Arizona 2025 Regular Session

Arizona Senate Bill SB1592 Compare Versions

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1	1	REFERENCE TITLE: ASRS; investments; fiduciaries; duties; limitations State of Arizona Senate Fifty-seventh Legislature First Regular Session 2025 SB 1592 Introduced by Senator Rogers An Act amending section 38-718, Arizona Revised Statutes; amending title 38, chapter 5, article 2, Arizona Revised Statutes, by adding section 38-718.01; relating to the Arizona state retirement system. (TEXT OF BILL BEGINS ON NEXT PAGE)
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11	11	REFERENCE TITLE: ASRS; investments; fiduciaries; duties; limitations
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16	16	REFERENCE TITLE: ASRS; investments; fiduciaries; duties; limitations
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66	66	An Act
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70	70	amending section 38-718, Arizona Revised Statutes; amending title 38, chapter 5, article 2, Arizona Revised Statutes, by adding section 38-718.01; relating to the Arizona state retirement system.
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80	80	Be it enacted by the Legislature of the State of Arizona: Section 1. Section 38-718, Arizona Revised Statutes, is amended to read: START_STATUTE38-718. Investment managers; general powers and duties; investment of monies; limitations A. A financial institution serving as an investment manager does not have a conflict of interest because it is also a depository in which ASRS monies are deposited. B. The board shall appoint and may remove multiple investment managers to invest and reinvest the assets of ASRS. The board may authorize the director to retain and manage staff to make investments as an investment manager. C. An investment manager shall be qualified to make the type of investments for which the investment manager is appointed. D. The board shall: 1. Prescribe investment goals and policies that are consistent with the purposes of this article and the limitations and standard of care prescribed in this section and section 38-718.01. 2. Allocate assets and use investment strategies to meet the investment goals and policies ASRS prescribes. 3. Adopt specific directives for the guidance of investment managers. 4. Review the performance of each investment manager at least annually or at the request of a board member. 5. Prescribe investment diversification programs and assign investment manager responsibilities regarding those programs as it deems appropriate to achieve its investment goals, objectives and policies. E. An investment manager shall discharge the duties of the position with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with the same matters would use in the conduct of an enterprise of a like character and with like aims as that of ASRS. F. An investment manager may invest and reinvest in the name of ASRS all ASRS monies assigned to the investment manager and shall purchase and sell in the name of ASRS any of the securities and investments held by ASRS under this article. An investment manager may hold, purchase, sell, assign, loan, borrow, transfer and dispose of any of the securities and investments in which any of its account monies are invested, subject to the specific directives determined by ASRS. An investment manager shall redeposit the proceeds of sales, maturities and calls in the ASRS depository. G. The director may enter into security loan agreements with one or more security lending entities. H. No Not more than eighty per cent percent of ASRS assets may be invested at any given time in equities, measured at market value. I. No Not more than forty per cent percent of ASRS assets may be invested in non-United States public investments, measured at market value. J. No Not more than sixty per cent percent of ASRS assets may be invested internally, measured at market value. K. No Not more than five per cent percent of ASRS assets may be invested in securities issued by any one institution, agency or corporation, other than securities issued as direct obligations of or fully guaranteed by the United States government or mortgage backed securities and agency debentures issued by federal agencies, measured at market value. L. No Not more than ten per cent percent of ASRS assets may be invested in bonds or other evidences of indebtedness of those multinational development banks in which the United States is a member nation, including the international bank for reconstruction and development, the African development bank, the Asian development bank and the inter-American development bank, measured at market value. M. If a limitation in subsection H, I, J, K or L of this section is reached, ASRS is not required to sell assets, but shall not make any further investments of that type until the limit is no longer exceeded. N. Notwithstanding any other law, an investment manager is not required to invest in any type of investment that is intended to fund economic development projects, public works or social programs but may consider such economically targeted investments pursuant to its fiduciary responsibility. O. For the purpose of exercising the investment responsibilities prescribed in this section, the board may enter into contracts to receive market data and other market information from securities, commodities, options and monetary exchanges. These contracts may be interpreted and enforced under the laws of a jurisdiction other than this state and are not subject to section 35-214 or 38-511 or title 41, chapter 23. P. Proprietary commercial information that is provided to the board, director, investment manager, employees of the director and attorneys of the board or the director relating to investments in which an investment manager has invested or has considered for investment is confidential and not a public record if the information is information that customarily would not be released to the public by the person or entity from whom the information was obtained. END_STATUTE Sec. 2. Title 38, chapter 5, article 2, Arizona Revised Statutes, is amended by adding section 38-718.01, to read: START_STATUTE38-718.01. ASRS; fiduciaries; duties; voting of ownership interests; investment managers; list; posting; definitions A. A fiduciary shall discharge The fiduciary's duties with respect to a plan solely in the interest of the participants and beneficiaries of the plan for the exclusive purpose of providing pecuniary benefits to the participants and their beneficiaries, defraying reasonable expenses of administering the plan and earning a return on the investment. B. A fiduciary shall take into account only pecuniary factors when evaluating an investment or discharging the fiduciary's duties with respect to a plan. A fiduciary may not take into account any nonpecuniary or other factors when evaluating an investment. C. Only ASRS may vote the shares held by the plan. ASRS may not grant proxy voting authority to any person unless that person follows guidelines consistent with ASRS's obligation to act based only on pecuniary factors. D. The shares held directly or indirectly by ASRS shall be voted only in the pecuniary interest of the plan. The shares may not be voted to further nonpecuniary, environmental, social, political, ideological or other benefits or goals. A plan may not entrust any plan assets to a fiduciary that: 1. has a practice of engaging with, or COMMITS to engaging with, a company based on nonpecuniary factors. 