S.F. _____ H.F. _____ Section 1. NEW SECTION . 12L.1 Definitions. 1 For purposes of this chapter: 2 1. “Best economic interest” means investment pursuant to the 3 objective of maximizing risk-adjusted investment returns of the 4 participants and beneficiaries of a plan over a time horizon 5 consistent with the risk management profile of the plan. 6 2. “Consumer” means a person who is a resident of this state 7 and to which any of the following apply: 8 a. The person has an interest in an investment company, 9 including but not limited to mutual funds and exchange-traded 10 funds, registered with the federal securities and exchange 11 commission that directly or indirectly owns shares of an 12 enterprise regulated by the state. 13 b. The person is a beneficiary or participant in a plan. 14 3. “Economic analysis” means a written analysis 15 demonstrating the factors considered in evaluating the economic 16 impact of a shareholder-sponsored proposal. At a minimum, the 17 analysis must address all of the following factors: 18 a. The subject matter of the shareholder-sponsored proposal. 19 b. An evaluation of the investment company’s stated reasons 20 for opposition to the shareholder-sponsored proposal. 21 c. An evaluation of whether the shareholder-sponsored 22 proposal reflects the investment objectives and risk management 23 profile of the plan in which the participants and beneficiaries 24 are invested. 25 d. An evaluation of the economic benefits and costs of 26 implementing the proposal, as written, over a time horizon that 27 reflects the investment objectives and risk management profile 28 of the plan. 29 e. The quantifiable impact of the shareholder-sponsored 30 proposal, as written, on the investment returns of the 31 participants and beneficiaries of the plan. 32 f. An explanation of modeling, procedures, or processes used 33 to complete the economic analysis. 34 4. “Fiduciary” means a person who, with respect to a pension 35 -1- LSB 5408XD (4) 90 sc/ns 1/ 9

S.F. _____ H.F. _____ benefit plan, does any of the following: 1 a. Exercises discretionary authority or discretionary 2 control with respect to management of the plan or exercises 3 authority or control with respect to acquisition, management, 4 or disposition of the plan’s assets. 5 b. Renders investment advice for a fee or other 6 compensation, direct or indirect, with respect to moneys or 7 other assets of the plan or has authority or responsibility to 8 do so. 9 c. Has discretionary authority or discretionary 10 responsibility in the administration of the plan. 11 5. “Investment company” means the same as defined in 15 12 U.S.C. §80a-3. 13 6. “Pension benefit plan” or “plan” means a plan, fund, or 14 program established, maintained, or offered by a public entity, 15 including but not limited to a public retirement system as 16 defined in section 97D.5, if by its terms or as a result of 17 surrounding circumstances the plan, fund, or program does any 18 of the following: 19 a. Provides retirement income or other retirement benefits 20 to employees or former employees. 21 b. Results in a deferral of income by employees for a period 22 extending to the termination of covered employment or beyond. 23 7. “Proxy advisory firm” means a person who is engaged 24 in the business of providing proxy voting advice, research, 25 analysis, ratings, or recommendations to a fiduciary, 26 shareholder, or investor, including institutional investors. 27 8. “Public entity” means the state or a political 28 subdivision of the state, including any agency, authority, 29 department, enterprise, instrumentality, school, college, 30 university, or other subunit operated by the state or a 31 political subdivision of the state. 32 9. “Shareholder-sponsored proposal” means a proposal 33 submitted to an issuer of securities by a shareholder under 17 34 C.F.R. §240.14a-8. 35 -2- LSB 5408XD (4) 90 sc/ns 2/ 9

