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Signed Into Law
Signed June 20, 2025Effective 2025-09-01
SB2337

Regular Session

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

Government Affairs & Regulatory Compliance Analysis

SB2337: Government Affairs Overview

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.

Sen. Bryan Hughes·Senate Bill·Regular Session

Critical
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)

Business Impact

Who SB2337 Affects

This legislation has regulatory implications for the following Texas businesses and organizations:

Regulatory Priority: critical

Significant regulatory changes (effective 2025-09-01). Review with your legal and compliance teams to understand implications.

🏭

Manufacturing & Business

Affected business types:

  • Manufacturers
  • Industrial facilities
  • Supply chain companies
  • Logistics providers
View all manufacturing & business legislation
🏦

Banking & Finance

Affected business types:

  • Banks
  • Credit unions
  • Financial services firms
  • Insurance companies
View all banking & finance legislation

Estimated Cost Impact

mediumModerate costs expected for implementation.

Enforcing Agencies

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SB2337
Critical
Relating to the regulation of the provision of proxy advisory services.
Critical Compliance Urgency
Requires immediate attention
Cost Impact
Medium
Effective
2025-09-01
Enforcing Agencies
Office of the Attorney GeneralPrivate Right of Action
Primary Author: Sen. Bryan Hughes
89th Texas Legislature
jdkey.com
01

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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Information presented is for general knowledge only and is provided without warranty, express or implied. Consult qualified government affairs professionals and legal counsel before making compliance decisions.

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Legislative Timeline

This bill's path through the Texas Legislature

Filed
Mar 12, 2025
Passed Senate
May 8, 2025
Passed House
May 28, 2025
Signed
Jun 20, 2025
Effective
Sep 1, 2025
TopicsBusiness & CommerceBusiness & Commerce--generalFinancialFinancial--generalCivil Remedies & LiabilitiesFinancial AdvisorsBusiness & Commerce--trade PracticesHuman Relations
03

Senate Authors

Sen. Bryan HughesRepublican · Primary Author

House Sponsors

Rep. Jeff LeachRepublican · Primary Sponsor
Cosponsors (1)

Bill Text(with markup)

View bill text in multiple formats on Texas Legislature website

Fiscal NoteView Original

Related Legislation

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More from Sen. Bryan Hughes

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Related by Topic

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Quick Reference

Frequently Asked Questions

Common questions about SB2337

Q

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.

Q

Who authored SB2337?

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

Q

When was SB2337 signed into law?

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

Q

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).

Q

How significant are the changes in SB2337?

The regulatory priority for SB2337 is rated as "critical". Businesses and organizations should review the legislation to understand potential impacts.

Q

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.

Q

What topics does SB2337 address?

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

Q

What are the key dates for SB2337?

Key dates for SB2337: Effective date is 2025-09-01. Consult with legal counsel regarding applicability.

Q

What are the penalties under SB2337?

SB2337 establishes the following penalties: civil penalty of Damages, court costs, and attorney's fees (DTPA remedies) for Violation of Chapter 6A is classified as a Deceptive Trade Practice under Bus. & Com. Code Chapter 17.; civil penalty of Injunctive Relief / Declaratory Judgment for Failure to provide required disclosures regarding nonfinancial factors or conflicting advice.. Consult with legal counsel for specific applicability to your situation.

Q

Which Texas businesses are affected by SB2337?

SB2337 primarily affects Texas businesses and commercial enterprises. These businesses should review the legislation with their legal and compliance teams to understand potential impacts.

Need Strategic Guidance on This Legislation?

JD Key Consulting is an Austin, Texas-based government affairs firm led by James Dickey, former Chairman of the Republican Party of Texas. We specialize in Texas regulatory compliance and legislative strategy for data centers, energy, banking, and manufacturing.

Legislative data provided by LegiScanLast updated: January 11, 2026