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Staie ~ Jennessee
PUBLIC CHAPTER NO. 986
SENATE BILL NO. 2641
By Roberts
Substituted for: House Bill No. 2476
By Lankford, Cochran
AN ACT to amend Tennessee Code Annotated, Title 9, Chapter 4, relative to investments.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF TENNESSEE:
SECTION 1. Tennessee Code Annotated, Section 9-4-1401, is amended by adding the
following as new, appropriately designated subdivisions:
( ) "Company" means a sole proprietorship, organization, association, corporation,
partnership, joint venture, limited partnership, limited liability partnership, limited liability
company, or another entity or business association, including all wholly owned subsidiaries,
majority-owned subsidiaries, and parent companies, or an affiliate of such entity or business
association that exists for the purpose of making a profit;
( ) "Direct holdings" means, with respect to a company, all public securities with a
number assigned by the Committee On Uniform Securities Identification Procedures (CUSIP)
or the International Securities Identification Numbers Organization (ISIN) that are held
directly by a pension plan, other than indirect holdings, or in an account or fund in which the
pension plan owns all shares or interests;
( ) "Fiduciary" means:
(A) A person, with respect to a pension plan, who:
(i) Exercises discretionary authority or discretionary control with
respect to the management of a pension plan or exercises authority or control
with respect to the acquisition, management, or disposition of the pension
plan's assets; or
(ii) Has discretionary authority or discretionary responsibility in the
administration of a pension plan, including, but not limited to, a plan
administrator or the governing body of a political subdivision; or
(B) A person, with respect to a pension plan, who renders investment advice
for a fee or other compensation, directly or indirectly, with respect to moneys or other
assets of the pension plan or who has the authority or responsibility to do so;
( ) "Financial analysis" means a written analysis demonstrating the financial factors or
reasons that a proxy advisory firm considered in evaluating whether to recommend an
affirmative vote on a shareholder proposal. This written analysis must include, at a minimum:
(A) The subject matter of the proposal;
(B) An evaluation of the proxy advisory firm's stated reasons for support or
opposition to the proposal;
(C) An evaluation of whether the proposal is consistent with the investment
objectives and risk management profile of the pension plan in which the participants
and beneficiaries are invested;
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(D) An evaluation of the economic benefits and costs of implementing the
proposal, as written, over a time period that is consistent with the investment
objectives and risk management profile of the pension plan;
(E) The quantifiable impact of the proposal, as written, on the investment
returns of the participants and beneficiaries of the pension plan; and
(F) An explanation of the modeling, procedures, and processes used to
complete the analysis;
( ) "Indirect holdings" means, with respect to a company, all securities of that
company that are held in a commingled fund or other collective investment, including, but not
limited to, private equity funds, strategic lending funds, mutual funds, and exchange-traded
funds, in which a pension plan owns shares or interests, together with other investors not
subject to this part;
( ) "Pension plan" means a defined benefit pension plan established and maintained
by a political subdivision for its employees that is subject to the Public Employee Defined
Benefit Financial Security Act of 2014, compiled in title 9, chapter 3, part 5;
( ) "Person" means an individual, firm, trust, partnership, corporation, joint venture,
association, or such other similar entity;
() "Political subdivision" means a local governmental entity, including, but not limited
to, a municipality, metropolitan government, county, utility district, school district, public
building authority, housing authority, emergency communications district, and development
district created and existing pursuant to the laws of this state, or an instrumentality of
government created by one (1) or more local governmental entities;
() "Proxy advisory firm" means a person or entity who, for compensation, is engaged
in the business of, with respect to a political subdivision for which neither the person nor any
affiliate thereof is a fiduciary:
(A) Providing proxy voting advice, research, analysis, ratings, or
recommendations to a political subdivision or a fiduciary thereof; or
(8) Providing proxy voting advice, research, analysis, ratings, or
recommendations relating to an issuer of securities;
SECTION 2. Tennessee Code Annotated, Title 9, Chapter 4, Part 14, is amended by adding
the following as new sections:
9-4-1405.
