S.B. No. 312 seeks to enhance the fiduciary responsibilities of governing bodies of public retirement systems in Texas, along with the investment managers and proxy advisors they employ. The bill introduces new definitions for "financial factor," "investment manager," and "proxy advisor," emphasizing that investment decisions must be based solely on financial interests and factors that materially impact risk and returns. It prohibits the use of system assets for social, political, or ideological purposes, and mandates that contracts with investment managers and proxy advisors prioritize financial factors. Additionally, the bill requires public retirement systems to disclose their proxy voting practices and report on these activities annually, thereby promoting transparency and accountability.

The legislation also amends existing laws to enhance reporting requirements for investment managers, mandating detailed reports on managed assets, fees, and expenses, which the State Pension Review Board must make publicly accessible. Furthermore, it allows public retirement systems to seek legal remedies against investment managers or proxy advisors for contract breaches, including the recovery of court costs and attorney's fees. The bill provides exemptions for public retirement systems from certain requirements if compliance conflicts with their fiduciary duties, necessitating notification to the State Pension Review Board, which will post such determinations online. These changes will take effect for contracts entered into after September 1, 2025, ensuring that existing contracts remain under prior regulations.

Statutes affected:
Introduced: Government Code 802.001, Government Code 802.002, Government Code 802.203 (Government Code 802)