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