SB 667

relating to prohibiting state retirement systems 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
SUBCHAPTER A.  GENERAL PROVISIONS
Sec. 809A.001.  DEFINITIONS.  In this chapter:
(1)  "Chinese-affiliated entity" means an entity that:
(A)  is incorporated or headquartered in the
People's Republic of China, other than a U.S. subsidiary, as that
term is defined by 15 C.F.R. Section 772.1;
(B)  is 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
(C)  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 retirement system in an account or fund in which
a state retirement system 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 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 (26
(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 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;
(D)  the Texas County and District Retirement
(E)  the Texas Emergency Services Retirement
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 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
restricted entities, or choosing asset managers, investment funds,
or investments for the state retirement system's securities
Sec. 809A.003.  INDEMNIFICATION OF STATE RETIREMENT
SYSTEMS, 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 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
(4)  a former contractor of a state retirement system
who was a contractor when the act or omission on which the damages
(5)  a state retirement system.
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 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,
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
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. 809A.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 entity assets or
other duties imposed by law relating to the investment of entity
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
SUBCHAPTER B.  DUTIES REGARDING INVESTMENTS
Sec. 809A.051.  LISTED RESTRICTED ENTITIES.  (a)  The
comptroller shall prepare and maintain, and provide to each state
retirement system, 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;
(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
Sec. 809A.052.  IDENTIFICATION OF INVESTMENT IN LISTED
RESTRICTED ENTITIES.  Not later than the 30th day after the date a
state retirement system receives the list provided under Section
809A.051, the state retirement system shall notify the comptroller
of the restricted entities in which the state retirement system
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 retirement system shall send a written notice:
(1)  informing the restricted entity of its status as a
(2)  warning the restricted entity that it may become
subject to divestment by the state retirement system.
Sec. 809A.054.  DIVESTMENT OF ASSETS.  (a)  A state
retirement system 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 retirement system'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 retirement
system determines, based on a good faith exercise of its fiduciary
discretion and subject to Subdivision (2), that a later date is more
(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 restricted entity receives
(b)  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 state retirement system'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 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 reason and justification for the state retirement
system'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 retirement system shall update the
Sec. 809A.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
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 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. 809A.056.  AUTHORIZED INVESTMENT IN LISTED RESTRICTED
ENTITIES.  (a)  A state retirement system may cease divesting from
one or more listed restricted entities only if clear and convincing
(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 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 retirement system may cease divesting from a
listed restricted entity 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
(c)  Before a state retirement system may cease divesting
from a listed restricted entity 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 restricted entity.
(d)  The state retirement system 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 retirement system 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 retirement system shall file a publicly available
report with the presiding officer of each house of the legislature
(1)  identifies all securities sold, redeemed,
divested, or withdrawn in compliance with Section 809A.054;
(2)  identifies all prohibited investments under
(3)  summarizes any changes made under Section
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.