| 1 | A bill to be entitled |
| 2 | An act relating to uniform prudent management of |
| 3 | institutional funds; creating s. 617.2104, F.S.; creating |
| 4 | a short title; providing definitions; providing |
| 5 | requirements for the management of funds held by an |
| 6 | institution exclusively for charitable purposes; providing |
| 7 | standards of conduct in managing and investing |
| 8 | institutional funds; providing requirements for |
| 9 | appropriation for expenditure or accumulation of an |
| 10 | endowment fund by an institution; authorizing an |
| 11 | institution to delegate to an external agent the |
| 12 | management and investment of an institutional fund; |
| 13 | authorizing the release or modification of a restriction |
| 14 | on management, investment, or purpose of an institutional |
| 15 | fund; providing for determination of compliance; providing |
| 16 | for application to existing or newly established |
| 17 | institutional funds; providing relationship to federal |
| 18 | law; providing requirements for uniformity of application |
| 19 | and construction of the act; repealing s. 1010.10, F.S., |
| 20 | relating to the Florida Uniform Management of |
| 21 | Institutional Funds Act; providing an effective date. |
| 22 |
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| 23 | Be It Enacted by the Legislature of the State of Florida: |
| 24 |
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| 25 | Section 1. Section 617.2104, Florida Statutes, is created |
| 26 | to read: |
| 27 | 617.2104 Uniform Prudent Management of Institutional Funds |
| 28 | Act.- |
| 29 | (1) SHORT TITLE.-This section may be cited as the "Uniform |
| 30 | Prudent Management of Institutional Funds Act." |
| 31 | (2) DEFINITIONS.-For purposes of this section: |
| 32 | (a) "Charitable purpose" means the relief of poverty, the |
| 33 | advancement of education or religion, the promotion of health, |
| 34 | the promotion of a governmental purpose, or any other purpose |
| 35 | the achievement of which is beneficial to the community. |
| 36 | (b) "Endowment fund" means an institutional fund or part |
| 37 | thereof that, under the terms of a gift instrument, is not |
| 38 | wholly expendable by the institution on a current basis. The |
| 39 | term does not include assets that an institution designates as |
| 40 | an endowment fund for its own use. |
| 41 | (c) "Gift instrument" means a record or records, including |
| 42 | an institutional solicitation, under which property is granted |
| 43 | to, transferred to, or held by an institution as an |
| 44 | institutional fund. |
| 45 | (d) "Institution" means: |
| 46 | 1. A person, other than an individual, organized and |
| 47 | operated exclusively for charitable purposes; |
| 48 | 2. A government or governmental subdivision, agency, or |
| 49 | instrumentality to the extent that it holds funds exclusively |
| 50 | for a charitable purpose; or |
| 51 | 3. A trust that had both charitable and noncharitable |
| 52 | interests after all noncharitable interests have terminated. |
| 53 | (e) "Institutional fund" means a fund held by an |
| 54 | institution exclusively for charitable purposes. The term does |
| 55 | not include: |
| 56 | 1. Program-related assets; |
| 57 | 2. A fund held for an institution by a trustee that is not |
| 58 | an institution; or |
| 59 | 3. A fund in which a beneficiary that is not an |
| 60 | institution has an interest, other than an interest that could |
| 61 | arise upon violation or failure of the purposes of the fund. |
| 62 | (f) "Person" means an individual, corporation, business |
| 63 | trust, estate, trust, partnership, limited liability company, |
| 64 | association, joint venture, public corporation, government or |
| 65 | governmental subdivision, agency, or instrumentality, or any |
| 66 | other legal or commercial entity. |
| 67 | (g) "Program-related asset" means an asset held by an |
| 68 | institution primarily to accomplish a charitable purpose of the |
| 69 | institution and not primarily for investment. |
| 70 | (h) "Record" means information that is inscribed on a |
| 71 | tangible medium or that is stored in an electronic or other |
| 72 | medium and is retrievable in perceivable form. |