S.F. _____ H.F. _____ Sec. 2. NEW SECTION . 12L.2 Fiduciary voting 1 responsibilities. 2 1. A fiduciary shall vote all shares held directly or 3 indirectly by, subject to, or on behalf of a plan for the 4 benefit of the plan’s participants and beneficiaries solely 5 in the best economic interest of the plan participants and 6 beneficiaries. 7 2. For purposes of this section, with respect to a 8 shareholder-sponsored proposal, there is a rebuttable 9 presumption that a fiduciary votes its shares solely 10 in the best economic interest of the plan participants 11 and beneficiaries if the fiduciary’s vote follows the 12 recommendation of the board of directors of the issuer of 13 the shares, as long as such board includes a majority of 14 independent directors. 15 3. With respect to a shareholder-sponsored proposal, 16 a fiduciary’s vote in a manner inconsistent with the 17 recommendation of the board of directors of the issuer of the 18 shares is presumed to be in the best economic interest of the 19 plan participants and beneficiaries if any of the following 20 criteria are met: 21 a. The fiduciary conducts and documents an economic analysis 22 demonstrating that such a vote is in the best economic interest 23 of the plan participants and beneficiaries. 24 b. On behalf of the fiduciary, a third party conducts and 25 documents an economic analysis demonstrating that such a vote 26 is in the best economic interest of the plan participants 27 and beneficiaries, and the fiduciary determines that the 28 economic analysis adequately demonstrates that such a vote is 29 in the best economic interest of the plan participants and 30 beneficiaries. 31 4. A fiduciary shall not vote in a manner that does any of 32 the following: 33 a. Subordinates the economic interest of the plan’s 34 participants and beneficiaries to any environmental, social, 35 -3- LSB 5408XD (4) 90 sc/ns 3/ 9

S.F. _____ H.F. _____ policy, governance, or ideological goal. 1 b. Promotes any environmental, social, policy, governance, 2 or ideological goal, unless, based on an economic analysis, it 3 is determined that the vote is in the best economic interest of 4 the plan participants and beneficiaries. 5 5. With respect to shareholder-sponsored proposals, a 6 fiduciary shall annually disclose in a report to the treasurer 7 of state all of the following: 8 a. Each vote that was inconsistent with the recommendation 9 of an issuer’s board of directors composed of a majority of 10 independent directors. 11 b. The economic analysis conducted and documented with 12 respect to each vote described in subsection 3 to determine 13 that the vote was in the best economic interest of the plan’s 14 participants and beneficiaries. 15 6. The report required under subsection 5 must be certified 16 by the chief executive officer and chief financial officer, or 17 an individual acting in each capacity, of the fiduciary. 18 7. At least once every three years, a fiduciary shall 19 back test its economic analysis to ensure that the models, 20 procedures, and processes it uses predict the best economic 21 interest of the plan’s participants and beneficiaries, and 22 shall deliver a report detailing such back testing to the 23 treasurer of state. Based on such back testing, the chief 24 executive officer and chief financial officer, or an individual 25 acting in each capacity, of the fiduciary shall certify that 26 the economic analysis performed by the fiduciary and included 27 in the report is effective. 28 8. The court may award court costs and reasonable attorney 29 fees to a party who prevails in an action brought under this 30 section. 31 Sec. 3. NEW SECTION . 12L.3 Proxy advisory firms. 32 1. A proxy advisory firm shall not provide proxy voting 33 advice with respect to shareholder-sponsored proposals 34 submitted to any enterprise that the state regulates, unless 35 -4- LSB 5408XD (4) 90 sc/ns 4/ 9