With respect to a pension plan, the political subdivision with authority over the
pension plan shall comply with this section. The requirements applicable to the pension plans
include the following:
(1) Consistent with the prudent investor rule pursuant to § 35-14-103, the
standard of care pursuant to § 35-14-104, and the exercise of reasonable care in
delegation of investment and management functions pursuant to § 35-14-111,
investing, reinvesting, managing, and selecting investment options for the assets of a
pension plan for financial reasons for the exclusive financial benefit of the
beneficiaries of the pension plan while maximizing long-term shareholder value;
(2) Exercising, in person or by proxy, all voting rights with respect to direct
holdings in securities held by or on behalf of a pension plan for financial reasons for
the exclusive benefit of the beneficiaries of the pension plan while maximizing long-
term shareholder value;
(3) Submitting an annual report no later than September 1 of each year to the
finance, ways and means committee of the senate and the standing committee of the
house of representatives with jurisdiction over finance, ways and means in a format
prescribed by the committees containing, but not limited to, the following, for a
pension plan's direct holdings for the annual reporting period from July 1 to June 30:
(A) The name of the proxy advisory firm utilized by the· pension plan or
fiduciary, if any;
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(8) The proxy advisory firm's recommendations for each proposal if
different from the final vote; and
(C) An analysis of:
(i) The number of proposals, by proposal type, where the proxy
advisory firm's recommendation is different than the company
management's recommendation; and
(ii) The number and percentage of votes, by proposal type, cast
by or on behalf of a pension plan in which the pension plan's vote was
different from either the proxy advisory firm's recommendation or the
company management's recommendation; and
(4) Ensuring that a pension plan does not enter into an agreement with a
proxy advisory firm with respect to the provision of proxy advisory services unless the
proxy advisory firm acknowledges in writing and accepts, under contract, its
obligations under this section.
9-4-1406.
(a)A proxy advisory firm shall not provide proxy voting advice to a pension plan if an
actual or potential conflict of interest exists that could reasonably be expected to affect the
objectivity or reliability of the proxy voting advice. As used in this subsection (a), "an actual or
potential conflict of interest" includes the following acts by a proxy advisory firm or any of its
affiliates:
(1) Receiving or seeking to receive fees for consulting services from the issuer
of the shares or any of its affiliates that are the subject of any proxy voting advice,
written report, research, analysis, rating, or recommendation furnished by the proxy
advisory firm;
(2) Receiving or seeking to receive fees for consulting services from the
sponsor of a shareholder-sponsored proposal or any of its affiliates that is the subject
of the proxy voting advice; or
(3) Being a member of an organization that actively supports a shareholder-
sponsored proposal that is, or that is substantially similar to, the subject of the proxy
voting advice.
(b) A proxy advisory firm that provides proxy voting advice to a pension plan must
provide a financial analysis supporting every re9ommendation that the proxy advisory firm
makes to the pension plan on a shareholder· proposal that differs from the company
management's recommendation. • •
(c) A proxy advisory firm shall not provide proxy voting advice to a pension plan if its
negative voting recommendation is based, in whole or in part, on the level of shareholder
support received with respect to a previous proposal submitted to a vote at the company;
provided, that the company's previous proposal was approved by the shareholders in
accordance with the laws of the state of incorporation of the applicable company.
(d) This section does not apply to fiduciaries, asset managers, custodians,
consultants, or other service providers that are not proxy advisory firms.
SECTION 3. This act takes effect July 1, 2026, the public welfare requiring it.
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SENATE BILL NO. 2641
PASSED: April 22, 2026
RANDY l\\cNALLY
SPEAKER OF THE i;ENA TE
CAMERONSEXTON,SPEAKER
HOUSE OF REPRESENTATIVES
J APPROVED this I q f£.. day of l".'.V]a: ◄ 2026
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