suffer a loss in the hypothetical value of all assets under

management by the state governmental entity as a result of having to

divest from listed restricted entities 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 restricted entities under this chapter.

(b) A state governmental entity may cease divesting from a

listed restricted entity as provided by this section only to the

extent necessary to ensure that the state governmental entity does

not suffer a loss in value or deviate from its benchmark as

described by Subsection (a).

(c) Before a state governmental entity may cease divesting

from a listed restricted entity under this section, the state

governmental entity 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

restricted entity.

(d) The state governmental entity shall update the report

required by Subsection (c) semiannually, as applicable.

Sec. 809A.057. PROHIBITED INVESTMENTS. Except as provided

by Section 809A.056, a state governmental entity may not acquire

securities of a listed restricted entity.

SUBCHAPTER C. REPORT; ENFORCEMENT

Sec. 809A.101. REPORT. Not later than January 5 of each

year, each state governmental entity 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 809A.054;

(2) identifies all prohibited investments under

Section 809A.057; and

(3) summarizes any changes made under Section

809A.055.

Sec. 809A.102. ENFORCEMENT. The attorney general may bring

any action necessary to enforce this chapter.

SECTION 2. This Act takes effect September 1, 2025.

______________________________
______________________________

President of the Senate
Speaker of the House

I hereby certify that S.B. No. 667 passed the Senate on

April 10, 2025, by the following vote: Yeas 24, Nays 6.

______________________________

Secretary of the Senate

I hereby certify that S.B. No. 667 passed the House on

May 28, 2025, by the following vote: Yeas 90, Nays 50, one

present not voting.

______________________________

Chief Clerk of the House

Approved:

______________________________

Date

______________________________

Governor