| 73 | (3) STANDARD OF CONDUCT IN MANAGING AND INVESTING |
| 74 | INSTITUTIONAL FUND.- |
| 75 | (a) Subject to the intent of a donor expressed in a gift |
| 76 | instrument, an institution, in managing and investing an |
| 77 | institutional fund, shall consider the charitable purposes of |
| 78 | the institution and the purposes of the institutional fund. |
| 79 | (b) In addition to complying with the duty of loyalty |
| 80 | imposed by law other than this section, each person responsible |
| 81 | for managing and investing an institutional fund shall manage |
| 82 | and invest the fund in good faith and with the care an |
| 83 | ordinarily prudent person in a like position would exercise |
| 84 | under similar circumstances. |
| 85 | (c) In managing and investing an institutional fund, an |
| 86 | institution: |
| 87 | 1. May incur only costs that are appropriate and |
| 88 | reasonable in relation to the assets, the purposes of the |
| 89 | institution, and the skills available to the institution. |
| 90 | 2. Shall make a reasonable effort to verify facts relevant |
| 91 | to the management and investment of the fund. |
| 92 | (d) An institution may pool two or more institutional |
| 93 | funds for purposes of management and investment. |
| 94 | (e) Except as otherwise provided by a gift instrument, the |
| 95 | following rules apply: |
| 96 | 1. In managing and investing an institutional fund, the |
| 97 | following factors, if relevant, must be considered: |
| 98 | a. General economic conditions. |
| 99 | b. The possible effect of inflation or deflation. |
| 100 | c. The expected tax consequences, if any, of investment |
| 101 | decisions or strategies. |
| 102 | d. The role that each investment or course of action plays |
| 103 | within the overall investment portfolio of the fund. |
| 104 | e. The expected total return from income and the |
| 105 | appreciation of investments. |
| 106 | f. Other resources of the institution. |
| 107 | g. The needs of the institution and the fund to make |
| 108 | distributions and to preserve capital. |
| 109 | h. An asset's special relationship or special value, if |
| 110 | any, to the charitable purposes of the institution. |
| 111 | 2. Management and investment decisions about an individual |
| 112 | asset must be made not in isolation but rather in the context of |
| 113 | the institutional fund's portfolio of investments as a whole and |
| 114 | as a part of an overall investment strategy having risk and |
| 115 | return objectives reasonably suited to the fund and to the |
| 116 | institution. |
| 117 | 3. Except as otherwise provided by law other than this |
| 118 | section, an institution may invest in any kind of property or |
| 119 | type of investment consistent with this section. |
| 120 | 4. An institution shall diversify the investments of an |
| 121 | institutional fund unless the institution reasonably determines |
| 122 | that, because of special circumstances, the purposes of the fund |
| 123 | are better served without diversification. |
| 124 | 5. Within a reasonable time after receiving property, an |
| 125 | institution shall make and carry out decisions concerning the |
| 126 | retention or disposition of the property or to rebalance a |
| 127 | portfolio in order to bring the institutional fund into |
| 128 | compliance with the purposes, terms, and distribution |
| 129 | requirements of the institution as necessary to meet other |
| 130 | circumstances of the institution and the requirements of this |
| 131 | section. |
| 132 | 6. A person that has special skills or expertise, or is |
| 133 | selected in reliance upon the person's representation that the |
| 134 | person has special skills or expertise, has a duty to use those |
| 135 | skills or that expertise in managing and investing institutional |
| 136 | funds. |
| 137 | (4) APPROPRIATION FOR EXPENDITURE OR ACCUMULATION OF |
| 138 | ENDOWMENT FUND; RULES OF CONSTRUCTION.- |
| 139 | (a) Subject to the intent of a donor expressed in the gift |
| 140 | instrument, an institution may appropriate for expenditure or |
| 141 | accumulate so much of an endowment fund as the institution |
| 142 | determines is prudent for the uses, benefits, purposes, and |
| 143 | duration for which the endowment fund is established. Unless |
