The South Carolina Supreme Court says cities were wrong in using a trust fund that invested in corporate stock. The cities, which include Charleston, were using the fund to cover future retirement benefits.

Some $7 million was invested by Charleston and other cities.

Read more over a NBC News 2.

Update 11:12 p.m.: A press release from the The Municipal Association of South Carolina expands a bit:
“We accept the court’s ruling on the constitutionality of the question of investing in equities,” said Howard Duvall, executive director of the Municipal Association. “However, we do plan to ask for a rehearing on the second part of the opinion that directs the trust to be dissolved.”

The question posed in the lawsuit was whether the constitution allows the trust, on behalf of participating local governments, to invest in equities rather than only traditional government backed investments. Investment in equities would yield a greater return on the funds over the long run.

A friendly lawsuit was filed by an employee in the City of Charleston, at the request of the Municipal Association and the trust board, to determine if the trust could invest in equities. The court ruled that the trust is not authorized to invest in equities under the state constitution.

“The trust never intended to invest in equities without first getting a favorable ruling from the SC Supreme Court or voter approval of a constitutional amendment,” Duvall said. An amendment is on the November ballot that would allow both the state and local governments to form trusts and invest in equities similar to what the state retirement system currently does.

The Post and Courier also offers a brief story where they interviewed many of the key players.