SB2337

Regular Session

Relating to the regulation of the provision of proxy advisory services.

CriticalImmediate action required

Medium Cost

Effective:2025-09-01

Enforcing Agencies

Office of the Attorney General (Intervention rights and receipt of notices) • Private Right of Action (Shareholders, Companies, Clients)

Compliance Analysis

Key implementation requirements and action items for compliance with this legislation

Implementation Timeline

Effective Date: September 1, 2025
Compliance Deadline: September 1, 2025 (No grace period; systems must be live).
Agency Rulemaking: No specific rulemaking is mandated for the Office of the Attorney General (OAG). This creates a "regulation by litigation" environment where the specific standards for "quantifiable economic impact" will likely be defined by the first lawsuits filed after the effective date.

Immediate Action Plan

1. Public Companies: Establish a formal intake process within the General Counsel’s office to receive and review proxy advisor notices starting September 2025.
2. Proxy Advisors: Begin developing and back-testing economic models now to ensure you can produce the required "Written Economic Analysis" for the 2026 proxy season.
3. Asset Managers: Audit your current proxy voting guidelines. If they align with the "solely financial interest" definition, confirm your advisor is not misclassifying your votes.
4. Legal Counsel: Prepare templates for Temporary Restraining Orders (TROs) based on DTPA violations to enjoin proxy advisors from distributing non-compliant advice during critical voting windows.

Operational Changes Required

Contracts

Asset Managers/Institutional Investors: Review Investment Management Agreements (IMAs). If your fiduciary mandate requires maximizing financial returns, ensure your proxy advisor is not triggering "nonfinancial" disclosures, as this creates a paper trail of potential fiduciary breach.
Proxy Advisors: Client service agreements must be amended to include disclaimers regarding "conflicting advice" (Sec. 6A.102) and to clarify that providing the mandatory statutory notices to issuers does not constitute a breach of client confidentiality.

Hiring/Training

Proxy Advisors: You must staff economists capable of producing the "Written Economic Analysis" required by Sec. 6A.101(c). General governance analysts are insufficient; the law requires "quantifiable" projections on investment returns.
Public Companies (Issuers): Investor Relations and Legal teams must be trained to monitor a designated channel for incoming notices from advisors. You must be prepared to file for injunctive relief within 7 days of receiving a non-compliant recommendation.

Reporting & Record-Keeping

Simultaneous Notice Protocol: Advisors must implement automated systems to send a copy of any nonfinancial disclosure to the Subject Company at the exact moment it is sent to the client.
The "Economic Analysis" File: For every recommendation supporting a shareholder proposal against the Board, advisors must retain a written calculation of short- and long-term costs and the projected financial impact.
AG Notifications: Advisors must file notices with the Attorney General regarding conflicting advice and retain proof of these filings.

Fees & Costs

Insurance Premiums: Proxy advisors operating in Texas should anticipate immediate increases in Errors & Omissions (E&O) premiums due to the new DTPA liability exposure.
Litigation Budget: Public companies should budget for potential legal costs associated with seeking declaratory judgments against advisors to block non-compliant proxy votes.

Strategic Ambiguities & Considerations

"Quantifiable Impact" Methodology: The law requires a "projected quantifiable impact on investment returns." It is unclear what methodology the courts will accept for quantifying intangible ESG factors. Advisors risk litigation if their math is deemed speculative.
The "Partly Based On" Threshold: Sec. 6A.101(a)(1) triggers disclosure if advice is based "wholly or partly" on nonfinancial factors. The OAG has not defined where "Governance" (financial) ends and "Social Policy" (nonfinancial) begins. Advisors will likely over-disclose to avoid liability, potentially flooding issuers with notices.