| 144 | stated otherwise in the gift instrument, the assets in an |
| 145 | endowment fund are donor-restricted assets until appropriated |
| 146 | for expenditure by the institution. In making a determination to |
| 147 | appropriate or accumulate, the institution shall act in good |
| 148 | faith with the care that an ordinarily prudent person in a like |
| 149 | position would exercise under similar circumstances and shall |
| 150 | consider, if relevant, the following factors: |
| 151 | 1. The duration and preservation of the endowment fund. |
| 152 | 2. The purposes of the institution and the endowment fund. |
| 153 | 3. General economic conditions. |
| 154 | 4. The possible effect of inflation or deflation. |
| 155 | 5. The expected total return from income and the |
| 156 | appreciation of investments. |
| 157 | 6. Other resources of the institution. |
| 158 | 7. The investment policy of the institution. |
| 159 | (b) To limit the authority to appropriate for expenditure |
| 160 | or accumulate under paragraph (a), a gift instrument must |
| 161 | specifically state the limitation. |
| 162 | (c) Terms in a gift instrument designating a gift as an |
| 163 | endowment, or a direction or authorization in the gift |
| 164 | instrument to use only "income," "interest," "dividends," or |
| 165 | "rents, issues, or profits," or "to preserve the principal |
| 166 | intact," or words of similar import: |
| 167 | 1. Create an endowment fund of permanent duration unless |
| 168 | other language in the gift instrument limits the duration or |
| 169 | purpose of the fund. |
| 170 | 2. Do not otherwise limit the authority to appropriate for |
| 171 | expenditure or accumulate under paragraph (a). |
| 172 | (5) DELEGATION OF MANAGEMENT AND INVESTMENT FUNCTIONS.- |
| 173 | (a) Subject to any specific limitation set forth in a gift |
| 174 | instrument or in law other than this section, an institution may |
| 175 | delegate to an external agent the management and investment of |
| 176 | an institutional fund to the extent that an institution could |
| 177 | prudently delegate under the circumstances. An institution shall |
| 178 | act in good faith, with the care that an ordinarily prudent |
| 179 | person in a like position would exercise under similar |
| 180 | circumstances, in: |
| 181 | 1. Selecting an agent. |
| 182 | 2. Establishing the scope and terms of the delegation, |
| 183 | consistent with the purposes of the institution and the |
| 184 | institutional fund. |
| 185 | 3. Periodically reviewing the agent's actions in order to |
| 186 | monitor the agent's performance and compliance with the scope |
| 187 | and terms of the delegation. |
| 188 | (b) In performing a delegated function, an agent owes a |
| 189 | duty to the institution to exercise reasonable care to comply |
| 190 | with the scope and terms of the delegation. |
| 191 | (c) An institution that complies with paragraph (a) is not |
| 192 | liable for the decisions or actions of an agent to which the |
| 193 | function was delegated. |
| 194 | (d) By accepting delegation of a management or investment |
| 195 | function from an institution that is subject to the laws of this |
| 196 | state, an agent submits to the jurisdiction of the courts of |
| 197 | this state in all proceedings arising from or related to the |
| 198 | delegation or the performance of the delegated function. |
| 199 | (e) An institution may delegate management and investment |
| 200 | functions to its committees, officers, or employees as |
| 201 | authorized by law other than this section. |
| 202 | (6) RELEASE OR MODIFICATION OF RESTRICTIONS ON MANAGEMENT, |
| 203 | INVESTMENT, OR PURPOSE.- |
| 204 | (a) If the donor consents in a record, an institution may |
| 205 | release or modify, in whole or in part, a restriction contained |
| 206 | in a gift instrument on the management, investment, or purpose |
| 207 | of an institutional fund. A release or modification may not |
| 208 | allow a fund to be used for a purpose other than a charitable |
| 209 | purpose of the institution. |
| 210 | (b) The court, upon application of an institution, may |
| 211 | modify a restriction contained in a gift instrument regarding |
