II
117th CONGRESS
2d Session
S. 4097
IN THE SENATE OF THE UNITED STATES
April 27, 2022
Mr. Kaine (for himself, Mr. Booker, Mrs. Murray, Mr. Menendez, and Mr. Warner) introduced the following bill; which was read twice and referred to the Committee on Health, Education, Labor, and Pensions
A BILL
To improve access for diverse-owned asset management firms, and for other purposes.
Short title
This Act may be cited as the Too Narrow to Succeed Act
.
Purpose
The purpose of this Act is to improve access for diverse-owned, including women- and minority-owned, asset management firms by—
increasing transparency regarding the asset management firm selection processes of Federal institutional investors;
identifying common and potential barriers that limit business opportunities for diverse-owned asset management firms and developing strategies to remove these barriers; and
enabling both public and private retirement funds to adopt broader and more inclusive selection processes to reduce systemic risk and maximize returns, consistent with administrators’ fiduciary responsibilities.
Definitions
In this Act:
Asset management firm
The term asset management firm means any investment firm that—
manages a portfolio of securities or other assets for a defined benefit plan or other institutional investor; or
offers investment options, such as mutual, private equity, real estate, or other commingled funds, to participate in a defined contribution or other comparable retirement plan.
Diverse-owned
The term diverse-owned, when used with respect to an asset management firm, means any threshold or other requirements determined appropriate by the Secretary under section 4(a)(3).
Federal institutional investor
The term Federal institutional investor means each of the following:
The Federal Retirement Thrift Investment Board.
The entity that administers—
the funds of the Pension Benefit Guaranty Corporation established under section 4005 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1305);
the funds of the National Railroad Retirement Investment Trust established under section 15(j) of the Railroad Retirement Act of 1974 (45 U.S.C. 231n(j));
the funds of the Federal Reserve System Retirement Plan;
the funds of the Federal Reserve System Thrift Plan;
the funds of the Tennessee Valley Authority Retirement System;
the funds of the Tennessee Valley Authority Retirement System Savings and Deferral Retirement Plan;
the funds of the Army and Air Force Exchange Service Retirement System;
the funds of the Navy Exchange Service Command Retirement Plan; or
the endowment funds of the Smithsonian Institution.
Any other Federal entity that administers a fund—
with more than $1,000,000,000 in assets invested for which the entity uses the services of, or contracts with, an asset management firm; and
that the Secretary determines is similar to the Thrift Savings Fund or a fund described in subparagraph (B).
Federal investments
The term Federal investments means investments of sums in a fund administered by a Federal institutional investor.
Secretary
The term Secretary means the Secretary of Labor.
Subcontractor asset management firm
The term subcontractor asset management firm means an asset management firm that—
enters into a contract (including a subcontract) with an asset management firm that is the primary manager of Federal investments, through the use of services or by contract, for a Federal institutional investor; and
under the terms of the contract, manages Federal investments of the Federal institutional investor.
Improving access for diverse-owned asset management firms
Annual reports by Federal institutional investors that invest in externally managed assets
Annual reports
Reports required
By not later than December 31, 2022, and annually thereafter, each Federal institutional investor that uses the services of, or contracts with, an asset management firm to manage Federal investments shall prepare and submit a report to the Secretary on the usage of diverse-owned asset management firms by the Federal institutional investor.
Inclusion of subcontractor asset management firms
The report under subparagraph (A) shall also include all subcontractor asset management firms of the Federal institutional investor.
Content of reports
Each report described in paragraph (1) shall include, with respect to any fund administered by the Federal institutional investor that uses the services of, or contracts with, an asset management firm—
the amounts of assets in such fund that are managed by non-diverse-owned asset management firms and by diverse-owned asset management firms, as determined by the Secretary under paragraph (3), disaggregated by race, ethnicity, and gender;
the challenges, if any, the Federal institutional investor faces in reporting on diverse-owned and non-diverse-owned asset management firms;
the challenges the Federal institutional investor faces in selecting diverse-owned asset management firms (including through subcontractor asset management firms) to manage investments of sums in the fund administered by the Federal institutional investor;
the actions taken during the reporting period, or planned to be taken, by the Federal institutional investor to alleviate barriers that limit participation of diverse-owned asset management firms; and
the actions taken during the reporting period, or planned to be taken, by the Federal institutional investor to increase opportunities for diverse-owned asset management firms to compete for contracts.
Diverse-owned
The Secretary shall evaluate industry benchmarks to determine the threshold or other requirements necessary for an asset management firm to qualify as diverse-owned.
Public availability
The Secretary shall make each report submitted under paragraph (1) publicly available.
Sense of Congress relating to diverse-Owned asset management firms and covered private sector plans
It is the sense of Congress that the Advisory Council on Employee Welfare and Pension Benefit Plans (commonly known as the ERISA Advisory Council) routinely consider barriers to the usage of diverse-owned asset management firms among covered private sector plans, and methods to overcome such barriers.
Survey of fund management best practices
In general
The Secretary shall—
conduct a survey of the best practices in fund asset management with respect to increasing the utilization and capacity of diverse-owned asset management firms; and
prepare and submit a report to Congress not less often than every 3 years, or more frequently as the Secretary considers to be appropriate.
Requirements of survey
The Secretary shall survey a sample of public and private-sector pension plans subject to the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1001 et seq.) and other retirement funds that are engaged in (or looking to engage in) strategies to improve access to, and representation by, diverse-owned asset management firms.
Report
The Secretary shall make publicly available a report to Congress on the best practices of pension funds and other retirement funds with respect to implementing strategies to improve access to diverse-owned asset management firms. The report shall include—
the challenges pension funds and other retirement funds may face in adopting or executing strategies to engage more with diverse-owned asset management firms as the primary institutional fund manager or as subcontractor asset management firms, including women- and minority-owned asset management firms; and
an identification of the strategies adopted to implement programs.
