RBH No. 5078
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STATE OF OKLAHOMA
1st Session of the 59th Legislature (2023)
HOUSE BILL 1617 By: Lepak
AS INTRODUCED
An Act relating to public finance; enacting the
Oklahoma Public Finance Protection Act ; defining
terms; providing fiduciary's standard of care;
prohibiting consideration of non -pecuniary factors;
providing who has authority to vot e on certain
shares; providing for delegation of authority;
providing that proxy votes be reported annual ly;
authorizing Attorney General to en force act and
examine certain persons and reco rds; providing for
codification; and providing an effective date .
BE IT ENACTED BY THE PEOPLE OF THE STATE OF OKLAHOMA:
SECTION 1. NEW LAW A new section of law to be codified
in the Oklahoma Statutes as Section 9101 of Title 62, unless there
is created a duplication in numbering, reads as follows:
This act shall be known and may be cited as the "Oklahoma Public
Finance Protection Act".
SECTION 2. NEW LAW A new s ection of law to be codified
in the Oklahoma Statutes as Section 9102 of Title 62, unless there
is created a duplication in numbering, reads as follows:
As used in the Oklahoma Public Finance Protection Act: RBH No. 5078
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1. "Pension benefit plan" or "plan" shall mean any plan, fund,
or program which was hereto fore or is hereafter established,
maintained, or offered by the State of Oklahoma or any subdivision,
county, municipality, agency , or instrumentality thereof, or any
school, college, university, administration, a uthority, or other
enterprise operated by the State of Oklahoma, to the extent that by
its terms or as a result of surrounding circumstances :
a. provides retirement income or other retirement
benefits to employees or former employees, or
b. results in a deferral of income by such employees for
period extending to the termination of covered
employment or beyond ;
2. "Fiduciary" means a person who, with respect to a pension
benefit plan:
a. exercises any discretionary authority or discretionary
control respecting management of such plan or
exercises any authority or control respecting
management or disposition of its assets,
b. renders investment advice for a fee or other
compensation, direct or indirect, with respect to any
moneys or other property of such pl an, or has any
authority or responsibility to do so, or
c. has any discretionary authority or discretionary
responsibility in the administration of such plan, RBH No. 5078
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including making recommendations or voting a plan 's
shares or proxies;
3. "Material", when used to qualify a risk or return:
a. means a risk or return regarding which there is a
substantial likelihood that a reasonable investor
would attach importance when :
(1) evaluating the potential financial return and
financial risks of an existing or prospectiv e
investment, or
(2) exercising, or declining to exercise, any rights
appurtenant to securities , and
b. does not include:
(1) furthering non-pecuniary, environmental, social,
political, ideological, or other goals or
objectives, or
(2) any portion of a ris k or return that primarily
relates to events that involve a high degree of
uncertainty regarding what may or may not occur
in the distant future and are systemic, general,
or not investment-specific in nature;
4. "Pecuniary factor" means a factor that has a material effect
on the financial risk or financial return of an investment based on
appropriate investment horizons consistent with the plan 's RBH No. 5078
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investment objectives and the funding policy. The term excludes non -
pecuniary factors;
5. "Non-pecuniary" includes any action taken or factor
considered by a fiduciary with any purpose to further environmental,
social, or political goals. A fiduciary purpose may be reasonably
determined by evidence, including, but not limited to, a fiduciary 's
statements indicating its purpose in selecting investments, engaging
with portfolio companies, or voting shares or proxies, or any such
statements by any coalition, initiative, or organization that the
fiduciary has joined, participated in, or become a signatory to, in
its capacity as a fiduciary.
SECTION 3. NEW LAW A new section of law to be codified
in the Oklahoma Statutes as Section 9103 of Title 62, unless there
is created a duplication in numbering, reads as follows:
A. A fiduciary shall dischar ge his duties with respect to a
plan solely in the pecuniary interest of the par ticipants and
beneficiaries:
1. for the exclusive purpose of providing pecuniary benefits to
participants and their beneficiaries and defraying reasonable
expenses of administ ering the plan;
2. with the care, skill, prudence, and diligence under the
circumstances then prevailing that a prudent man acting in a like
capacity and familiar with such matters would use in the conduct of
an enterprise of a like character and with lik e aims; RBH No. 5078
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3. by diversifying the investments of the plan so as to
minimize the risk of large losses, unless under the circumstances it
is clearly prudent not to do so; and
4. in accordance with the documents and instruments governing
the plan insofar as su ch documents and instruments are consistent
with the provisions of this act.
SECTION 4. NEW LAW A new section of law to be codified
in the Oklahoma Statutes as Section 9104 of Title 62, unless there
is created a duplication in numbe ring, reads as follows:
A fiduciary's evaluation of an investment, or evaluation or
exercise of any right appurtenant to an investment, must take into
account only pecuniary factors. Plan fiduciaries are not permitted
to promote non-pecuniary benefits or any other non-pecuniary goals.
