The Florida Senate
BILL ANALYSIS AND FISCAL IMPACT STATEMENT
(This document is based on the provisions contained in the legislation as of the latest date listed below.)
Prepared By: The Professional Staff of the Committee on Fiscal Policy
BILL: CS/SB 302
INTRODUCER: Banking and Insurance Committee and Senator Grall
SUBJECT: Government and Corporate Activism
DATE: April 12, 2023 REVISED:
ANALYST STAFF DIRECTOR REFERENCE ACTION
1. Moody Knudson BI Fav/CS
2. Moody Yeatman FP Favorable
Please see Section IX. for Additional Information:
COMMITTEE SUBSTITUTE - Substantial Changes
I. Summary:
CS/SB 302 addresses the provision of products and services by financial institutions, the
investment of certain state and local government funds, the issuance of environmental, social,
and governance (ESG) bonds, and procurement of and contracting with vendor’s by certain state
and local entities and educational institutions.
Financial Institutions
The bill requires financial institutions, consumer finance lenders, and money services businesses,
to make decisions about the provision or denial of services based on an analysis of risk factors
unique to each customer, and prohibits them from engaging in any “unsafe and unsound
practice” or applying a “social credit score” when making determinations about the provision of
services. Upon application or renewal, such entities to attest must attest to compliance with these
provisions. They are subject to penalties and sanctions for violating any of these provisions.
Government Investments
The bill codifies and expands the program adopted by the State Board of Administration last year
that requires, with limited exceptions, investments of certain state and local funds to be based
solely on pecuniary factors and not on the furtherance of any social, political, or ideological
interests. The expansion applies to all funds of state Treasury, all local government retirement
plans, investments of local government surplus funds, and investment of funds raised by citizen
support or direct-support organizations. The bill prohibits the person or entity responsible for
BILL: CS/SB 302 Page 2
making investment decisions from subordinating the interests of the beneficiaries to other
objectives, and requires the weight given to any pecuniary factor to appropriately reflect a
prudent assessment of its impact on risk or returns. Investment policies are required to be
updated to incorporate these requirements.
State and local retirement systems must report compliance with these requirements on a biennial
basis, and provides the Attorney General with authority to seek an injunction against any
violators.
Investment managers who invest public funds on behalf of state and local funds must include a
specified disclaimer in certain external communications that discuss social, political, or
ideological interests. On or after July 1, 2023, contracts with investment managers may be
unilaterally terminated in certain circumstances. Investment managers are subject to sanctions if
they fail to comply with the new provisions under the bill.
Bond Financing
The bill prohibits specified state and local issuers from:
 Issuing ESG bonds;
 Expending public funds or use money derived from the issuance of bonds to pay a third-party
verifier to certify or verify that bonds may be designated or labeled as ESG bonds;
 Entering into a contract with any rating agency whose ESG scores would have a direct,
negative impact on the issuer’s bond ratings.
The bill applies to any bonds issued or to any agreement entered into or any contract executed on
or after July 1, 2023.
Procurement and Contracting with Vendors
Beginning July 1, 2023, certain state and local government entities, and educational institutions,
are prohibited from giving preference to a vendor based on the vendor’s social, political, or
ideological interests when procuring or contracting with them. Such entities may not request
documentation relating to a vendor’s social, political, or ideological interests, and any
solicitation for purchases or leases must notify vendors of these provisions.
The bill reenacts ss. 17.61 and 215.44, F.S.
See Section V. Fiscal Impact Statement.
The bill is effective July 1, 2023.
II. Present Situation:
Environmental, social, and governance (ESG) are non-financial risks that are used by some
institutions and investment managers when making investment decisions. Examples of
environmental factors include greenhouse gases and air or water and ground pollution emissions.
Social practices considered include product liabilities, supply chain labor, and health and safety
BILL: CS/SB 302 Page 3
standards. Governance factors include shareholder rights, board diversity, executive
compensation, and corporate board behavior such as anti-competitive practices and corruption.1
JP Morgan reports that over $500 billion flowed into ESG-integrated funds in 2021.2 According
to Broadridge Financial Solutions, ESG assets are forecasted to exceed $30 trillion by 2030.3
Financial Institutions
Dual Oversight of Depository Institutions
An institution must have a federal or state charter to accept deposits. Banks are chartered and
regulated as national banks by the Office of the Comptroller of the Currency within the U.S.
