{"data":{"id":"us-ky/krs-78.790","jurisdiction":"us-ky","citation":"KRS 78.790","heading":"Board trustee of funds -- Investment committee -- Standards of conduct --","body":"Unitized managed custodial account -- Cap on amount of assets managed by\nany one investment manager -- Investment procurement policy -- Proxy voting\nguidelines.\n(1) (a) The board shall be the trustee of funds pertaining to the County Employees\nRetirement System created by KRS 78.510 to 78.852, and KRS 61.701, and\nshall have full and exclusive power to invest and reinvest such assets in\naccordance with federal law.\n(b) 1. The board shall establish an investment committee that shall include\nmembers of the board with investment experience, elected members, or\nother members as determined by the board chair, and may also include\nnonvoting members who have investment expertise.\n2. The investment committee shall have authority to implement the\ninvestment policies adopted by the board and act on behalf of the board\non all investment-related matters.\n(c) 1. For the purposes of this paragraph:\na. \"Solely in the interest of the me mbers and beneficiaries\" shall be\ndetermined using only pecuniary factors and shall not include any\npurpose to further a nonpecuniary interest;\nb. \"Pecuniary factor\" means a consideration having a direct and\nmaterial connection to the financial risk or fin ancial return of an\ninvestment;\nc. A \"material connection\" is established if there is a substantial\nlikelihood that a reasonable investor would consider it important in\ndetermining the financial risk or the financial return of an\ninvestment;\nd. \"Nonpecuniary interest\" includes but is not limited to an\nenvironmental, social, political, or ideological interest which does\nnot have a direct and material connection to the financial risk or\nfinancial return of an investment;\ne. \"Investment manager\" sha ll have the same definition attributed to\n\"investment adviser\" under the federal Investment Advisers Act of\n1940, 15 U.S.C. sec. 80b-2;\nf. \"Shareholder-sponsored proposal\" means a proposal by a\nshareholder included in the proxy statement of an issuer of\nsecurities pursuant to 17 C.F.R. sec. 240.14a-8;\ng. \"Economic analysis\" means a written analysis of the economic\nimpact of a shareholder -sponsored proposal, which shall include,\nat a minimum:\ni. The subject matter of the shareholder-sponsored proposal;\nii. Whether the board of directors of the issuer of securities\nopposes the shareholder -sponsored proposal and the stated\nreasons for the opposition;\niii. Whether the shareholder -sponsored proposal is consistent\nwith the investment policy of the retirement system;\niv. The economic benefits and costs of implementing the\nshareholder-sponsored proposal, as written, in the long and\nshort term;\nv. The quantifiable impact of the shareholder -sponsored\nproposal, as written, on the investment returns of the funds\nof the retirement system; and\nvi. An explanation of the modeling, procedures, and processes\nused to complete the economic analysis; and\nh. i. \"Proxy adviser\" means any person who is engaged in the\nbusiness of providing advice, research, analysis, ratings, or\nrecommendations specifically with respect to proxy voting\nand who has entered into an agreement or contracted with\nthe board of trustees of the retirement system to receive\ncompensation for those purposes.\nii. \"Proxy adviser\" does not include an investment mana ger as\ndefined in this subparagraph.\n2. A trustee, officer, employee, employee of the Kentucky Public Pensions\nAuthority, investment manager, or other fiduciary, or proxy adviser shall\ndischarge duties with respect to the system:\na. Solely in the interest of the members and beneficiaries;\nb. For the exclusive purpose of providing benefits to members and\nbeneficiaries and paying reasonable expenses of administering the\nsystem;\nc. With the care, skill, and caution under the circumstances then\nprevailing that a prudent person acting in a like capacity and\nfamiliar with those matters would use in the conduct of an activity\nof like character and purpose;\nd. Impartially, taking into account any differing interests of members\nand beneficiaries;\ne. Incurring any costs that are appropriate and reasonable; and\nf. In accordance with a good -faith interpretation of the federal, state,\nand common law governing the system and fiduciaries.\n3. Evidence that a fiduciary has considered or acted on a nonpecuniary\ninterest shall include but is not limited to:\na. Statements, explanations, reports, or correspondence;\nb. Communications with portfolio companies;\nc. Statements of principles or policies, whether made individually or\njointly;\nd. Votes of shares or proxies; or\ne. Coalitions, initiatives, agreements, or commitments to which the\nfiduciary is a participant, affiliate, or signatory.\n4. When exercising or recommending a vote on a shareholder -sponsored\nproposal, a proxy adviser that has entered into an agreement or\ncontracted with the board of trustees of the retirement system acts solely\nin the interest of the members and beneficiaries under this subsection if:\na. The proxy adviser's vote or recommendation is consistent with the\nrecommendation of the board of directors of the issuer of the\nshares, provided:\ni. The board of directors of the issuer of the shares is composed\nof a majority of independent directors; and\nii. The recommendation of the board of directors is not for the\npurpose of furthering a nonpecuniary interest; or\nb. The proxy adviser's vote or recommendation is inconsistent with\nthe recommendation of the board of directors of the issuer of the\nshares, p rovided the proxy adviser conducts and documents an\neconomic analysis demonstrating that the vote or recommendation\nis solely in the interest of the members and beneficiaries.