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Legislative Timeline

This bill's path through the Texas Legislature

TopicsBusiness & Commerce Business & Commerce--general Financial Financial--general Civil Remedies & Liabilities Financial Advisors Business & Commerce--trade Practices Human Relations

Official Analysis

View HRO Analysis View All Bill Documents

BILL ANALYSIS

Senate Research Center	S.B. 2337
	By: Hughes
	State Affairs
	4/22/2025
	As Filed

AUTHOR'S / SPONSOR'S STATEMENT OF INTENT

Proxy advisory firms are hired primarily by institutional investors to conduct research about corporate issuers and to make proxy voting recommendations. They do not themselves owe fiduciary duties to shareholders, but they assist institutional investors (who do owe such fiduciary duties) in making voting decisions on the shareholders' behalf and provide services to facilitate the voting process. The two largest proxy advisory firms hold a dominant market share of approximately 97 percent and are owned by foreign (German and Canadian) entities.

Proxy advisory firms (1) provide voting recommendations and other services that often prioritize non-financial factors, such as ESG or DEI-based standards and (2) provide irreconcilably conflicting recommendations (e.g., "yes" and "no") to different clients on the same company or shareholder proposals, both of which necessarily cannot be in the financial interest of the shareholders. The firms justify these practices on the basis that they do not owe fiduciary duties to the shareholders, while ignoring the reality that their clients do (and that they, in turn, owe fiduciary duties to such clients who rely on them).

Proxy advisory firms also issue corporate governance ratings for public companies, use those corporate governance ratings in formulating their voting recommendations for or against a company, and provide consulting services to companies to assist in raising their corporate governance ratings. Conflicts of interest abound at every step.

What does S.B. 2337 do?

Helps prevent fraud and deceit by requiring proxy advisory firms to make certain disclosures when their proxy advisory services are based on non-financial factors and/or are in conflict with other proxy advisory services relating to the same company or shareholder proposal.
Required disclosures include to the recipient client(s), to the subject company, to the attorney general, and to the general public.
Allows for enforcement of its provisions by reference to existing DTPA and Declaratory Judgment Act procedures and remedies.

As proposed, S.B. 2337 amends current law relating to the provision of proxy advisory services in connection with certain entities domiciled in this state.

RULEMAKING AUTHORITY

This bill does not expressly grant any additional rulemaking authority to a state officer, institution, or agency.

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Title 2, Chapter 21, Business Organizations Code, by adding Subchapter T, as follows:

SUBCHAPTER T. PROXY ADVISORS

Sec. 21.1001. DEFINITIONS. Defines "company," "company proposal," "investment manager," "proxy advisor," "proxy advisory services," "proxy proposal," and "shareholder."

Sec. 21.1002. OBLIGATION TO DISCHARGE DUTY BASED SOLELY ON CERTAIN FINANCIAL INTERESTS. (a) Requires a proxy advisor, except as otherwise provided in this section, to 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) Provides that, 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 certain principles and factors.

(c) Requires the proxy advisory, for any proxy advisory services that are not provided solely in the best financial interest of the shareholders, to take certain actions.

Sec. 21.1003. VOTING RECOMMENDATIONS; CONFLICTS. (a) Requires that, 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 be considered not to be in the best financial interest of the shareholders.

(b) Requires the proxy advisor, for any proxy advisory services described in Subsection (a), in addition to complying with the requirements of Section 21.1002(c), to immediately take certain actions.

Sec. 21.1004. VIOLATIONS; DECLARATORY JUDGMENT. Authorizes an affected party, including the company that is the subject of the proxy advisory services, any shareholders of the company, or other interested parties, to bring an action under Chapter 37 (Declaratory Judgments), Civil Practice and Remedies Code, to determine whether a proxy advisor has committed a violation of this subchapter.

SECTION 2. Makes application of this Act prospective.

SECTION 3. Effective date: upon passage or September 1, 2025.