Department of the Treasury or as state banks by a state regulator.4
The Florida Financial Institutions Codes apply to all state-authorized or state-chartered financial
banks, trust companies, credit unions and related entities.5 The Office of Financial Regulation
(OFR) licenses and regulates 197 financial entities, including 69 state-chartered banks and 66
state-chartered credit unions.6 There are also 33 federally-chartered banks and 63 federally
chartered credit unions operating in Florida.7
Due to federal preemptions, a state’s regulatory powers in relation to federally chartered
institutions is limited. However, the state may exercise powers within their exceptions to
exclusive federal visitorial authority. Such exceptions are those recognized by federal law and
courts of law or created by the U.S. Congress.8
Once a financial institution obtains a charter, one of the regulator’s primary task is to ensure
solvency which is achieved by conducting financial exams of its licensed entities. Financial
institutions also need approval from their regulator to make changes in their upper management,
merge with another company, pay dividends to shareholders, engage in material transactions
with subsidiaries and affiliates, or make significant changes to their business operations.9
1
Deloitte, #1 What is ESG?, available at: #1 What is ESG? (deloitte.com) (last visited Mar. 26, 2023).
2
Wu, J., Five Reasons Why the Future of ESG Investing is Long Term, JP Morgan, Jan. 1, 2022, available at: ESG Outlook
2022: The future of ESG investing | J.P. Morgan Asset Management | J.P. Morgan Asset Management (jpmorgan.com) (last
visited Mar. 26, 2023).
3
Green, A., The Future of ESG Investing, Forbes, Feb. 16, 2022, available at: The Future Of ESG Investing (forbes.com)
(last visited Mar. 26, 2023).
4
Congressional Research Service, Introduction to Financial Services: Banking, p. 1, Jan. 5, 2023, available at:
https://crsreports.congress.gov/product/pdf/IF/IF10035 (last visited Mar. 26, 2023).
5
Section 655.005(1)(k), F.S., states that the Financial Institutions Codes includes: Ch. 655, financial institutions generally;
Ch. 657, credit unions; Ch. 658, banks and trust companies; Ch. 660, trust business; Ch. 662, family trust companies; Ch.
663, international banking; Ch. 665, relating to associations; and Ch. 667, savings banks.
6
Office of Financial Regulation, Fast Facts (2021 ed.), available at: FastFacts.pdf (flofr.gov) (last visited Mar. 26, 2023).
7
Id.
8
12 C.F.R. § 7.4000 (2011).
9
For a detailed discussion of the regulatory framework, see, Congressional Research Service, Who Regulates Whom? An
Overview of the U.S. Financial Regulatory Framework, March 10, 2020, available at:
https://crsreports.congress.gov/product/pdf/R/R44918/7 (last visited Feb. 13, 2023). Also see ss. 655.037, 655.0385,
655.0386, 655.03855, and 655.412, F.S.
BILL: CS/SB 302 Page 4
Banks chartered by OFR must become a members of the Federal Reserve or obtain insurance
from the Federal Deposit Insurance Corporation.10 Credit Unions chartered by OFR must insure
their accounts by becoming a member of the National Credit Union Administration.11 Thus,
state-chartered banks and credit unions are subject to a dual-regulatory system.
OFR must examine the condition of each state-chartered financial institution at least every 18
months, and may conduct more frequent examinations as needed, based on risks associated with
a licensee, such as prior examination results or significant operational changes.12 When a state-
chartered financial institution also has a federal regulator, OFR may accept an examination
performed by the federal regulator or the regulators may conduct a joint examination.13
Financial institutions that become insolvent are liquidated by their primary regulator.14
Authority of OFR
OFR may impose administrative sanctions on financial institutions subject to the Florida
Financial Institutions Codes that engage in an “unsafe or unsound practice.” This term is defined
at s. 655.005(1)(y), F.S., which states:
“Unsafe or unsound practice” means any practice or conduct found by the office
to be contrary to generally accepted standards applicable to a financial institution,
or a violation of any prior agreement in writing or order of a state or federal
regulatory agency, which practice, conduct, or violation creates the likelihood of
loss, insolvency, or dissipation of assets or otherwise prejudices the interest of the
financial institution or its depositors or members. In making this determination,
the office must consider the size and condition of the financial institution, the
gravity of the violation, and the prior conduct of the person or institution
involved.
Possible penalties include: issuance of a cease and desist order,15 removal of an institution-
affiliated party,16 administrative fines,17 and a court-ordered injunction to restrain conduct that
violates a formal enforcement action.18 When imposing a sanction or requiring a remedy, OFR
must consider “the appropriateness of the penalty with respect to the size of the financial
resources and good faith of the person charged, the gravity of the violation, the history of
previous violations, and such other matters as justice may require.”19
10
Sections 658.22 and 658.38, F.S.
11
Sections 657.005 and 657.008, F.S.
12
Section 655.045(1), F.S.
13
Section 655.045(1)(a), F.S.
14
Sections 657.063, 657.064, 658.83, and 660.48, F.S.
15
Section 655.033, F.S.
16
Section 655.037, F.S.
17
Section 655.041, F.S.
18
Section 655.034, F.S.