S.F. _____ H.F. _____ the proxy advisory firm bases its voting recommendations 1 solely on the best economic interests of the enterprise’s 2 shareholders. 3 2. For purposes of this section, with respect to a 4 shareholder-sponsored proposal submitted to an enterprise 5 regulated by the state, there is a presumption that a proxy 6 advisory firm’s voting recommendation is based solely on the 7 best economic interest of the enterprise’s shareholders if 8 the recommendation follows the recommendation of the board of 9 directors of the issuer of the shares, as long as the board 10 includes a majority of independent directors. 11 3. With respect to a shareholder-sponsored proposal 12 submitted to an enterprise regulated by the state, a proxy 13 advisory firm may recommend a vote that is inconsistent with 14 the recommendation of the board of directors of the issuer of 15 the shares if the proxy advisory firm conducts and documents an 16 economic analysis demonstrating that such a vote is in the best 17 economic interest of the enterprise’s shareholders. 18 4. With respect to shareholder-sponsored proposals 19 submitted to an enterprise regulated by the state, a proxy 20 advisory firm shall annually disclose in a report to the 21 treasurer of state all of the following: 22 a. Each vote recommendation that was inconsistent with the 23 recommendation of an issuer’s board of directors composed of a 24 majority of independent directors. 25 b. The economic analysis conducted and documented with 26 respect to each vote recommendation described in subsection 27 3 to determine that the vote recommendation was in the best 28 economic interest of the regulated enterprise’s shareholders. 29 Sec. 4. NEW SECTION . 12L.4 Consumer right to disclosure. 30 1. a. If a consumer has reason to believe that the 31 requirements of section 12L.2 or 12L.3 have not been met, a 32 consumer may submit a request to any of the following to obtain 33 a copy of the documented economic analysis demonstrating that 34 such a vote is solely in the best economic interest of the 35 -5- LSB 5408XD (4) 90 sc/ns 5/ 9

S.F. _____ H.F. _____ consumer: 1 (1) The investment company that owns shares of an enterprise 2 regulated by the state. 3 (2) The plan, in each case, in which the consumer is an 4 investor, beneficiary, or participant. 5 b. There is a presumption that a vote is solely in the 6 best economic interest of the consumer if the vote follows the 7 recommendation of the board of directors of the issuer of the 8 shares, as long as the board includes a majority of independent 9 directors. 10 2. a. The investment company or plan shall respond in 11 writing to the consumer within ninety days of receipt of 12 a request described in subsection 1 by doing one of the 13 following: 14 (1) Providing the consumer with the requested economic 15 analysis. 16 (2) Informing the consumer that no economic analysis is 17 available, if the investment company did not conduct and 18 document an economic analysis. 19 (3) Informing the consumer that the vote at issue was 20 consistent with the recommendation of the board of directors 21 of the issuer of the shares and such board is composed of a 22 majority of independent directors. 23 b. The investment company or plan shall provide information 24 in response to a consumer request at no cost up to twice 25 annually per consumer. 26 Sec. 5. NEW SECTION . 12L.5 Enforcement. 27 1. This chapter may be enforced by the attorney general. 28 2. If the attorney general has reasonable cause to believe 29 that a person has engaged in, is engaging in, or is about to 30 engage in a violation of this chapter, the attorney general may 31 do any of the following: 32 a. Require the person to file on forms prescribed by the 33 attorney general a statement or report in writing, under oath, 34 as to all the circumstances surrounding the violation and 35 -6- LSB 5408XD (4) 90 sc/ns 6/ 9

S.F. _____ H.F. _____ such other data and information as the attorney general deems 1 necessary. 2 b. Examine under oath any person in connection with the 3 violation. 4 c. Examine any record, book, document, account, or paper as 5 the attorney general deems necessary. 6 d. Issue civil investigatory demands consistent with 7 investigation into a potential enforcement action. 8 e. Under an order of the district court, impound any record, 9 book, document, account, paper, or sample or material relating 10 to the violation and retain the same in the attorney general’s 11 possession until the completion of all proceedings undertaken 12 under this chapter or in court. 13 3. The attorney general may initiate an action in the 14 name of the state and may seek an injunction to restrain 15 any violations of this chapter. A violation of this chapter 16 shall constitute irreparable harm. Each share voted by a 17 fiduciary that is not voted in the best economic interest of 18 the shareholder constitutes a separate violation. The attorney 19 general may also seek civil penalties for each violation under 20 this chapter. All civil penalties issued shall be in equity. 21 Civil penalties shall not exceed one thousand dollars per 22 violation. Civil penalties collected under this chapter shall 23 be deposited in the general fund of the state. 24 EXPLANATION 25 The inclusion of this explanation does not constitute agreement with 26 the explanation’s substance by the members of the general assembly. 27 This bill requires a fiduciary to vote all shares of a 28 pension benefit plan established, maintained, or offered by 29 a public entity solely in the best economic interest of the 30 plan participants and beneficiaries. The bill creates the 31 rebuttable presumption that, if a fiduciary’s vote aligns with 32 the recommendation of the board of directors of the issuer 33 of the shares or if the fiduciary or a third party conducts 34 and documents an economic analysis showing that the vote is 35 -7- LSB 5408XD (4) 90 sc/ns 7/ 9