\n(d) In addition to the standards of conduct prescribed by paragraph (c) of this\nsubsection:\n1. All internal investment staff of the Kentucky Public Pensions Authority,\nand investment consultants shall adhere to the Code of Ethics and\nStandards of Professional Conduct, and all board trustees shall adhere to\nthe Code of Conduct for Memb ers of a Pension Scheme Governing\nBody. All codes cited in this subparagraph are promulgated by the CFA\nInstitute;\n2. Investment managers shall comply with all applicable provisions of the\nfederal Investment Advisers Act of 1940, as amended, and the rules and\nregulations promulgated thereunder, and shall comply with all other\napplicable federal securities statutes and related rules and regulations\nthat apply to investment managers; and\n3. Proxy advisers and proxy voting services shall comply with all\napplicable provisions of the Investment Advisers Act of 1940, as\namended, and the rules and regulations promulgated thereunder, and\nshall comply with all other federal statutes and related rules and\nregulations that apply to proxy advisers and proxy voting services.\n(e) No contract or agreement, whether made in writing or not, shall in any\nmanner waive, restrict, or limit a fiduciary's liability as to any of the duties\nimposed by this section. Any agreement shall specify that it is made in the\nCommonwealth and governed by the laws of the Commonwealth.\n(2) The board, through adopted written policies, shall maintain ownership and control\nover its assets held in its unitized managed custodial account.\n(3) The board, in keeping with its responsibility as the trustee a nd wherever feasible,\nshall give priority to the investment of funds in obligations calculated to improve\nthe industrial development and enhance the economic welfare of the\nCommonwealth.\n(4) The contents of real estate appraisals, engineering or feasibilit y estimates, and\nevaluations made by or for the system relative to the acquisition or disposition of\nproperty, until such time as all of the property has been acquired or sold, shall be\nexcluded from the application of KRS 61.870 to 61.884 and shall be sub ject to\ninspection only upon order of a court of competent jurisdiction.\n(5) Based upon market value at the time of purchase, the board shall limit the amount\nof assets managed by any one (1) active or passive investment manager to fifteen\npercent (15%) of the assets in the pension and insurance funds.\n(6) All contracts for the investment or management of assets of the system shall not be\nsubject to KRS Chapters 45, 45A, 56, and 57. Instead, the board shall conduct the\nfollowing process to develop and adopt  an investment procurement policy with\nwhich all prospective contracts for the investment or management of assets of the\nsystem shall comply:\n(a) The board shall consult with the secretary of the Finance and Administration\nCabinet or his or her designee to  develop an investment procurement policy,\nwhich shall be written to meet best practices in investment management\nprocurement;\n(b) Thirty (30) days prior to adoption, the board shall tender the preliminary\ninvestment procurement policy to the secretary of the Finance and\nAdministration Cabinet or his or her designee for review and comment;\n(c) Upon receipt of comments from the secretary of the Finance and\nAdministration Cabinet or his or her designee, the board shall choose to adopt\nor not adopt any recommended changes;\n(d) Upon adoption, the board shall tender the final investment procurement policy\nto the secretary of the Finance and Administration Cabinet or his or her\ndesignee;\n(e) No later than thirty (30) days after receipt of the investment procuremen t\npolicy, the secretary or his or her designee shall certify whether the board's\ninvestment procurement policy meets or does not meet best practices for\ninvestment management procurement; and\n(f) Any amendments to the investment procurement policy shall ad here to the\nrequirements set forth by paragraphs (b) to (e) of this subsection.\n(7) (a) The board shall adopt written proxy voting guidelines, which are consistent\nwith the fiduciary duties and other requirements of this section.\n(b) The board shall not ad opt the recommendations of a proxy adviser or proxy\nvoting service and shall not allow such proxy adviser or proxy voting service\nto vote on behalf of the system, unless the proxy adviser or proxy voting\nservice acknowledges in writing and accepts under co ntract its duties under\nthis section and commits to follow the board -adopted proxy voting guidelines\nwhen voting the system's shares in order to comply with the board's fiduciary\nduties and other responsibilities under this section.\n(c) All shares held by or on behalf of the system, and which the system is entitled\nto vote under state, federal, or common laws, shall be voted according to the\nproxy voting guidelines adopted by the board and subject to the fiduciary\nduties and other requirements of this section by:\n1. The board, the investment committee of the board, or an employee or\nemployees of the Authority who are fiduciaries under subsection (1) of\nthis section and are appointed or otherwise authorized by the board; or\n2. A proxy adviser or proxy voting service that acknowledges in writing\nand accepts under contract its duties under this section and commits to\nfollow the board -adopted proxy voting guidelines when voting the\nsystem's shares in order to comply with the board' s fiduciary duties and\nother responsibilities under this section.\n(d) All proxy votes shall be reported at least quarterly to the board. For each vote,\nthe report shall provide:\n1. The vote caption;\n2. The date of the vote;\n3. The company's name;\n4. The vote cast for the system;\n5. The recommendation of the company's management; and\n6. If applicable, the recommendation of the proxy adviser or proxy voting\nservice.","path":["KRS Chapter 78"],"source_url":"https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=56403","current_through":"Includes enactments through the 2026 Regular Session","vintage":"09/05/2026","retrieved_at":"2026-09-05T20:49:39Z","sha256":"56fe7a0661719674271353adb97bb55d68736cd99a8b4adcfdf742d4027b0426","source_id":"us-ky","stale":false,"prev":"us-ky/krs-78.784","next":"us-ky/krs-78.800"},"notice":"GroundRules: Original legal text. Not legal advice."}