Environmental, social, corporate governance, or other similarly
oriented considerations are pecuniary factors only if they present
economic risks or opportunities that qualified investment
professionals would treat as materia l economic considerations under
generally accepted investment theories. The weight given to those
factors should solely reflect a prudent assessment of their impact
on risk and return. Fiduciaries considering environmental, social,
corporate governance, or other similarly oriented factors as
pecuniary factors are also required to examine the level of
diversification, degree of liquidity, and the potential risk -return
in comparison with other available alternative investments that RBH No. 5078
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would play a similar role in their plans' portfolios. Any pecuniary
consideration of environmental, social, or governance fac tors must
necessarily include evaluating whether greater returns can be
achieved through investments that rank poorly on such factors.
SECTION 5. NEW LAW A new section of law to be codified
in the Oklahoma Statutes as Section 9105 of Title 62, unless there
is created a duplication in numbering, reads as follows:
A. All shares held direct ly or indirectly by or on behalf of a
pension benefit plan or the beneficiaries thereof shall be voted
solely in the pecuniary interest of plan participants. Voting to
further non-pecuniary, environmental, social, political, ideological
or other benefits or goals is prohibited.
B. Unless no economically practicable alternative is available,
a fiduciary may not adopt a practice of following the
recommendations of a proxy advisory firm or other service provider
unless such firm or service provider has a practice of, and in
writing commits to, follow ing proxy voting guidelines that are
consistent with the fiduciary 's obligation to act based only on
pecuniary factors.
C. Unless no economically practicable alternative is available,
plan assets shall not be e ntrusted to a fiduciary, unless that
fiduciary has a practice of, and in writing commits to, follow ing
guidelines, when engaging with portfolio companies and voting shares RBH No. 5078
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or proxies, that match the plan's obligation to act based only on
pecuniary factors.
D. Authority to vote such shares should be in t he hands of a
State official politically accountable to the people of the State of
Oklahoma. As such, all current proxy voting authority with respect
to any and all shares held directly or indirectly by or on behalf of
a pension benefit plan or the plan participants is hereby revoked.
With respect to the pension benefit plans, a ll such voting authority
shall reside with the respective Board of Trustees, except that the
Board of Trustees may delegate such author ity to a person who has a
practice of, and in writing commits to, following guidelines that
match the plan's obligation to act based only on pecuniary factors .
E. All proxy votes shall be tabulated and reported annually to
the respective Board of Trustees . For each vote, the report shall
contain a vote caption, the plan's vote, the recommendation of
company management, and, if applicable, the proxy advisor 's
recommendation. These reports shall be posted on a publicly
available webpage.
SECTION 6. NEW LAW A new section of law to be codified
in the Oklahoma Statutes as Section 9106 of Title 62, unless there
is created a duplication in numbering, re ads as follows:
A. This act may be enforced by the Attorney General. RBH No. 5078
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B. If the Attorney General has reasonable cause to believe tha t
a person has engaged in, is engaging in, or is about to engage in, a
violation of this article, he or she may:
1. require such person to file on such forms as he or she
prescribes a statement or report in writing, under oath, as to all
the facts and circumstances concerning the violation, and such other
data and information as he or she may deem necessary,
2. examine under oath any person in c onnection with the
violation,
3. examine any record, book, document, account, or paper as he
or she may deem necessary, and
4. pursuant to an order of the Supreme Court of Oklahoma,
impound any record, book, document, account, paper, or sample or
material relating to such practice and retain the same in his or her
possession until the completion of all proceedings undertaken under
this article or in the courts.
SECTION 7. NEW LAW A new section of law to be codif ied
in the Oklahoma Statutes as Section 9107 of Title 62, unless there
is created a duplication in numbering, reads as follows:
Should a court of competent jurisdiction hold any provision(s)
of this chapter to be invalid, such action will not affect any ot her
provision of this chapter. RBH No. 5078
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SECTION 8. This act shall become effective November 1, 2023.
59-1-5078 CMA 01/17/23
THOMAS E. CUMMINS CONSULTING ACTUARY, INC.
2512 E. 71
st
Street , Suite D ∙ Tulsa, Oklahoma 74136
(918) 492-9658 ∙ (918) 492- 9659
January 18, 2023
Representative Mark Lepak
Room 543
Re: RBH No. 5078
RBH No. 5078 defines the fiduciary’s duties for the retirement
systems.
RBH No. 5078 is a nonfiscal bill as defined by OPLAAA .
I am a member of the American Academy of Actuaries and meet the
Qualification Standards of the American Academy of Actuaries to
render the actuarial opinion herein.
Thomas E. Cummins
Thomas E. Cummins, MAAA