Senate Authors

Sen. Bryan HughesRepublican · Primary Author

House Sponsors

Rep. Jeff LeachRepublican · Primary Sponsor

Cosponsors (1)

Phil King (R)

Bill Text(with markup)

S.B. No. 2337

View bill text in multiple formats on Texas Legislature website

Fiscal NoteView Original

	AN ACT
	relating to the regulation of the provision of proxy advisory
	services.
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
	SECTION 1. The legislature finds that:
	(1) when shareholders in this state hire professionals
	to provide advice in the exercise of their rights as shareholders,
	the shareholders expect that service to be performed in their
	financial interest as shareholders, and professionals who are hired
	by shareholders to provide that service and who deviate from that
	expectation must clearly disclose that fact;
	(2) there is a particular need for disclosures for
	proxy voting advice because that advice is often:
	(A) provided for hundreds or thousands of
	shareholder votes each year; and
	(B) based on lengthy policies that contain
	general statements but do not explain whether or how the policy
	provisions will maximize returns for investors for any particular
	company or shareholder vote;
	(3) proxy advisors:
	(A) have recommended votes based on
	environmental, social, or governance (ESG) investing, diversity,
	equity, or inclusion (DEI), and social credit or sustainability
	scores; and
	(B) have not conducted financial analyses before
	making the recommendations described by Paragraph (A) of this
	subdivision despite having proxy voting policies claiming that the
	purpose of the recommendation is maximizing and protecting
	shareholder value;
	(4) requiring proxy advisors to provide clear, factual
	disclosures when the advisors recommend casting a vote for
	nonfinancial reasons or provide conflicting advice to multiple
	clients who seek to maximize financial returns is necessary in
	order to prevent fraudulent or deceptive acts and practices in this
	state; and
	(5) a company that is the subject of a shareholder
	proposal may have information regarding whether the proposal is in
	the shareholder's financial interests or regarding the costs of the
	proposal, and notice would allow the company to provide relevant
	information to shareholders that may prevent fraudulent or
	deceptive practices associated with proxy advisors making
	recommendations for nonfinancial reasons.
	SECTION 2. Title 1, Business Organizations Code, is amended
	by adding Chapter 6A to read as follows:
	CHAPTER 6A. PROXY ADVISORY SERVICES
	SUBCHAPTER A. GENERAL PROVISIONS
	Sec. 6A.001. DEFINITIONS. In this chapter:
	(1) "Company" means a publicly traded, for-profit
	corporation, limited liability company, partnership, or other
	business entity that is organized or created under the laws of this
	state, has its principal place of business in this state, or is a
	foreign entity that has made a company proposal to become a domestic
	entity, whether by merger, conversion, or otherwise.
	(2) "Company proposal" means a proposal made by a
	company that is included in the company's proxy statement,
	including a proposal regarding director nominations or elections,
	executive compensation, corporate transactions and structure,
	auditor selection, or similar measures.
	(3) "Proxy advisor" means a person who, for
	compensation, provides a proxy advisory service to shareholders of
	a company or to other persons with authority to vote on behalf of
	shareholders of a company.
	(4) "Proxy advisory service" means any of the
	following services that are provided in connection with or in
	relation to a company:
	(A) advice or a recommendation on how to vote on a
	proxy proposal or company proposal;
	(B) proxy statement research and analysis
	regarding a proxy proposal or company proposal;
	(C) a rating or research regarding corporate
	governance; or
	(D) development of proxy voting recommendations
	or policies, including establishing default recommendations or
	policies.
	(5) "Proxy proposal" means a proposal made by a
	company's shareholder that is included in the company's proxy
	statement, including the nomination of a director.
	(6) "Shareholder" includes a shareholder, unitholder,
	limited partner, or other equity owner of a company.
	SUBCHAPTER B. DISCLOSURE REQUIREMENTS FOR PROXY ADVISORS
	Sec. 6A.101. DISCLOSURE OF NONFINANCIAL PROXY VOTING
	SERVICES TO PREVENT FRAUD OR DECEIT. (a) For purposes of this
	section, a proxy advisory service is not provided solely in the
	financial interest of the shareholders of a company if the service:
	(1) is wholly or partly based on, or otherwise takes
	into account, one or more nonfinancial factors, including a
	commitment, initiative, policy, target, or subjective or
	value-based standard based on:
	(A) an environmental, social, or governance
	(ESG) goal, factor, or investment principle;
	(B) diversity, equity, or inclusion (DEI),
	including any attempt to provide preferential treatment based on
	characteristics protected under Section 21.051, Labor Code;
	(C) a social credit or sustainability factor or
	score; or
	(D) membership in or commitment to an
	organization or group that wholly or partly bases its evaluation or
	assessment of a company's value over any period on nonfinancial
	factors;
	(2) involves providing a voting recommendation with
	respect to a shareholder-sponsored proposal that:
	(A) is inconsistent with the voting
