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Signed Into Law
Signed June 20, 2025Effective 2025-09-01
SB667

Regular Session

Relating to prohibiting certain state governmental entities from investing in certain Chinese-affiliated entities.

Government Affairs & Regulatory Compliance Analysis

SB667: Government Affairs Overview

Effective September 1, 2025, SB667 mandates that Texas state retirement systems and the Permanent School Fund divest from "Chinese-affiliated entities. " While the statutory directive targets state agencies, the operational burden falls immediately on asset managers, who must restructure portfolios to retain state capital, and publicly traded companies, who face automatic "Restricted Entity" classification if they fail to respond to Comptroller inquiries within 60 days.

Sen. Bryan Hughes·Senate Bill·Regular Session

Moderate
Low Cost
Effective:2025-09-01
Enforcing Agencies

Texas Attorney General (Enforcement of chapter compliance) • Texas Comptroller of Public Accounts (List maintenance)

Business Impact

Who SB667 Affects

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

Regulatory Priority: moderate

Notable regulatory updates (effective 2025-09-01). Consider how these changes may affect your operations.

🏭

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

Key Operational Considerations

  • 1Investment Management Agreements (IMAs): Existing IMAs with Texas state clients (TRS, ERS, TMRS) require amendment to include clauses mandating adherence to Chapter 809A.
  • 2Vendor Agreements: Review upstream ownership of vendors; contracts should indemnify your firm if a vendor is designated a "Restricted Entity," causing operational disruption.

Estimated Cost Impact

lowMinimal cost impact anticipated.

Enforcing Agencies

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SB667
Moderate
Relating to prohibiting certain state governmental entities from investing in certain Chinese-affiliated entities.
Moderate Compliance Urgency
Requires near-term attention
Cost Impact
Low
Effective
2025-09-01
Enforcing Agencies
Texas Attorney GeneralTexas Comptroller of Public Acco...
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:
  • Suspected Entities: Must respond to Comptroller verification requests within 60 days of receipt to avoid automatic restricted status.
  • Asset Managers: Divestment clocks (180 days for 50%; 360 days for 100%) trigger individually upon receipt of notice from the state governmental entity.
  • Annual Reporting: State entities must report divestment progress to the Legislature/AG by January 5 annually; managers must provide data prior to this date.
  • Agency Rulemaking: The Comptroller must publish the initial "Restricted Entities List" shortly after the effective date. The period between September 1, 2025, and the publication of this list is a regulatory gray zone; however, entities already on federal exclusion lists (Dept of Commerce/DoD) should presume immediate non-compliance.

Immediate Action Plan

  • Immediate Audit: Cross-reference your current portfolio or corporate ownership against the U.S. Dept of Commerce Entity List and DoD Section 1260H list; these are the likely baselines for the Comptroller.
  • Update Address: Ensure the Texas Comptroller has the correct registered agent address for your entity to prevent missing the 60-day verification notice.
  • Prepare Data: If you manage state funds, prepare the "Fiduciary Exception" analysis models now so they can be deployed immediately if a holding is flagged.
  • Segregate Assets: Asset managers should evaluate the feasibility of creating "Texas-compliant" share classes for commingled funds.

Operational Changes Required

Contracts

  • Investment Management Agreements (IMAs): Existing IMAs with Texas state clients (TRS, ERS, TMRS) require amendment to include clauses mandating adherence to Chapter 809A.
  • Side Letters: Private equity and commingled fund managers must issue side letters confirming Texas capital will not be deployed into restricted entities, or establish "clean" parallel funds to segregate Texas assets.
  • Vendor Agreements: Review upstream ownership of vendors; contracts should indemnify your firm if a vendor is designated a "Restricted Entity," causing operational disruption.

Hiring/Training

  • Compliance Screening: Compliance officers must integrate the Texas Comptroller’s specific list into screening software. Reliance on standard OFAC lists is insufficient as this law covers broader "affiliation" criteria.
  • Inquiry Response Protocol: Designate a specific legal team member to handle correspondence from the Texas Comptroller. Missing the 60-day response window results in an automatic, presumptive "Restricted" designation that is difficult to reverse.

