New year, new duties? A Missouri senator has introduced legislation that would modify the duties of fiduciaries serving public employee retirement systems.
Sen. Jill Carter (R-Jasper and Newton) on Jan. 4 introduced the bill, SB 436. It provides that an investment fiduciary would discharge his or her duties in the interests of the participants in a public employee retirement system and their beneficiaries exclusively to (1) provide financial benefits and (2) pay reasonable expenses for administering the system.
The bill further provides that:
- Duties of fiduciaries serving public employee retirement systems would be the same as a member of the board of trustees of a system.
- When discharging fiduciary duties, an investment fiduciary would take into account only financial factors. The term "financial" is defined in the act as a material effect on the financial risk or the financial return of an investment, but does not include any action taken, or factor considered, by an investment fiduciary with a purpose to further social, political, or ideological interests.
- All shares held by or on behalf of a public employee retirement system, the participants, and their beneficiaries would be voted solely in the financial interest of participants in the system and their beneficiaries.
- Unless no economically practicable alternative is available, the following actions would not be allowed, unless there is a practice and commitment to follow guidelines that match the system's obligations to act solely upon financial factors:
1. the board of a system granting proxy voting authority to persons not on the board;
2. the system entrusting assets to investment fiduciaries; and
3. the system adopting a practice of following the recommendations of a proxy advisor or other service provider.
- All proxy votes would be tabulated and provided in an annual report containing certain information to the board of a system and the report would be posted on the system's website.
The bill provides that a company that serves as an investment fiduciary that violates the provisions of the bill would be obligated to pay damages in an amount equal to three times all funds the system paid to the company.
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