2. has a practice of voting shares based on nonpecuniary factors. E. A fiduciary may not adopt a practice of following the recommendations of a proxy advisory firm or other service provider unless The proxy advisory firm's or the service provider's proxy voting guidelines are consistent with the fiduciary's obligation to act based only on pecuniary factors. F. ASRS shall post a current list of ASRS investments and investment managers by name on ASRS's pUBLICLY accessible website. ASRS shall update Any changes to the list within a reasonable period of time. G. For the purposes of this section: 1. "Fiduciary" means a person who does any of the following: (a) exercises any discretionary authority or discretionary control with respect to A plan or exercises any authority or control managing or disposing of the plan's assets. (b) renders investment advice for a fee or other compensation, directly or indirectly, with respect to any monies or other property of A plan or has the authority or responsibility to render investment advice. (c) has any discretionary authority or discretionary responsibility in administering A plan. 2. "Nonpecuniary factor" includes Any factor that is intended to further or is branded, advertised or otherwise publicly described by The offeror or FIDUCIARY as furthering any of the following: (a) international, domestic or industry agreements relating to environmental or social goals. (b) corporate governance structures based on social characteristics. (c) social or environmental goals. 3. "Pecuniary factor" means a factor that has a material effect on the financial risk or the financial return of an investment based on appropriate investment horizons consistent with A plan's investment objectives and funding policy. 4. "Plan" means any plan, fund or program that is established or maintained by ASRS to do any of the following: (a) Provide retirement income or other retirement benefits to employees or former employees. (b) defer income by employees for A period of time extending to the termination of covered employment or beyond. (c) invest ASRS assets for any purpose prescribed by this article or article 2.1 of this chapter. END_STATUTE
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82	82	Be it enacted by the Legislature of the State of Arizona:
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84	84	Section 1. Section 38-718, Arizona Revised Statutes, is amended to read:
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86	86	START_STATUTE38-718. Investment managers; general powers and duties; investment of monies; limitations
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88	88	A. A financial institution serving as an investment manager does not have a conflict of interest because it is also a depository in which ASRS monies are deposited.
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90	90	B. The board shall appoint and may remove multiple investment managers to invest and reinvest the assets of ASRS. The board may authorize the director to retain and manage staff to make investments as an investment manager.
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92	92	C. An investment manager shall be qualified to make the type of investments for which the investment manager is appointed.
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94	94	D. The board shall:
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96	96	1. Prescribe investment goals and policies that are consistent with the purposes of this article and the limitations and standard of care prescribed in this section and section 38-718.01.
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98	98	2. Allocate assets and use investment strategies to meet the investment goals and policies ASRS prescribes.
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100	100	3. Adopt specific directives for the guidance of investment managers.
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102	102	4. Review the performance of each investment manager at least annually or at the request of a board member.
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104	104	5. Prescribe investment diversification programs and assign investment manager responsibilities regarding those programs as it deems appropriate to achieve its investment goals, objectives and policies.
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106	106	E. An investment manager shall discharge the duties of the position with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with the same matters would use in the conduct of an enterprise of a like character and with like aims as that of ASRS.
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108	108	F. An investment manager may invest and reinvest in the name of ASRS all ASRS monies assigned to the investment manager and shall purchase and sell in the name of ASRS any of the securities and investments held by ASRS under this article. An investment manager may hold, purchase, sell, assign, loan, borrow, transfer and dispose of any of the securities and investments in which any of its account monies are invested, subject to the specific directives determined by ASRS. An investment manager shall redeposit the proceeds of sales, maturities and calls in the ASRS depository.
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110	110	G. The director may enter into security loan agreements with one or more security lending entities.
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112	112	H. No Not more than eighty per cent percent of ASRS assets may be invested at any given time in equities, measured at market value.
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114	114	I. No Not more than forty per cent percent of ASRS assets may be invested in non-United States public investments, measured at market value.
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116	116	J. No Not more than sixty per cent percent of ASRS assets may be invested internally, measured at market value.
