§ 24-2-618. Delegation of investment and management functions

(a) Trustees may delegate investment and management functions that a prudent trustee of comparable skills could properly delegate under the circumstances. The trustees shall exercise reasonable care, skill, and caution in:

1. (1) Selecting an agent;

2. (2) Establishing the scope and terms of the delegation, consistent with the purposes and terms of the trust; and

3. (3) Reviewing periodically the agent’s actions in order to monitor the agent’s performance and compliance with the terms of the delegation.

(b) In performing a delegated function, an agent owes a duty to the trust to exercise reasonable care to comply with the terms of the delegation.

(c) Trustees who complied with the requirements of subsection (a) of this section are not liable to the beneficiaries or to the trust for the decisions or actions of the agent to whom the function was delegated.

(d) By accepting the delegation of a trust function from the trustees of a trust that is subject to the law of this state, an agent submits to the jurisdiction of the courts of this state.

(e) Single agent or exclusive agency delegations by the trustees shall be discouraged. Trustees shall delegate investment and management functions to a single agent or an exclusive agency arrangement only after the trustee has determined that the exclusive agency arrangement is in the best interest of the trust, has exercised extraordinary care and caution in selecting the exclusive agent, and has arranged to periodically review in detail the agent’s actions to monitor the agent’s performance and compliance with the terms of the delegation.

(f)

1. (1) Notwithstanding the Arkansas Procurement Law, § 19-11-201 et seq., the boards of trustees of the respective state retirement systems shall promptly implement their investment directives consistent with the duty of care required of a fiduciary under the prudent investor rules in this chapter.

2. (2) If in the capacity as fiduciary, the trustees deem it appropriate to immediately retain an investment manager or to alter the terms of an existing agreement with an investment manager, the trustees shall:

   1. (A) Pass a resolution stating the reason for the immediate retention of the investment manager;

   2. (B) State the anticipated date of implementation; and

   3. (C) Provide the Office of State Procurement and the staff of the Review Subcommittee of the Legislative Council the information contained in subdivisions (f)(2)(A) and (B) of this section within five (5) business days.

3. (3) As required by the Review Subcommittee of the Legislative Council, a member of the board of trustees or the director of the respective retirement system fund shall appear before the next occurring meeting of that body to explain the details of the professional services contracts in question.

(g)

1. (1) The length of a contract or other investment agreement and any renewal or extension of the contract or other investment agreement may be agreed upon by a state retirement system and the other party to the contract or other investment agreement and is exempt from the mandatory expiration provisions under the Arkansas Procurement Law, § 19-11-201 et seq., if the contract or other investment agreement is procured under the Arkansas Procurement Law, § 19-11-201 et seq., and the purpose of the contract or other investment agreement is to:

   1. (A) Invest and manage a system’s trust assets under § 24-2-610;

   2. (B) Provide actuarial services to determine the liabilities and financial status of a state retirement plan;

   3. (C) Retain custody of a system’s trust assets; or

   4. (D) Protect and recover trust assets of a system.

2. (2) The board of trustees of a state retirement system shall determine the duration of the contract or other investment agreement and any renewal or extension of the contract or other investment agreement by negotiating with the other party to the contract or other investment agreement for the most favorable rates and terms for the state retirement system based on:

   1. (A) Market competition;

   2. (B) Experience of the other party to the contract or other investment agreement;

   3. (C) Knowledge of the state retirement system’s need; and

   4. (D) Compliance with the prudent investor rule set forth in §§ 24-2-610 — 24-2-619.

3. (3) The board of trustees of a state retirement system shall submit information requested by the Legislative Council concerning a contract or other investment agreement procured under the Arkansas Procurement Law, § 19-11-201 et seq.

4. (4) A partial equity ownership agreement between a state retirement system and another party shall be reviewed under § 19-11-1301 et seq.

5. (5) If a contract with a consultant to provide a state retirement system consulting services, to recommend investment managers and investment funds, or for the investment of trust funds of the state retirement system under this subsection is extended, an amendment, acknowledged by the consultant in writing, shall be added to the contract extension that:

   1. (A) States that the State of Arkansas and the state retirement system have a statutory goal to recruit and hire emerging managers and emerging investment funds consistent with the prudent investor rule;

   2. (B)

      1. (i) Requires the consultant to submit a report to the state public retirement system that describes the plan or process the consultant will use to recruit and hire emerging managers and emerging investment funds.

      2. (ii) The consultant shall provide an emerging manager update on the progress made in the previous fiscal year to the state retirement system no later than sixty (60) days after the end of the fiscal year that details the consultant’s processes in locating, analyzing, evaluating, and performing due diligence activity on emerging managers; and

   3. (C)

      1. (i) Allows a state retirement system to refer or recommend a specific emerging manager or emerging investment fund to the consultant.

      2. (ii) A state retirement system that makes a referral may request a report concerning the outcome of a referral from the consultant.

6. (6) At the request of the Joint Committee on Public Retirement and Social Security Programs or the Legislative Council, a state retirement system shall appear and make a presentation concerning the recruitment and hiring of emerging managers and emerging investment funds.