Fiduciary Duty Act

This law relates to strengthening fiduciary duties for public retirement systems. It also adds protections to ensure that the assets of public retirement systems are not used to push harmful policies on agriculture producers or to invest in companies who are headquartered in countries that have been declared foreign adversaries.

Summary: AN ACT relating to public retirement systems.

SECTION 1. Definitions

As used in this Act:
  1. “Agriculture producer” means a person engaged in the production, development, or harvesting of goods derived from plants or animals; such production includes, but is not limited to, the production of livestock or dairy products, the growing of crops, animal husbandry, and the production or harvesting of aquatic products.
  2. “Fiduciary” means any person who exercises any discretionary authority or control over the management of a public retirement system, or the management or disposition of its assets; renders investment advice for a fee or other compensation, direct or indirect, or has any authority or responsibility to do so; or has any discretionary authority or responsibility in the administration of the system.1
  3. “Pecuniary factor” means a factor that a prudent person in a like capacity would reasonably believe has a material effect or impact on the financial risk or return on an investment, including factors material to assessing an investment manager’s operational capability, based on an appropriate investment horizon consistent with a retirement system’s investment objectives and funding policy. The term excludes “nonpecuniary factors” which is any factor or consideration that is collateral to the financial risk and return of the investment and includes, but is not limited to, the promotion, furtherance, or achievement of environmental, social, or political goals, objectives, or outcomes.
    2

SECTION 2. General Fiduciary Duty

  1. With regard to the investments and assets of a public retirement system, each fiduciary:
    1. Shall discharge its duties:
      1. Solely in the interests of plan participants and their beneficiaries;
      2. For the exclusive purpose of providing benefits to plan participants and their beneficiaries; and
      3. In accordance with this Act first and with the laws, resolutions, ordinances, and plan documents appurtenant to such retirement system second.3

SECTION 3. Rules for Investing

  1. In investing and managing the assets of a public retirement system, a fiduciary shall::
    1. act in keeping with its fiduciary duties,4 as specified in Section 2;
    2. make a reasonable effort to verify facts relevant to the investment and management of system assets;5 and
    3. only consider pecuniary factors in making an investment decision, exercising rights appurtenant to investment, or allocating capital to an investment strategy.6

SECTION 4. Restrictions on use of system assets

  1. No public retirement system assets may be used in either corporate engagement or shareholder voting:
    1. to pressure or penalize an agriculture producer, or its customers or suppliers, regarding the producer’s greenhouse gas emissions, use of fossil-fuel derived fertilizer, or use of fossil-fuel powered machinery; or
    2. to require any disclosure, beyond what is required by controlling law, regarding the same.
  2. No public retirement system assets may be invested in a company whose headquarters or primary place of business is located within a foreign adversary of the United States, as listed in section 791.4 of title 15, Code of Federal Regulations, or any successor provision.

SECTION 5. Enforcement

The Attorney General may bring an action in a court of competent jurisdiction to enforce this Act.7

SECTION 6. Severability

Each section, subsection, paragraph, and portion of each paragraph of this Act is severable. If one or more sections, subsections, paragraphs, or portions of one or more paragraphs of this Act are held invalid on their face or as applied to particular facts, then the remaining portions and applications of this Act shall be given full effect to the greatest extent practicable.

1 SS.D. Codified Laws § 3-12C-101(45)
2 S.C. Code Ann. § 9-16-10(10)
3 Ga. Code Ann. § 47-20-88(b)(1)
4 Based on S.C. Code Ann. § 9-16-30(G)(1)
5 S.C. Code Ann. § 9-16-50(A)(3)
6 Based on S.C. Code Ann. § 9-16-50(A)(5)
7 < S.C. Code Ann. § 9-16-110