,,ii #aahth ,,congress #ast ,session ,s4 #bbhb ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,july #ab1 #bjbc,mr4 ,cotton 7for himself1 ,mr4 ,braun1 ,mr4 ,budd1 ,mr4 ,risch1 ,mrs4 ,blackburn1 ,mr4 ,cramer1 and ,mr4 ,scott of ,florida7 introduced the following bill2 which was read twice and referred to the ,committee on ,banking1 ,housing1 and ,urban ,affairs ,a ,,bill ,to amend the ,investment ,advisers ,act of #aidj and the ,employee ,retirement ,income ,security ,act of #aigd to specify requirements concerning the consideration of pecuniary and non-pecuniary factors1 and for other purposes4 #a4 ,short title ,this ,act may be cited as the ,ensuring ,sound ,guidance ,act4 #b4 ,definitions ,in this ,act3 7#a7 ,commission ,the term ,commission means the ,securities and ,exchange ,commission4 7#b7 ,municipal securities ,the term municipal securities has the meaning given the term in section #c7;a7 of the ,securities ,exchange ,act of #aicd 7#ae ,u4,s4,c4 #gh;c7a774 #c4 ,investment ,advisors ,act of #aidj amendment 7a7 ,in general ,section #baa7;g7 of the ,investment ,advisers ,act of #aidj 7#ae ,u4,s4,c4 #hj;b-#aa7;g77 is amended-- 7#a7 by redesignating paragraph 7#b7 as paragraph 7#c72 and 7#b7 by inserting after paragraph 7#a7 the following3 7#b7 ,best interest based on pecuniary factors 7,a7 ,definition ,in this paragraph1 the term pecuniary factor has the meaning given the term in paragraph 7#c7 of section #djd7;a7 of the ,employment ,retirement ,income ,security ,act of #aigd 7#bi ,u4,s4,c4 #aajd7;a774 7,b7 ,determination ,for purposes of paragraph 7#a71 the best interest of a customer shall be determined using pecuniary factors1 which may not be subordinated to or limited by non-pecuniary factors1 unless the customer provides informed consent1 in writing1 that such non-pecuniary factors be so considered4 7,c7 ,disclosure of pecuniary factors ,if a customer provides a broker1 dealer1 or investment adviser with the informed consent to consider non-pecuniary factors described in subparagraph 7,b71 the broker1 dealer1 or investment adviser shall also-- 7i7 disclose the expected pecuniary effects to the customer over a time period selected by the customer and not to exceed #c years2 and 7ii7 at the end of the time period described in clause 7i71 disclose1 by comparison to a reasonably comparable index or basket of securities selected by the customer1 the actual pecuniary effects of that time period1 including all fees1 costs1 and other expenses incurred to so consider non-pecuniary factors4 4 7b7 ,rulemaking ,not later than #a year after the date of enactment of this ,act1 the ,commission shall revise or issue such rules as may be necessary to implement the amendment made by subsection 7a74 7c7 ,effective date ,the amendment made by subsection 7a7 shall apply to actions taken by a broker1 dealer1 or investment adviser on or after the date that is #a year after the date of enactment of this ,act4 #d4 ,employee ,retirement ,income ,security ,act of #aigd amendment 7a7 ,in general ,section #djd7;a7 of the ,employee ,retirement ,income ,security ,act of #aigd 7#bi ,u4,s4,c4 #aajd7;a77 is amended by adding at the end the following3 7#c7 ,interest based on pecuniary factors 7,a7 ,in general ,for purposes of paragraph 7#a71 a fiduciary of a plan shall be considered to act solely in the interest of the participants and beneficiaries of the plan with respect to an investment or investment course of action only if the fiduciary's action with respect to such investment or investment course of action is based1 except as provided in subparagraph 7,b71 only on pecuniary factors4 ,the weight given to any such pecuniary factors by a fiduciary shall appropriately reflect a prudent assessment of the impact of such factor on the risk and return of the investment or investment course of action4 ,the duties under paragraph 7#a7 shall include the duty to not subordinate the interests of the participants and beneficiaries in retirement income or financial benefits under a plan to other objectives and the duty to not sacrifice investment return or take on additional investment risk to promote non-pecuniary benefits or goals4 7,b7 ,use of non-pecuniary factors for investment alternatives ,notwithstanding paragraph 7,a71 if a fiduciary is unable to distinguish between or among investment alternatives or investment courses of action on the basis of pecuniary factors alone1 the fiduciary may use non-pecuniary factors as the deciding factor in the selection or retention of an investment if the fiduciary documents-- 7i7 why pecuniary factors were not sufficient to select or retain a plan investment or investment course of action2 7ii7 how the selected investment compares to the alternative investments with regard to the composition of the portfolio with regard to diversification1 the liquidity and current return of the portfolio relative to the anticipated cash flow requirements of the plan1 and the projected return of the portfolio relative to the funding objectives of the plan2 and 7iii7 how the selected non-pecuniary factor is consistent with the interests of the participants and beneficiaries in their retirement income or financial benefits under the plan4 7,c7 ,investment alternatives for participant-directed individual account plans ,the consideration1 selection1 or retention by a fiduciary of an investment option for a pension plan described in subsection 7c77#a77;,a7 that promotes1 seeks1 or supports a non-pecuniary benefit or goal shall not constitute a breach of fiduciary duties under paragraph 7#a7 if-- 7i7 the fiduciary satisfies the requirements of subparagraph 7,a7 and paragraph 7#a7 in selecting1 considering1 or retaining any such investment option2 and 7ii7 in the case of such an investment option in which the investment objectives or goals or