	recommendation of the board of directors or a board committee
	composed of a majority of independent directors; and
	(B) subject to Subsection (c), does not include a
	written economic analysis of the financial impact on shareholders
	of the proposal;
	(3) is not based solely on financial factors and
	subordinates the financial interests of shareholders to other
	objectives, including sacrificing investment returns or
	undertaking additional investment risk to promote nonfinancial
	factors; or
	(4) advises against a company proposal to elect a
	governing person unless the proxy advisor affirmatively states that
	the proxy advisory service solely considered the financial interest
	of the shareholders in making such advice.
	(b) If a proxy advisor provides a proxy advisory service
	that is not provided solely in the financial interest of the
	shareholders of a company, the advisor shall:
	(1) include a disclosure to each shareholder or entity
	or other person acting on behalf of a shareholder receiving the
	service that:
	(A) conspicuously states that the service is not
	being provided solely in the financial interest of the company's
	shareholders because it is based wholly or partly on one or more
	nonfinancial factors; and
	(B) explains, with particularity, the basis of
	the proxy advisor's advice concerning each recommendation and that
	the advice subordinates the financial interests of shareholders to
	other objectives, including sacrificing investment returns or
	undertaking additional investment risk to promote one or more
	nonfinancial factors;
	(2) immediately provide a copy of the notice under
	Subdivision (1) to the company that is the subject of the service;
	and
	(3) publicly and conspicuously disclose on the home or
	front page of the proxy advisor's publicly accessible Internet
	website that the advisor's proxy advisory services include advice
	and recommendations that are not based solely on the financial
	interest of shareholders.
	(c) A written economic analysis provided under Subsection
	(a)(2)(B) must include:
	(1) the short-term and long-term economic benefits and
	costs of implementing any shareholder-sponsored proposal, as
	written;
	(2) an analysis of whether the proposal is consistent
	with the investment objectives and policies of the client;
	(3) the projected quantifiable impact of the proposal,
	if adopted, on the investment returns of the client; and
	(4) an explanation of the methods and processes used
	to prepare the economic analysis.
	Sec. 6A.102. DISCLOSURES IF PROVIDING CONFLICTING VOTER
	ADVICE OR RECOMMENDATIONS. (a) For purposes of this section,
	"materially different," with respect to advice or a recommendation
	on how to vote on a company proposal or proxy proposal, means
	simultaneously advising or recommending that:
	(1) one or more clients vote for the proposal and one
	or more clients vote against the proposal;
	(2) one or more clients vote for a nominee for a
	company's governing authority and one or more clients vote against
	or abstain from voting for the same nominee; or
	(3) one or more clients vote for or against the
	proposal in opposition to the recommendation of the company's
	management.
	(b) If a proxy advisor provides to different clients who
	have not expressly requested services for a nonfinancial purpose
	either advice or a recommendation on how to vote on a proxy or
	company proposal that is materially different, the advisor shall:
	(1) if applicable, comply with disclosure
	requirements for nonfinancial proxy advisory services under
	Section 6A.101(b);
	(2) notify the following persons, in writing or by
	electronic means, of the conflicting advice or recommendation:
	(A) each shareholder receiving the advice or
	recommendation;
	(B) each entity or other person receiving the
	advice or recommendation on behalf of a shareholder;
	(C) the company that is the subject of the
	company or proxy proposal; and
	(D) the attorney general; and
	(3) disclose which of the conflicting advice or
	recommendations is:
	(A) provided solely in the financial interest of
	the shareholders; and
	(B) supported by any specific financial analysis
	performed or relied on by the advisor.
	SUBCHAPTER C. ENFORCEMENT
	Sec. 6A.201. DECEPTIVE TRADE PRACTICE. A violation of this
	chapter is a deceptive trade practice under Subchapter E, Chapter
	17, Business & Commerce Code, and is actionable under Section 17.47
	of that code.
	Sec. 6A.202. DECLARATORY JUDGMENT OR INJUNCTIVE RELIEF.
	(a) In this section, "affected party" includes:
	(1) the recipient of proxy advisory services provided
	by the proxy advisor;
	(2) the company that is the subject of the proxy
	advisory services; or
	(3) any shareholder of the company described by
	Subdivision (2).
	(b) An affected party may bring an action seeking a
	declaratory judgment or injunctive relief under Chapter 37, Civil
	Practice and Remedies Code, against a proxy advisor who violates
	this chapter. Not later than the seventh day after the date on
	which an action is brought under this subsection, the plaintiff
	shall provide notice to the attorney general, who may intervene in
	the action.
	SECTION 3. The changes in law made by this Act apply only to
	a proxy advisory service provided on or after the effective date of
	this Act.
	SECTION 4. This Act takes effect July 1, 2025, 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 effect on that
	date, this Act takes effect September 1, 2025.

