85R6593 CLG-F     By: Parker H.B. No. 2382       A BILL TO BE ENTITLED   AN ACT   relating to information required to be disclosed by certain   investors of publicly traded companies whose headquarters are   located in this state; creating an offense.          BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:          SECTION 1.  This Act shall be known as the Bring Business to   Texas and Fairness in Disclosure Act.          SECTION 2.  It is the policy of this state to:                (1)  foster and promote the immediate and full   disclosure of the individual ownership of persons who are activist   investors with respect to publicly traded entities whose   headquarters are located in Texas; and                (2)  prohibit discrimination by a proxy advisory firm   toward any publicly traded entity whose headquarters are located in   Texas.          SECTION 3.  Section 4, The Securities Act (Article 581-4,   Vernon's Texas Civil Statutes), is amended by adding Subsections R,   S, T, U, V, W, X, and Y to read as follows:          R.  "Activist investor" means a person who, directly or   indirectly, or through or with an affiliate:                 (1)  nominates or attempts to nominate the person or   another person to the governing authority or body of a publicly   traded entity, including the board of directors of a corporation or   the general partners of a general partnership or limited   partnership;                 (2)  makes or attempts to make one or more shareholder   proposals or the equivalent for a publicly traded entity; or                 (3)  acts broadly in concert with, or on behalf of, a   person who engages in actions described by either Subdivision (1)   or (2) of this subsection.          S. "Affiliate," with respect to a person, means:                (1)  a family member of a natural person; or                (2)  any person who controls, is controlled by, or is   under common control with the person.          T. "Beneficial owner," with respect to a class of securities   of a publicly traded entity, means a person who has the sole or   shared power to vote or dispose of a security or who enjoys the   economic benefits of ownership of a security. The term includes a   person who enjoys the benefits of ownership of a security or the   voting power of a security, regardless of whether the security is   held in the name of another person.          U. "Governing authority" has the meaning assigned by Section   1.002, Business Organizations Code.          V. "Headquarters," with respect to a publicly traded entity,   means the location at which the president or other chief executive   officer of the entity, a general partner of the entity, or any other   senior member of the entity's management team routinely performs   duties in those respective capacities.          W. "Mutual fund" means an entity that:                 (1)  is engaging primarily in, or proposes to engage   primarily in, the business of investing, reinvesting, or trading in   securities;                 (2)  is engaging or proposes to engage in the business   of issuing face-amount certificates of the installment type;                (3)  has engaged in a business described by Subdivision   (2) of this subsection and has outstanding a certificate described   by that subdivision;                 (4)  is engaging or proposes to engage in the business   of investing, reinvesting, owning, holding, or trading in   securities and owns or proposes to acquire investment securities   whose value exceeds 40 percent of the value of the total assets of   the issuer of the securities, not including government securities   and cash, on an unconsolidated basis; or                 (5)  is an investment company registered under the   Investment Company Act of 1940 (15 U.S.C. Section 80a-1 et seq.).          X. "Proxy advisory firm" means a person that provides   corporate governance ratings, proxy research, analyses, advisory   services, or other similar services to shareholders of a publicly   traded entity.          Y. "Texas-based public company" means a publicly traded   entity whose headquarters are located in this state.           SECTION 4.  The Securities Act (Article 581-1 et seq.,   Vernon's Texas Civil Statutes) is amended by adding Sections 45   through 55 to read as follows:          Sec. 45.  BENEFICIAL OWNERSHIP; DISCLOSURE. A. This section   applies only to a person who is simultaneously:                (1)  a beneficial owner of a security of any class of   securities of a Texas-based public company; and                (2)  an activist investor with respect to the same   Texas-based public company that is beneficially owned by the   person.          B. Not later than the 10th day after the date the person is or   becomes both a beneficial owner and an activist investor of a   Texas-based public company or September 11, 2017, whichever is   later, the person shall file with the Securities Commissioner and   deliver, by United States certified mail, to the company's   headquarters and to the company's registered agent designated under   Chapter 5, Business Organizations Code, a certified statement that:                (1)  contains:                      (A)  the full name, identity, background,   residence, primary phone number, and citizenship of the person;                       (B)  the address of the principal place of   business of the person and the person's primary e-mail address;                      (C)  the nature of:                            (i)  the beneficial ownership of the person;   and                            (ii)  