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SENATE FLOOR VERSION
April 8, 2024
ENGROSSED HOUSE
BILL NO. 1617 By: Lepak, O'Donnell, McDugle,
and Echols of the House
and
Jett and Rader of the
Senate
An Act relating to public finance; enacting the
Oklahoma Public Finance Protection Act; de fining
terms; providing fiduciary's standard of care;
prohibiting consideration of non -pecuniary factors;
providing who has authority to vote on certain
shares; providing for delegation of authority;
providing that proxy votes be reported annually;
authorizing Attorney General to enforce act and
examine certain persons and records; providing
immunity for the State of Oklahoma and certain
individuals; providing for inde mnification; providing
for severability; providing for codification;
providing an effectiv e date; and declaring an
emergency.
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".
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SECTION 2. NEW LAW A new section of law to be codified
in the Oklahoma Statutes as Section 9102 of Ti tle 62, unless there
is created a duplication in numbering, reads as follows:
As used in the Oklahoma Public Finance Protection Act:
1. "Fiduciary" means a person who, with respect to a pension
benefit plan:
a. exercises any discretionary authority or dis cretionary
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
monies or other property of such plan, or has any
authority or responsibility to do so, or
c. has any discretionary authority or discretionary
responsibility in the administration of such plan,
including making recommendations or voting a plan's
shares or proxies;
2. "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:
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(1) evaluating the potential financial return and
financial risks of an existing or prospective
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 risk or return that primarily
relates to events that are not investment -
specific in nature;
3. "Non-pecuniary" includes any action taken or factor
considered by a fiduciary with any purpose to further environmental,
social, political, ideological, or other goals or ob jectives. A
fiduciary purpose with respect to plan assets, including any right
appurtenant to plan assets, may be reasonably determined by
evidence, including, but not limited to, a fiduciary's statements or
commitments that include or would include plan assets and indicate
its purpose in selecting investments, engaging with portfolio
companies, or voting shares or proxies, including such statements or
commitments made by a fiduciary pursuant to its participation in, or
status as a signatory to, any coalit ion, initiative, or organization
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that has a purpose of using investment activity to further non -
pecuniary goals;
4. "Pecuniary factor" means a factor that has a material effect
on the financial risk or financial return o f an investment based on
appropriate investment horizons consistent with the plan's
investment objectives and the funding policy. The term excludes
non-pecuniary factors; and
5. "Pension benefit plan" or "plan" shall mean any plan, fund,
or program which was heretofore or is hereafter est ablished,
maintained, or offered by the State of Oklahoma or any subdivision,
county, municipality, agency, or instrumentality thereof, or any
school, college, university, administration, authority, 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 employe es for
a period extending to the te rmination of covered
employment or beyond, and
c. the term does not include a defined contribution plan
under the Retirement Freedom Act, established pursuant
to Section 935.1 et seq. of Title 74 of the Oklahoma
Statutes, except that investment options selected as
default investment options for participating employees
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shall be selected in adherence to the requirements of
this act.
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 fiduciary shall discharge his duties with respect to a plan
solely in the pecuniary interest of the participants and
beneficiaries:
1. For the exclusive purpose of providing pecuniary benefits to
participants and their beneficiaries and defraying reasonable
expenses of administering 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 like aims;
3. By diversifying the investments of the plan so as to
minimize the risk of large losses, unless under the circ umstances it
is clearly prudent not to do so; and
4. In accordance with the documents and instruments governing
the plan and insofar as such documents and instruments are
consistent with the fiduciary responsibilities provided by law,
including the provis ions of this act.
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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 numbering, reads as follows:
A fiduciary's evaluation of an inve stment, 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, ideo logical, corporate governance, or o ther
goals, objectives, or similarly oriented considerations are
pecuniary factors only if they present economic risks or
opportunities that qualified investment professionals would treat as
material economic consideratio ns under generally accepted investment
theories. The weight given to those factors should solely reflect a
prudent assessment of their impact on risk and return.
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 proxies held 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
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recommendations of a proxy advisor y firm or other service provider
unless such firm or service provider has a practice of, and in
writing commits to, following proxy voting guidelines that are
consistent with the plan's fiduciary obligation to act based o nly on
pecuniary factors.
C. Unless no economically practicable alternative is available,
plan assets shall not be entrusted to a fiduciary unless that
fiduciary has a practice of, and in writing commits to, following
guidelines, when using plan assets to engage with portfolio
companies and vote shares or proxies that match the plan's
obligation to act based only on pecuniary factors.
D. With respect to the pension benefit plans, all such proxy
voting authority shall reside with the respective Board of Tr ustees,
except that the Board of Trustees may delegate such authority 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 t abulated 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 s hall be posted on a publicly
available webpage.
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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, reads as follows:
A. This act may be enforced by the Atto rney General.
B. If the Attorney General has reasonable cause to believe that
a person has engaged in, is engaging in, or is about to engage in a
violation of this act, he or she may:
1. Require such person to file on s uch 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 connec tion with the
violation;
3. Examine any record, book, document, 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, paper, or sample or material
relating to such prac tice and retain the same in his or her
possession until the completion of all proceedings undertaken under
this act or in the courts.
SECTION 7. NEW LAW A new section of law to be codified
in the Oklahoma Statutes as Section 9107 of Title 62, unless there
is created a duplication in numbering, reads as follows:
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A. The State of Oklahoma, pension benefit plans as defined in
this act, as well as officers, board members, and employees of the
state or the pension benefit plans are immune from civil liability
for any act or omission related to any provision under this act.
B. In addition to the immunity provided under subsection A of
this section, officers, board members, and employees of the state or
the pension benefit plans are entitle d to indemnification from the
pension benefit plan for all losses, costs and expenses, including
reasonable attorney fees, associated with defending against any
claim or suit related to any provision of this act.
SECTION 8. NEW LAW A new section of law to be codified
in the Oklahoma Statutes as Section 9108 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, su ch action will not affect any other
provision of this act.
SECTION 9. This act shall become effective July 1, 2024.
SECTION 10. It being immediately necessary for the preservation
of the public peace, health or safety, an e mergency is hereby
declared to exist, by reason whereof this act shall take effect and
be in full force from and after its passage and approval.
COMMITTEE REPORT BY: COMMITTEE ON FINANCE
April 8, 2024 - DO PASS