Reporting & Record-Keeping

  • Verification Logs: Maintain permanent records of all corporate structure documents used to deny "Chinese-affiliated" status.
  • Fiduciary Exception Evidence: Asset managers advising state clients *not* to divest must provide objective, numerical evidence proving "loss of hypothetical value." General market sentiment is legally insufficient for the required state reports.

Fees & Costs

  • Litigation Costs: While third parties are barred from suing for compliance actions, companies contesting a "Restricted" designation must bear their own legal costs.
  • Liquidity Costs: Forced divestment within the 360-day window may necessitate asset liquidation at unfavorable prices; these costs are generally not reimbursable by the state.

Strategic Ambiguities & Considerations

  • "Controlled By" Threshold: The statute defines a Chinese-affiliated entity as one "controlled by" the PRC but does not define a specific ownership percentage (e.g., 10% vs. 51%). The Comptroller has broad discretion here; expect the initial list to be expansive.
  • Federal List Lag: The law references federal lists (Dept of Commerce Entity List). It is unclear if a new federal addition triggers an immediate Texas ban or if the ban applies only after the Comptroller updates the state list.
  • Indirect Holdings Loophole: The law allows state entities to remain in commingled funds if divestment creates a value loss, provided they switch to a "similar fund" within 450 days if one becomes available. The definition of "similar fund" (fees, strategy, liquidity) will likely be a point of contention.

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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
Dec 19, 2024
Passed Senate
Apr 10, 2025
Passed House
May 28, 2025
Signed
Jun 20, 2025
Effective
Sep 1, 2025
TopicsPeople's Republic of ChinaBusiness & CommerceBusiness & Commerce--generalIntergovernmental RelationsRetirement SystemsRetirement Systems--generalInternational RelationsComptroller of Public AccountsCivil Remedies & LiabilitiesFinancialFinancial--generalRetirement Systems--county & DistrictRetirement Systems--state EmployeesRetirement Systems--teachersMunicipal Retirement System, TexasEmployees Retirement System of TexasRetirement Systems--municipalRetirement Systems--police & FirefightersState Agencies, Boards & Commissions
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Senate Authors

Sen. Bryan HughesRepublican · Primary Author
Coauthors (1)

House Sponsor

Rep. Jeff BarryRepublican · Primary Sponsor

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

View more People's Republic of China legislation
Quick Reference

Frequently Asked Questions

Common questions about SB667

Q

What does Texas SB667 do?

Effective September 1, 2025, SB667 mandates that Texas state retirement systems and the Permanent School Fund divest from "Chinese-affiliated entities. " While the statutory directive targets state agencies, the operational burden falls immediately on asset managers, who must restructure portfolios to retain state capital, and publicly traded companies, who face automatic "Restricted Entity" classification if they fail to respond to Comptroller inquiries within 60 days.

Q

Who authored SB667?

SB667 was authored by Texas Senator Bryan Hughes during the Regular Session.

Q

When was SB667 signed into law?

SB667 was signed into law by Governor Greg Abbott on June 20, 2025.

Q

Which agencies enforce SB667?

SB667 is enforced by Texas Attorney General (Enforcement of chapter compliance) and Texas Comptroller of Public Accounts (List maintenance).

Q

How significant are the changes in SB667?

The regulatory priority for SB667 is rated as "moderate". Businesses and organizations should review the legislation to understand potential impacts.

Q

What is the cost impact of SB667?

The cost impact of SB667 is estimated as "low". This may vary based on industry and implementation requirements.

Q

What topics does SB667 address?

SB667 addresses topics including people's republic of china, business & commerce, business & commerce--general, intergovernmental relations and retirement systems.

Q

What are the key dates for SB667?

Key dates for SB667: Effective date is 2025-09-01. Rulemaking: Update and file the list of restricted Chinese-affiliated entities with the Legislature and Attorney General. (Annually (minimum)). Consult with legal counsel regarding applicability.

Q

What are the penalties under SB667?

SB667 establishes the following penalties: civil penalty of Defendant's attorney's fees and costs for Filing a private lawsuit against a state governmental entity, employee, or contractor regarding actions taken to comply with this chapter (Private Cause of Action is prohibited).; administrative penalty of Presumption of 'Restricted Entity' status for Failure by a suspected restricted entity to provide written verification to the Comptroller within 60 days of a request.. Consult with legal counsel for specific applicability to your situation.

Q

Which Texas businesses are affected by SB667?

SB667 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