the beneficial ownership of all other   persons by whom or on whose behalf the beneficial ownership of the   person has been or is to be effected;                      (D)  all plans, intentions, motives, strategies,   and objectives of the person with respect to becoming an activist   investor and following through with:                            (i)  director, general partner, or other   similar governing person nominations; or                            (ii)  shareholder proposals or the   equivalent;                      (E)  all notes, e-mails, memoranda, letters,   communications, proposals, analyses, spreadsheets, presentations,   instruments, and any other documents, whether in written, digital,   or magnetic format, relating to the items listed in Paragraph D of   this subdivision; and                      (F)  all costs and expenses paid, incurred,   authorized, and anticipated by the person in connection with the   items listed in Paragraph D of this subdivision; and                (2)  is signed by the senior executive officer of the   person certifying that the information disclosed in Subdivision (1)   of this subsection is correct and complete.          C. The following persons shall disclose the information   required by Subsection B of this section in the same manner and to   the same extent as a person is required to disclose the information   under that subsection:                (1)  any beneficial owner of the person; and                (2)  all beneficial owners of the beneficial owner   described by Subdivision (1) of this subsection until the last   person named is a natural person.          D. All information disclosed under Subsection B of this   section is considered public information for all purposes.           E. This section shall be liberally construed in favor of   requiring the disclosure of information required by this section.          Sec. 46.  NONPROFIT CORPORATION THAT BENEFICIALLY OWNS   TEXAS-BASED PUBLIC COMPANY; ADDITIONAL DISCLOSURES. A. This   subsection applies only to a nonprofit corporation that is the last   named beneficial owner of a person required to make a disclosure   under Section 45B of this Act. A donor who makes financial   contributions to a nonprofit corporation shall disclose the   information required by Section 45B of this Act in the same manner   and to the same extent as a person required to disclose the   information under that section if the financial contributions are   in an amount equal to the lesser of:                (1)  one percent of the aggregate contributions made to   the corporation in the preceding 12 months; or                 (2)  $100,000.           B. A nonprofit corporation required to disclose information   under Section 45 of this Act shall disclose:                (1)  the corporation's annual financial statements for   each of the preceding three fiscal years;                (2)  the corporation's year-to-date financial   statements for the fiscal year in which the nonprofit corporation   becomes an activist investor;                (3)  a good faith estimate of the total amount the   nonprofit corporation expects to spend in the corporation's current   fiscal year to further the corporation's activist investor   activities directly and through other persons the corporation may   have an ownership interest in or with which the corporation is   affiliated; and                (4)  the total compensation paid by the nonprofit   corporation to its 10 most highly compensated employees for each of   the preceding five fiscal years.          C. A nonprofit corporation shall disclose the information   required by Subsection B of this section in the same manner and to   the same extent the corporation is required to disclose information   under Section 45 of this Act.          D. This section shall be liberally construed in favor of   requiring disclosure of the information required by this section.          Sec. 47.  CHANGE TO CERTAIN DISCLOSED INFORMATION;   AMENDMENT. If, during the time a person described by Section 45A of   this Act is an activist investor of the Texas-based public company,   any change occurs in the information contained in the certified   statement the person filed under Section 45 of this Act, the person   shall:                (1)  file an amendment to the certified statement with   the Securities Commissioner not later than the 10th day after the   date the change occurs; and                (2)  deliver, by United States certified mail, a   correct and complete copy of the amendment to the security issuer's   headquarters in this state.          Sec. 48.  ACTIONS TO AVOID MAKING CERTAIN REQUIRED   DISCLOSURES PROHIBITED. A. This section does not apply to a mutual   fund.          B. A person may not act at the direction of, for the benefit   of, or otherwise on behalf of another person with the intent or   effect of avoiding a disclosure required by Section 45 or 46 of   this Act.          C. If the board of directors or other governing authority of   a corporation, limited liability company, partnership, or other   Texas-based public company reasonably believes that one or more   persons are acting in concert with, at the direction of, or on   behalf of another person with the intent or effect of avoiding a   disclosure required by Section 45 or 46 of this Act, the governing   authority of the company shall notify the Securities Commissioner   of that conduct.           D. If the Securities Commissioner determines that a person   is violating Subsection B of this section, the Securities   Commissioner shall require the person to disclose the information   required by Section 45 of this Act.          