principal investment strategy of the investment option include1 consider1 or indicate the use of a non-pecuniary factor1 such investment option is not selected or retained as1 or included as a component of1 a default investment under subsection 7c77#e7 7or any other default investment alternative74 7,d7 ,pecuniary factor defined ,for the purposes of this paragraph1 the term pecuniary factor means a factor that a fiduciary prudently determines is expected to have a material effect on the risk or return of an investment based on appropriate investment horizons consistent with the plan's investment objectives and the funding policy established pursuant to section #djb7;b77#a74 4 7b7 ,effective date ,the amendments made by this section shall apply to actions taken by a fiduciary on or after the date that is #ab months after the date of enactment of this ,act4 #e4 ,study of ,state and local pension plans 7a7 ,study ,the ,comptroller ,general of the ,united ,states shall conduct a study on the potential impact of underfunded ,state and local pension plans on the ,federal ,government1 including-- 7#a7 the extent to which such pension plans subordinate the pecuniary interests of participants and beneficiaries to environmental1 social1 governance1 or other objectives2 and 7#b7 legislative and administrative actions that1 if implemented at the ,federal level1 would prevent such pension plans from subordinating the interests of participants and beneficiaries to environmental1 social1 or governance objectives4 7b7 ,report ,not later than #ab months after the date of enactment of this ,act1 the ,comptroller ,general submit to ,congress a report containing the results of the study4 #f4 ,study on climate change and other environmental disclosures in municipal bond market 7a7 ,in general ,the ,commission shall solicit public comment and thereafter conduct a study to determine the extent to which issuers of municipal securities make disclosures to investors regarding climate change and other environmental matters 7referred to in this section as covered disclosures74 7b7 ,contents ,the study under subsection 7a7 shall consider and analyze1 among other things-- 7#a7 the frequency of covered disclosures2 7#b7 whether covered disclosures made by issuers of municipal securities in connection with offerings of securities align with covered disclosures made by issuers of municipal securities in other contexts or to other audiences other than investors2 7#c7 any voluntary or mandatory disclosure standards observed by issuers of municipal securities in the course of making covered disclosures2 and 7#d7 the degree to which investors consider covered disclosures in connection with making an investment decision4 7c7 ,report 7#a7 ,in general ,not later than #a year after the date of enactment of this ,act1 the ,commission shall submit to the ,committee on ,banking1 ,housing1 and ,urban ,affairs of the ,senate and the ,committee on ,financial ,services of the ,house of ,representatives a report on the study required under this section4 7#b7 ,contents ,the report required under paragraph 7#a7 shall include-- 7,a7 a detailed discussion of-- 7i7 the financial risks to investors from investments in municipal securities2 and 7ii7 whether the risks described in clause 7i7 are being adequately disclosed2 and 7,b7 a discussion of regulatory or legislative steps that are recommended1 or that may be necessary1 to address any concerns identified in the study required under this section4 #g4 ,study on solicitation of municipal securities business 7a7 ,definition ,in this section1 the term covered rules means-- 7#a7 ,rule ,g-#ch of the ,municipal ,securities ,rulemaking ,board2 and 7#b7 section #bge4bjf7d7-e of title #ag1 ,code of ,federal ,regulations1 or any successor regulation4 7b7 ,study ,the ,commission shall solicit public comment and thereafter conduct a study to determine the effectiveness of the covered rules in preventing the payment of funds to elected officials or candidates for elected office in exchange for the receipt of government business in connection with the offer or sale of municipal securities4 7c7 ,contents ,the study under subsection 7b7 shall consider and analyze1 among other things-- 7#a7 whether the covered rules have had their intended effects and any unintended adverse effects2 7#b7 the frequency and scope of enforcement actions undertaken under the covered rules2 7#c7 the degree to which persons subject to the covered rules have put in place policies and procedures intended to ensure compliance with the covered rules2 7#d7 the degree to which ,state and ,federal regulations1 other than the covered rules1 impact the solicitation of municipal securities business2 and 7#e7 the degree to which persons subject to the covered rules are disadvantaged from participating in the political process1 both as a general matter and relative to persons that solicit or receive government business or government licenses1 permits1 and approvals other than in connection with the offer or sale of municipal securities4 7d7 ,report 7#a7 ,in general ,not later than #a year after the date of enactment of this ,act1 the ,commission shall submit to the ,committee on ,banking1 ,housing1 and ,urban ,affairs of the ,senate and the ,committee on ,financial ,services of the ,house of ,representatives a report on the study required under this section4 7#b7 ,contents ,the report required under paragraph 7#a7 shall include-- 7,a7 a discussion of the extent to which persons affiliated with small businesses1 and persons affiliated with minority- and women-opened businesses1 have been affected by the covered rules2 and 7,b7 a discussion of regulatory or legislative steps that are recommended1 or that may be necessary1 to address any concerns identified in the study required under this section4