By: Hughes S.B. No. 2337               A BILL TO BE ENTITLED   AN ACT   relating to the provision of proxy advisory services in connection   with certain entities domiciled in this state.          BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:          SECTION 1.  Title 2, Chapter 21, Business Organizations   Code, is amended by adding Subchapter T to read as follows:   SUBCHAPTER T: PROXY ADVISORS     Sec. 21.1001.  DEFINITIONS. In this subchapter:                (1)  "Company" means a publicly traded, for-profit   company organized or created under the laws of this state or having   a principal place of business in this state.                (2)  "Company proposal" means any proposal made by a   company that is included in a company's proxy statement, including   but not limited to proposals regarding director elections,   executive compensation, corporate transactions and structure,   auditor selections, and other similar measures.                (3)  "Investment manager" means a person or company   who, for compensation, provides professional investment   management services. The term does not include:                      (A)  an employee or member of an advisory   committee of a public retirement system; or                      (b)  a seller of security interests.                (4)  "Proxy advisor" means a person or entity who, for   compensation, provides proxy advisory services to the shareholders   of a company, or to other interested parties, including but not   limited to investment managers.                (5)  "Proxy advisory services" includes the provision   of any of the following services in connection with or relating to   a company:                      (A)  advice or recommendations on how to vote with   regard to measures under shareholder consideration, including   proxy proposals and company proposals;                      (B)  proxy statement research and analyses,   including with regard to proxy proposals and company proposals;                      (C)  corporate governance ratings and research or   other similar services;                      (D)  proxy voting policy development; or                      (E)  proxy vote administration, including through   the use pf proxy vote management software or other similar   services.                (6)  "Proxy proposal" means any proposal made by a   shareholder to a company that is included in the company's proxy   statement.                (7)  "Shareholder" includes a shareholder, unitholder,   limited partner, or other equity owner of a company.          Sec. 21.1002.  OBLIGATION TO DISCHARGE DUTY BASED SOLELY ON   CERTAIN FINANCIAL INTERESTS. (a) Except as otherwise provided in   this section, a proxy advisor shall provide proxy advisory services   solely in the best financial interest of the shareholders of a   company, based on quantitative, impartial standards, for the sole   purpose of maximizing financial return and control associated   levels of risk.          (b)  For purposes of this section, proxy advisory services   are not provided solely in the best financial interest of the   shareholders if based, all or in part, on non-financial factors,   including any commitments, initiatives, policies, targets, or   subjective or value-based standards pertaining to:                (1)  environmental, social, or governance (ESG)   investment principles;                (2)  diversity, equity, or inclusion;                (3)  social credit or sustainability scores; or                (4)  membership in, or association with, any non-profit   organization, coalition, initiative, institution, industry, or   similar organization that bases its evaluation or assessment of a   company's value on non-financial factors.          (c)  For any proxy advisory services that are not provided   solely in the best financial interest of the shareholders, the   proxy advisor shall:                (1)  include a conspicuous warning with the provision   of each such proxy advisory services that they are not made solely,   and may not be, in the best financial interest of the shareholders;                (2)  use best efforts to obtain a prompt, written   acknowledgment of the warning required by subpart (a) herein from   each recipient shareholder or other interested party, as   applicable;                (3)  immediately notify the company that is the subject   of such proxy advisory services, including full disclosure of all   related proxy advisory services, the basis of the proxy advisor's   advice and recommendations under this subsection, and all   recipients of each such proxy advisory services; and                (4)  publicly and conspicuously disclose on the   homepage or front page of the proxy advisor's website that its proxy   advisory services include advice and recommendations that are not   made solely, and may not be, in the best financial interest of   shareholders.          Sec. 21.1003.  VOTING RECOMMENDATIONS; CONFLICTS. (a) If a   proxy advisor provides proxy advisory services regarding a company   to multiple shareholders or other interested parties that include   voting recommendations that differ in any material respect   regarding the same proxy proposal or company proposal, the proxy   advisory services shall be considered not to be in the best   financial interest of the shareholders.          (b)  For any proxy advisory services described in Subsection   (a), in addition to complying with the requirements of Section   21.1002(c), the proxy advisor shall immediately:                (1)  notify each recipient shareholder or other   interested party in writing of the conflicting advice or   recommendations, including full disclosure of all related advice or   recommendations and the proxy advisor's basis for such advice or   recommendations;                (2)  notify the company that is the subject of the proxy   advisory services in writing of the conflicting advice or   recommendations, including disclosure of all related   recommendations, the proxy advisor's basis for the   recommendations, and the recipients of each recommendation; and                (3)  publicly and conspicuously disclose on the landing   page or front page of the proxy advisor's website that its proxy   advisory services include advice and recommendations that are in   material conflict with proxy advisory services provided to other   shareholders or interested parties.          Sec. 21.1004.  VIOLATIONS; DECLARATORY JUDGMENT. An   affected party, including the company that is the subject of the   proxy advisory services, any shareholders of the company, or other   interested parties, may bring an action under Chapter 37, Civil   Practice and Remedies Code, to determine whether a proxy advisor   has committed a violation of this subchapter.          SECTION 2.  The changes in law made by this Act apply only to   proxy advisory services rendered on or after the effective date of   this Act. Proxy advisory services rendered before the effective   date of this Act are governed by the law in effect on the date the   contract or other agreement for the services was entered into, and   the former law is continued in effect for that purpose.          SECTION 3.  This Act takes effect immediately 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 immediate effect, this   Act takes effect September 1, 2025.