| 212 | the management or investment of an institutional fund if the |
| 213 | restriction has become impracticable or wasteful, if it impairs |
| 214 | the management or investment of the fund, or if, because of |
| 215 | circumstances not anticipated by the donor, a modification of a |
| 216 | restriction will further the purposes of the fund. The |
| 217 | institution shall notify the Attorney General of the |
| 218 | application, and the Attorney General must be given an |
| 219 | opportunity to be heard. To the extent practicable, any |
| 220 | modification must be made in accordance with the donor's |
| 221 | probable intention. |
| 222 | (c) If a particular charitable purpose or a restriction |
| 223 | contained in a gift instrument on the use of an institutional |
| 224 | fund becomes unlawful, impracticable, impossible to achieve, or |
| 225 | wasteful, the court, upon application of an institution, may |
| 226 | modify the purpose of the fund or the restriction on the use of |
| 227 | the fund in a manner consistent with the charitable purposes |
| 228 | expressed in the gift instrument. The institution shall notify |
| 229 | the Attorney General of the application, and the Attorney |
| 230 | General must be given an opportunity to be heard. |
| 231 | (d) If consent of the donor in a record cannot be obtained |
| 232 | by reason of the donor's death, disability, unavailability, or |
| 233 | impossibility of identification, a governing board may modify a |
| 234 | restriction contained in a gift instrument regarding the |
| 235 | management, investment, or purpose of an institutional fund if |
| 236 | the fund has a total value of $100,000 or less and the |
| 237 | restriction has become impracticable or wasteful, impairs the |
| 238 | management, investment, or use of the fund or if, because of |
| 239 | circumstances not anticipated by the donor, a modification of a |
| 240 | restriction will further the purposes of the fund. |
| 241 | (e) If an institution determines that a restriction |
| 242 | contained in a gift instrument on the management, investment, or |
| 243 | purpose of an institutional fund is unlawful, impracticable, |
| 244 | impossible to achieve, or wasteful, the institution, 60 days |
| 245 | after obtaining written approval from the Attorney General, may |
| 246 | release or modify the restriction, in whole or part, if: |
| 247 | 1. The institutional fund subject to the restriction has a |
| 248 | total value of at least $100,000 and not more than $250,000; |
| 249 | 2. More than 20 years have elapsed since the fund was |
| 250 | established; and |
| 251 | 3. The institution uses the property in a manner |
| 252 | consistent with the charitable purposes expressed in the gift |
| 253 | instrument. |
| 254 | (7) REVIEWING COMPLIANCE.-Compliance with this section is |
| 255 | determined in light of the facts and circumstances existing at |
| 256 | the time a decision is made or action is taken, and not by |
| 257 | hindsight. |
| 258 | (8) APPLICATION TO EXISTING INSTITUTIONAL FUNDS.-This |
| 259 | section applies to institutional funds existing on or |
| 260 | established after the effective date of this section. As applied |
| 261 | to institutional funds existing on the effective date of this |
| 262 | section, this section governs only decisions made or actions |
| 263 | taken on or after that date. |
| 264 | (9) RELATION TO ELECTRONIC SIGNATURES IN GLOBAL AND |
| 265 | NATIONAL COMMERCE ACT.-This section modifies, limits, and |
| 266 | supersedes the federal Electronic Signatures in Global and |
| 267 | National Commerce Act, 15 U.S.C. ss. 7001 et seq., but does not |
| 268 | modify, limit, or supersede s. 101(c) of that act, 15 U.S.C. s. |
| 269 | 7001(c), or authorize electronic delivery of any of the notices |
| 270 | described in s. 103(b) of that act, 15 U.S.C. s. 7001(b). |
| 271 | (10) UNIFORMITY OF APPLICATION AND CONSTRUCTION.-In |
| 272 | applying and construing this uniform act, consideration must be |
| 273 | given to the need to promote uniformity of the law with respect |
| 274 | to its subject matter among states that enact it. |
| 275 | Section 2. Section 1010.10, Florida Statutes, is repealed. |
| 276 | Section 3. This act shall take effect July 1, 2011. |