19
Section 655.031(1), F.S.
BILL: CS/SB 302 Page 5
OFR may impose monetary fines if a licensee violates a provision of the financial institutions
codes or associated rules, an order of the office, or a written agreement with the office.20 In
general, administrative fines may not exceed $2,500 per day for each violation.21 Larger fines are
allowed in the following circumstances:
 Up to $10,000 per day for each reckless violation that result in more than a minimal loss to a
financial institution or pecuniary benefit to the person liable for the violation;22
 Up to the lesser of $500,000 per day or 1 percent of the total assets in the case of a financial
institution, or $50,000 per day in any other case, for knowing violations that result in more
than a minimal loss to a financial institution or pecuniary benefit to the person liable for the
violation;23 and
 Up to $10,000 per day for any financial institution that refuses to permit an examination.24
Criminal violations – like embezzlement and fraud – may be prosecuted under the penal code.25
OFR has authority to monitor state-chartered banks, to ensure compliance with state and federal
laws, and may enforce state consumer protection laws on federally chartered banks operating
within their boundaries so long as the state law is not pre-empted by federal law.26 Federal pre-
emption permits federally chartered banks and savings associations to operate under a uniform
set of rules when they operate across state lines.27
When a state chartered financial institution encounters a competitive disadvantage caused by
state law in relation to the capacities and powers allowed to federally chartered institutions, OFR
may issue an order or a rule waiving the state law causing the competitive imbalance.28
Non-Depository Financial Institutions
Consumer finance lenders and money services businesses are non-depository lenders that profit
from fees charged on such loans or transactions. OFR has regulatory authority over consumer
finance lenders that offer consumers finance products or services.29 Consumer finance lenders
are required to obtain a license from OFR that must be renewed every two years to conduct
20
Section 655.041, F.S.
21
Section 655.041(2), F.S.
22
Section 655.041(2)(a), F.S.
23
Section 655.041(2)(b), F.S.
24
Section 655.041(2)(c), F.S. Rule 69U-100.0451, F.A.C, discusses fees that may be assessed to cover the costs of
examinations.
25
Section 655.0322, F.S.
26
12 U.S.C. 25b.
27
U.S. Department of the Treasury, Office of the Comptroller of the Currency, OCC Chief Counsel’s Interpretation: 12
U.S.S. §25b, Dec. 18, 2020, available at: https://www.occ.gov/news-issuances/news-releases/2020/nr-occ-2020-176a.pdf (last
visited Mar. 26, 2023).
28
Section 655.061, F.S.
29
Section 516.01(2), F.S., defines “consumer finance loans” as a loan of money, credit, goods, or choses in action, including,
except as otherwise specifically indicated, provision of a line of credit, in an amount or to a value of $25,000 or less for
which the lender charges, contracts for, collects, or receives interest at a rate greater than 18 percent per annum.
BILL: CS/SB 302 Page 6
business in Florida. 30 Each location of a consumer finance company must be licensed by OFR,
even if the separate locations are part of the same business entity.31
Consumer finance lenders may make secured or unsecured loans of up to $25,000 at interest
rates between 18 and 30 percent per year.32 OFR investigates consumer complaints to ensure that
consumer finance lenders are licensed to purchase or hold retail installment contracts and comply
with fair lending laws.33 Administrative sanctions for consumer finance lenders may include
suspension or revocation of a license, a written reprimand, or a fine of up to $1,000 for each
violation.34 Certain violations, such as violating fair lending laws or operating without a license,
may be prosecuted as a first-degree misdemeanor.35
OFR also has regulatory authority over money services businesses36 that assist consumers in
transacting instruments, transmitting money,37 cashing checks,38 and exchanging foreign
currency.39 Examples include check cashers like The Check Cashing Store,40 money transmitters
like PayPal,41 and exchangers like Florida Currency Exchange.42 Money services businesses also
include “payday lenders” who offer short-term, high-interest loans that are due on the
consumer’s next pay day. Two types of payday loans are allowed in Florida:
 The lender provides cash in exchange for the borrower’s check (up to $500) and agrees to
hold the check for 7 to 31 days before cashing the check. Fees may not exceed 10 percent of
the payment to the borrower plus a $5 verification fee.
30
Section 516.02(1), F.S.
31
Section 516.05, F.S.
32
Section 516.02(2)(a), F.S.
33
Sections 516.11, 516.15, 516.26, 516.31 and 516.35, F.S.
34
Section 516.07(2), F.S. A first degree misdemeanor is punishable by up to one year in imprisonment or a $1,000 fine as
provide in s. 775.082, F.S., or s. 775.083, F.S.
35
Section 516.19, F.S.
36
Section 560.103(23), F.S., defines “money services businesses” as any person located in or doing business in this state,
from this state, or into this state