Sec. 49.  DEFENSE TO DISCLOSURE REQUIREMENT; INJUNCTIVE   RELIEF. A person who in good faith believes the person has a valid   defense to a disclosure requirement of Section 45 or 46 of this Act   may bring a court action on an expedited basis to seek injunctive   relief.          Sec. 50.  CONFIDENTIALITY AGREEMENTS PROHIBITED. A person   who is required to disclose information under Section 45, 46, or 48   of this Act may not request or require that any person entitled to   receive the information:                (1)  sign a confidentiality agreement; or                (2)  otherwise treat the information as private or   confidential.          Sec. 51.  NOTICE TO CERTAIN INVESTORS OF ACTIVIST INVESTORS   OF TEXAS-BASED PUBLIC COMPANIES. A. This section applies only to   a person who has the capability to become an activist investor of a   Texas-based public company and who solicits or accepts money from   one or more investors.          B. Before accepting money from an investor and at least once   each calendar year, a person shall provide to the investor:                (1)  a written statement stating that the person may   become an activist investor of a Texas-based public company; and                (2)  a legible copy of the most recent version of this   section and Sections 4, 45, 46, 47, 48, 49, 50, 52, 53, and 54 of   this Act.          Sec. 52.  DISCLOSURES REQUIRED BY CERTAIN PROXY ADVISORY   FIRMS. A. This section applies to a proxy advisory firm that   publishes or otherwise provides an analysis or a recommendation to   one or more shareholders of a Texas-based public company   concerning:                (1)  a nominee to the governing authority or body of   another publicly traded entity, including the board of directors of   a corporation and the general partners of a partnership; or                (2)  a shareholder proposal submitted by an activist   investor.          B. At the same time a proxy advisory firm provides to the   shareholders of a Texas-based public company an analysis or   recommendation described by Subsection A of this section, the firm   shall file with the Securities Commissioner and deliver to the   company's headquarters and to the company's registered agent, in   the manner prescribed by Subsection C of this section:                (1)  all financial statements of the proxy advisory   firm for each of the preceding five years, including an audited   balance sheet, income statement, and cash flow statement; and                (2)  a written statement that:                      (A)  contains:                            (i)  the names of all beneficial owners of   the proxy advisory firm, until each beneficial owner named is a   natural person; and                            (ii)  all notes, e-mails, memoranda,   letters, communications, proposals, analyses, spreadsheets,   presentations, instruments, and any other documents, whether in   written, digital, or magnetic format, relating to the discussions   and deliberations that resulted in the proxy advisory firm's   analysis or recommendation regarding the activist investor's   governing authority nominee or shareholder proposal; and                      (B)  is signed by the senior executive officer of   the proxy advisory firm certifying that the information provided in   this subsection is correct and complete.          C. A notice to a Texas-based public company required under   Subsection B of this section must be delivered by:                (1)  United States certified mail; or                 (2)  a nationally recognized overnight courier service   with confirmation of receipt.          Sec. 53.  DISCLOSURE REQUIREMENTS APPLICABLE TO OTHER PROXY   ADVISORY FIRMS. If the Securities Commissioner determines that a   proxy advisory firm has lowered its rating of a Texas-based public   company as a result of the requirements of Sections 45, 46, 47, 48,   49, 50, 51, 52, 54, and 55 of this Act, the disclosure requirements   of Section 52 of this Act apply to the firm.          Sec. 54.  CRIMINAL PENALTY. A. A person commits an offense   if the person does not comply with the requirements of Sections 45,   46, 47, and 48 of this Act. An offense under this subsection is a   Class C misdemeanor.           B. Any criminal penalty under this section shall be imposed   against the senior executive officer of the person that did not   make the required disclosure, in the executive officer's personal   capacity.          C. This section may be enforced by the attorney general or by   the district attorney of the county in this state in which the   headquarters of the security's issuer is located.          Sec. 55.  PRIVATE CAUSE OF ACTION. A. This section applies   to a Texas-based public company entitled to receive a disclosure   under Sections 45, 46, 48, 52, and 53 of this Act.          B. A Texas-based public company or a person acting on behalf   of the company may bring an action, on an expedited basis, in a   court in this state against a person that does not comply with the   disclosures described by Subsection A of this section for:                (1)  injunctive relief; and                (2)  recovery of the company's reasonable attorney's   fees.           C. A civil penalty or remedy in addition to the injunctive   relief provided by Subsection B of this section may not be imposed   or awarded against a person for a violation that arises out of the   same conduct described by that subsection.          SECTION 5.  This Act takes effect September 1, 2017.