The bill, introduced by Paul H.B. No. 4807, seeks to enhance the fiduciary responsibilities of governing bodies of public retirement systems in Texas, along with the investment managers and proxy advisors acting on their behalf. It introduces definitions for "financial factor," "investment manager," and "proxy advisor," establishing that investment decisions must be made solely based on financial interests. The bill mandates that these entities act in the financial interest of participants and beneficiaries, focusing on risk management and ethical standards, while explicitly prohibiting the use of system assets for social, political, or ideological purposes. Additionally, it sets forth requirements for contracts with investment managers and proxy advisors, ensuring that only financial factors are considered in decision-making and mandates annual reporting on proxy voting activities.

Moreover, the bill amends existing laws to enhance transparency and accountability, requiring investment managers to report the net value of managed assets and associated fees, which the State Pension Review Board must make publicly accessible. It allows public retirement systems to pursue legal action against investment managers or proxy advisors for breaches of contract, with provisions for recovering court costs and attorney's fees. The bill clarifies that compliance with certain requirements is not obligatory if it conflicts with fiduciary responsibilities, necessitating notification to the State Pension Review Board, which will post such determinations online. The changes will apply only to contracts entered into after the bill's effective date of September 1, 2025.

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