SB667

The definitions are narrower than “any company doing business in China.” The Chinese-affiliated definition requires a publicly traded entity and either both the specified China/Hong Kong location and publicly confirmed government/party control, or the specified government-agency identification concerning China’s intelligence law. The location branch excepts a “U.S. subsidiary” using the particular federal definition: that federal glossary entry is expressly labeled “as applied to encryption items” and concerns foreign branches of U.S. companies and foreign entities satisfying specified U.S. ownership or management/control tests. It is not simply any company with a U.S. office. The restricted-entity definition also uses federal entity lists for national-security, human-rights or unfair-trade restrictions; its specifically enumerated BIS-list and Defense-list clauses are joined by “and.” This explanation does not identify any company as currently listed. Definitions, 809A.001; Incorporated U.S.-subsidiary definition.

The comptroller must maintain the restricted list, update it at least annually but not more often than quarterly, and publish/file it within 30 days after first providing or updating it. A requested written verification not provided before day 61 triggers a statutory presumption. The comptroller may rely first on a federal determination, then an entity’s response, without further investigation. Covered funds must identify their direct and indirect holdings to the comptroller within 30 days of receiving the list and send affected entities written status/divestment warnings. Sections 809A.006 and .051–.053.

For required divestments, at least half of the covered publicly traded securities must ordinarily be removed within 180 days after the restricted entity receives its notice, and all within 360 days. Good-faith fiduciary discretion may postpone the halfway step subject to the final deadline; other delays require the specified loss/benchmark justification, supporting numerical estimates and six-month report updates. These are notice-based deadlines, not one year from the act’s effective date. Divestment schedule, 809A.054.

Indirect holdings in managed investment funds or private-equity funds are exempt from mandatory divestment. Funds must ask managers to remove restricted entities or offer a similar alternative. Switching to a qualifying replacement fund is permitted, not mandatory, and if undertaken must meet the prudent-timing and 450-day conditions. A separate exception permits stopping divestment only to the necessary extent on clear and convincing evidence of the specified asset-value loss or benchmark deviation, with a written justification and semiannual updates. New purchases are prohibited except under that exception. More broadly, a requirement does not apply when the fund determines it conflicts with fiduciary responsibilities or other legal investment duties. Sections 809A.005 and .055–.057.

Annual public reports are due January 5, and the attorney general may enforce the chapter. The act also provides protection from conflicting statutory/common-law duties for compliance actions, state indemnification and defense for covered actors, and a broadly worded bar on private suits connected with the chapter, with costs and attorney fees for prohibited suits. These describe the statute’s terms, not a court ruling resolving every potential constitutional challenge. Sections 809A.002–.004 and .101–.102.

The Senate substitute narrowed “Chinese-affiliated” to publicly traded entities, made the location and publicly confirmed control tests cumulative rather than separate alternatives, expressly included Hong Kong, and added the Permanent School Fund to the five retirement systems. The Senate-passed, House committee and final operative texts match that substitute. The official index lists no floor amendments. Introduced bill; Senate substitute; Text versions; Amendment index.

Compare the published text versions in the official text index. A change is not attributed to a specific amendment here without a verified record.

The intended benefit is reducing these public portfolios’ exposure to entities meeting the statutory China-related restrictions. The process creates screening, notice, reporting and possible trading work; the fiduciary and loss exceptions seek to protect investment interests. It does not establish a dollar benefit, guarantee higher returns or itself change pension benefit formulas. Final requirements and exceptions.

The latest fiscal note, May 8 for the engrossed bill, anticipates no significant state fiscal impact and assumes comptroller and attorney-general costs fit existing resources. But TRS could not determine the effect on investment returns, and TMRS likewise could not determine the return impact despite a small affected share of its portfolio. ERS, the Permanent School Fund and TCDRS reported no significant fiscal impact. The actuarial statements likewise say the effect is likely none or cannot be determined; their “within one year” shorthand should not replace the final law’s notice-based deadlines and exceptions. Latest fiscal note; Introduced estimate; Substitute estimate; Substitute actuarial statement.