LEGISLATIVE BUDGET BOARD
Austin, Texas

FISCAL NOTE, 89TH LEGISLATIVE REGULAR SESSION


April 23, 2025

TO:	Honorable Bryan Hughes, Chair, Senate Committee on State Affairs

FROM:	Jerry McGinty, Director, Legislative Budget Board

IN RE:	SB2337 by Hughes (Relating to the provision of proxy advisory services in connection with certain entities domiciled in this state.), As Introduced

No significant fiscal implication to the State is anticipated.

The bill would amend the Business Organizations Code as it relates to the provision of proxy advisory services in connection with certain entities domiciled in this state. It is assumed any costs associated with implementing the provisions of the bill could be absorbed using existing resources.

Local Government Impact

No significant fiscal implication to units of local government is anticipated.

Source Agencies:

302 Office of the Attorney General, 312 Securities Board, 323 Teacher Retirement System, 326 Texas Emergency Services Retirement System, 327 Employees Retirement System, 338 Pension Review Board, 451 Department of Banking, 706 Texas Permanent School Fund Corporation

LBB Staff:

JMc, WP, JPO, RStu

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Frequently Asked Questions

Common questions about SB2337

What does Texas SB2337 do?

SB2337 fundamentally alters the liability landscape for proxy advisory firms by classifying undisclosed nonfinancial (ESG/DEI) voting recommendations as Deceptive Trade Practices. This law grants Texas-based public companies and shareholders a statutory cause of action to sue advisors for treble damages if voting advice contradicts Board recommendations without a rigorous, quantifiable economic analysis. Implementation Timeline Effective Date: September 1, 2025 Compliance Deadline: September 1, 2025 (No grace period; systems must be live).

Who authored SB2337?

SB2337 was authored by Texas Senator Bryan Hughes during the Regular Session.

When was SB2337 signed into law?

SB2337 was signed into law by Governor Greg Abbott on June 20, 2025.

Which agencies enforce SB2337?

SB2337 is enforced by Office of the Attorney General (Intervention rights and receipt of notices) and Private Right of Action (Shareholders, Companies, Clients).

How urgent is compliance with SB2337?

The compliance urgency for SB2337 is rated as "critical". Businesses and organizations should review the requirements and timeline to ensure timely compliance.

What is the cost impact of SB2337?

The cost impact of SB2337 is estimated as "medium". This may vary based on industry and implementation requirements.

What topics does SB2337 address?

SB2337 addresses topics including business & commerce, business & commerce--general, financial, financial--general and civil remedies & liabilities.

Legislative data provided by LegiScanLast updated: November 25, 2025

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