S.F. _____ H.F. _____ in the best economic interest of the plan participants and 1 beneficiaries, the vote is in the best interest of the plan 2 participants and beneficiaries. The bill prohibits a fiduciary 3 from voting shares of a plan based on any environmental, 4 social, policy, governance, or ideological goal that is 5 not in the best economic interest of plan participants and 6 beneficiaries. 7 The bill requires a fiduciary to annually report to 8 the treasurer of state any vote inconsistent with the 9 recommendation of an issuer’s board of directors and the 10 economic analysis on which the fiduciary relied. This report 11 must be certified by the fiduciary’s chief executive officer 12 and chief financial officer. 13 The bill also requires a fiduciary to review its economic 14 analysis every three years to ensure that the fiduciary’s 15 models, procedures, and processes predict the best economic 16 interest of the plan participants and beneficiaries. 17 The bill permits a court to award court costs and reasonable 18 attorney fees to the prevailing party in a suit concerning 19 fiduciary voting responsibilities. 20 The bill prohibits a proxy advisory firm from providing 21 proxy voting advice regarding shareholder-sponsored proposals 22 to an entity that the state regulates unless the advice is 23 based solely on the best economic interests of the enterprise’s 24 shareholders. If a proxy advisory firm’s advice follows the 25 recommendation of the board of directors of the issuer of the 26 shares or if the proxy advisory firm conducts and documents an 27 economic analysis demonstrating that the vote is in the best 28 economic interest of the plan participants and beneficiaries, 29 then the advice is presumed to be based solely on the best 30 economic interest of the enterprise’s shareholders. A proxy 31 advisory firm must submit an annual report to the treasurer of 32 state disclosing any vote inconsistent with the issuer’s board 33 of directors’ recommendations and the economic analysis on 34 which the proxy advisory firm relied. 35 -8- LSB 5408XD (4) 90 sc/ns 8/ 9

S.F. _____ H.F. _____ The bill permits an investor, beneficiary, or participant of 1 a plan to submit a request for the economic analysis conducted 2 for a fiduciary’s vote to the investment company that owns 3 shares of an enterprise regulated by the state or the plan if 4 the individual has reason to believe that shares of the plan 5 have not been voted in the best economic interest of the plan 6 participants and beneficiaries. The investment company or 7 plan must respond in writing within 90 days by providing the 8 requested economic analysis or informing the individual that no 9 economic analysis was conducted or the vote aligned with the 10 recommendation of the board of directors of the issuer of the 11 shares. The investment company or plan must provide such a 12 response without cost up to twice annually per consumer. 13 The bill allows the attorney general to investigate any 14 suspected violations of the bill and to enforce the bill’s 15 provisions by initiating an action in the name of the state 16 and seeking civil penalties for each violation. Each share 17 not voted in the best economic interest of the shareholder 18 qualifies as a separate violation and constitutes irreparable 19 harm. The bill requires civil penalties to be in equity and 20 to not exceed $1,000 per violation. Civil penalties collected 21 under the bill are deposited in the general fund of the state. 22 -9- LSB 5408XD (4) 90 sc/ns 9/ 9