Pension members deserve to know why an investment was chosen, what risks it carries, and how it serves their retirement. The Integrity Act would make that explanation public, whether a board or an outside manager makes the purchase.
The short version
The board sets the investment rules. Managers explain their covered purchases. Pension systems sharing an account can share the research, while showing each system’s stake. When a system joins an outside fund, it explains why that choice serves its members.
The pension system is responsible for making the record public.
The proposal covers future pension investments in non-tradable sovereign debt: government borrowing without an ordinary market exit. The same rules would apply regardless of the issuer. State Treasury investments are outside its pension focus.
1. The board sets the rules; a manager can make purchases
The board would decide what a manager may buy and set limits on risk, the amount invested, and how long money can be tied up. The manager could then make purchases within those limits, without a new board vote for every routine trade.
Each covered purchase would still need a financial explanation and confirmation that it follows the board’s rules. A new issuer, a significant change in risk, or a purchase outside the approved limits would need additional review.
Example: a board puts $50 million into a manager’s account. The manager later buys a $10 million bond using that money. The bond needs its own explanation. It is part of the $50 million account, not an additional $10 million. This is an illustration, not a reported transaction.
2. Each covered purchase gets a record
Before agreeing to an investment, the decision-maker would explain:
- The risk that the borrower will not repay.
- How the investment compares with reasonable alternatives.
- Whether the money can be recovered before maturity, and at what cost.
- Why this investment, at these terms, serves pension members.
The explanation must be ready before the binding commitment: the order or agreement committing the system to the investment. The pension system would publish it within 30 calendar days of that commitment, identifying whether the transaction has settled. Cancellations and replacement purchases would be recorded accurately.
Existing research could be reused, but each additional purchase or renewal would need a check of current terms, risks, alternatives and the system’s overall exposure. The record would name who prepared and approved it and disclose relevant conflicts of interest.
3. A controlled pool can share the research
When pension systems combine money in an account whose investment rules they control, they could share one analysis. Each system would still explain its share, why the investment fits its needs, and who approved its financial finding.
Example: two systems split a $10 million purchase, with $6 million belonging to one and $4 million to the other. One analysis could serve both, with their shares shown separately. The total is still $10 million. This is an illustration.
4. An external fund is reviewed when the system commits to it
A pension system may join a fund with many investors, where it cannot direct individual trades. In that case, it would explain why it is committing money to the fund: the permitted investments, credit risks, fees, withdrawal limits and alternatives.
It would also seek reporting rights and regularly disclose what it knows about the fund’s covered investments, with dates and gaps in the information clearly stated.
A fund set up mainly to hold covered debt, or an account the system controls within a fund, would still need records for the underlying investments. Changing the account structure should not remove the duty to explain a purchase.
Who would prepare and check the work?
Investment staff, an adviser or the manager could prepare the analysis. The board’s initial instructions, a new issuer or a significant change would receive review independent of the issuer and seller. An existing qualified adviser could do that work.
Choosing a manager and choosing a bond are different decisions. A manager-selection memo or credit rating alone would not explain why a particular purchase serves members.
What happens when the rules are missed?
Each system would name someone responsible for publication, list missing or late records, and respond to requests for them.
A late posting could be corrected. A purchase made without prior analysis would require the failure to be reported and the board to take corrective action. A memo written later cannot stand in for work that should have happened beforehand.
Manager contracts and oversight would address repeated or serious failures. Audits would check whether the required work occurred. A paperwork delay would not automatically force a sale, and completing a form would not excuse a breach of existing duties to members.
What would it cost?
Preparing, reviewing and publishing records takes staff time and professional work. Shared research, standard forms and existing advisers would help avoid duplication. Implementation costs still need to be estimated as the bill is developed.
What comes next?
We are building support for the Integrity Act for Arkansas’s 2027 legislative session. Help make a public financial explanation the standard for these pension investments.
Support the Integrity Act · Read the five safeguards · Legislative briefing.