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118	118	K. No Not more than five per cent percent of ASRS assets may be invested in securities issued by any one institution, agency or corporation, other than securities issued as direct obligations of or fully guaranteed by the United States government or mortgage backed securities and agency debentures issued by federal agencies, measured at market value.
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120	120	L. No Not more than ten per cent percent of ASRS assets may be invested in bonds or other evidences of indebtedness of those multinational development banks in which the United States is a member nation, including the international bank for reconstruction and development, the African development bank, the Asian development bank and the inter-American development bank, measured at market value.
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122	122	M. If a limitation in subsection H, I, J, K or L of this section is reached, ASRS is not required to sell assets, but shall not make any further investments of that type until the limit is no longer exceeded.
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124	124	N. Notwithstanding any other law, an investment manager is not required to invest in any type of investment that is intended to fund economic development projects, public works or social programs but may consider such economically targeted investments pursuant to its fiduciary responsibility.
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126	126	O. For the purpose of exercising the investment responsibilities prescribed in this section, the board may enter into contracts to receive market data and other market information from securities, commodities, options and monetary exchanges. These contracts may be interpreted and enforced under the laws of a jurisdiction other than this state and are not subject to section 35-214 or 38-511 or title 41, chapter 23.
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128	128	P. Proprietary commercial information that is provided to the board, director, investment manager, employees of the director and attorneys of the board or the director relating to investments in which an investment manager has invested or has considered for investment is confidential and not a public record if the information is information that customarily would not be released to the public by the person or entity from whom the information was obtained. END_STATUTE
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130	130	Sec. 2. Title 38, chapter 5, article 2, Arizona Revised Statutes, is amended by adding section 38-718.01, to read:
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132	132	START_STATUTE38-718.01. ASRS; fiduciaries; duties; voting of ownership interests; investment managers; list; posting; definitions
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134	134	A. A fiduciary shall discharge The fiduciary's duties with respect to a plan solely in the interest of the participants and beneficiaries of the plan for the exclusive purpose of providing pecuniary benefits to the participants and their beneficiaries, defraying reasonable expenses of administering the plan and earning a return on the investment.
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136	136	B. A fiduciary shall take into account only pecuniary factors when evaluating an investment or discharging the fiduciary's duties with respect to a plan. A fiduciary may not take into account any nonpecuniary or other factors when evaluating an investment.
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138	138	C. Only ASRS may vote the shares held by the plan. ASRS may not grant proxy voting authority to any person unless that person follows guidelines consistent with ASRS's obligation to act based only on pecuniary factors.
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140	140	D. The shares held directly or indirectly by ASRS shall be voted only in the pecuniary interest of the plan. The shares may not be voted to further nonpecuniary, environmental, social, political, ideological or other benefits or goals. A plan may not entrust any plan assets to a fiduciary that:
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142	142	1. has a practice of engaging with, or COMMITS to engaging with, a company based on nonpecuniary factors.
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144	144	2. has a practice of voting shares based on nonpecuniary factors.
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146	146	E. A fiduciary may not adopt a practice of following the recommendations of a proxy advisory firm or other service provider unless The proxy advisory firm's or the service provider's proxy voting guidelines are consistent with the fiduciary's obligation to act based only on pecuniary factors.
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148	148	F. ASRS shall post a current list of ASRS investments and investment managers by name on ASRS's pUBLICLY accessible website. ASRS shall update Any changes to the list within a reasonable period of time.
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150	150	G. For the purposes of this section:
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152	152	1. "Fiduciary" means a person who does any of the following:
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154	154	(a) exercises any discretionary authority or discretionary control with respect to A plan or exercises any authority or control managing or disposing of the plan's assets.
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156	156	(b) renders investment advice for a fee or other compensation, directly or indirectly, with respect to any monies or other property of A plan or has the authority or responsibility to render investment advice.
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158	158	(c) has any discretionary authority or discretionary responsibility in administering A plan.
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160	160	2. "Nonpecuniary factor" includes Any factor that is intended to further or is branded, advertised or otherwise publicly described by The offeror or FIDUCIARY as furthering any of the following:
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162	162	(a) international, domestic or industry agreements relating to environmental or social goals.
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164	164	(b) corporate governance structures based on social characteristics.
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166	166	(c) social or environmental goals.
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168	168	3. "Pecuniary factor" means a factor that has a material effect on the financial risk or the financial return of an investment based on appropriate investment horizons consistent with A plan's investment objectives and funding policy.
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170	170	4. "Plan" means any plan, fund or program that is established or maintained by ASRS to do any of the following:
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172	172	(a) Provide retirement income or other retirement benefits to employees or former employees.
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174	174	(b) defer income by employees for A period of time extending to the termination of covered employment or beyond.
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176	176	(c) invest ASRS assets for any purpose prescribed by this article or article 2.1 of this chapter. END_STATUTE