HB 599

1
A bill to be entitled
2An act relating to uniform prudent management of
3institutional funds; creating s. 617.2104, F.S.; creating
4a short title; providing definitions; providing
5requirements for the management of funds held by an
6institution exclusively for charitable purposes; providing
7standards of conduct in managing and investing
8institutional funds; providing requirements for
9appropriation for expenditure or accumulation of an
10endowment fund by an institution; authorizing an
11institution to delegate to an external agent the
12management and investment of an institutional fund;
13authorizing the release or modification of a restriction
14on management, investment, or purpose of an institutional
15fund; providing for determination of compliance; providing
16for application to existing or newly established
17institutional funds; providing relationship to federal
18law; providing requirements for uniformity of application
19and construction of the act; repealing s. 1010.10, F.S.,
20relating to the Florida Uniform Management of
21Institutional Funds Act; providing an effective date.
22
23Be It Enacted by the Legislature of the State of Florida:
24
25     Section 1.  Section 617.2104, Florida Statutes, is created
26to read:
27     617.2104  Uniform Prudent Management of Institutional Funds
28Act.-
29     (1)  SHORT TITLE.-This section may be cited as the "Uniform
30Prudent Management of Institutional Funds Act."
31     (2)  DEFINITIONS.-For purposes of this section:
32     (a)  "Charitable purpose" means the relief of poverty, the
33advancement of education or religion, the promotion of health,
34the promotion of a governmental purpose, or any other purpose
35the achievement of which is beneficial to the community.
36     (b)  "Endowment fund" means an institutional fund or part
37thereof that, under the terms of a gift instrument, is not
38wholly expendable by the institution on a current basis. The
39term does not include assets that an institution designates as
40an endowment fund for its own use.
41     (c)  "Gift instrument" means a record or records, including
42an institutional solicitation, under which property is granted
43to, transferred to, or held by an institution as an
44institutional fund.
45     (d)  "Institution" means:
46     1.  A person, other than an individual, organized and
47operated exclusively for charitable purposes;
48     2.  A government or governmental subdivision, agency, or
49instrumentality to the extent that it holds funds exclusively
50for a charitable purpose; or
51     3.  A trust that had both charitable and noncharitable
52interests after all noncharitable interests have terminated.
53     (e)  "Institutional fund" means a fund held by an
54institution exclusively for charitable purposes. The term does
55not include:
56     1.  Program-related assets;
57     2.  A fund held for an institution by a trustee that is not
58an institution; or
59     3.  A fund in which a beneficiary that is not an
60institution has an interest, other than an interest that could
61arise upon violation or failure of the purposes of the fund.
62     (f)  "Person" means an individual, corporation, business
63trust, estate, trust, partnership, limited liability company,
64association, joint venture, public corporation, government or
65governmental subdivision, agency, or instrumentality, or any
66other legal or commercial entity.
67     (g)  "Program-related asset" means an asset held by an
68institution primarily to accomplish a charitable purpose of the
69institution and not primarily for investment.
70     (h)  "Record" means information that is inscribed on a
71tangible medium or that is stored in an electronic or other
72medium and is retrievable in perceivable form.
73     (3)  STANDARD OF CONDUCT IN MANAGING AND INVESTING
74INSTITUTIONAL FUND.-
75     (a)  Subject to the intent of a donor expressed in a gift
76instrument, an institution, in managing and investing an
77institutional fund, shall consider the charitable purposes of
78the institution and the purposes of the institutional fund.
79     (b)  In addition to complying with the duty of loyalty
80imposed by law other than this section, each person responsible
81for managing and investing an institutional fund shall manage
82and invest the fund in good faith and with the care an
83ordinarily prudent person in a like position would exercise
84under similar circumstances.
85     (c)  In managing and investing an institutional fund, an
86institution:
87     1.  May incur only costs that are appropriate and
88reasonable in relation to the assets, the purposes of the
89institution, and the skills available to the institution.
90     2.  Shall make a reasonable effort to verify facts relevant
91to the management and investment of the fund.
92     (d)  An institution may pool two or more institutional
93funds for purposes of management and investment.
94     (e)  Except as otherwise provided by a gift instrument, the
95following rules apply:
96     1.  In managing and investing an institutional fund, the
97following 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
101decisions or strategies.
102     d.  The role that each investment or course of action plays
103within the overall investment portfolio of the fund.
104     e.  The expected total return from income and the
105appreciation of investments.
106     f.  Other resources of the institution.
107     g.  The needs of the institution and the fund to make
108distributions and to preserve capital.
109     h.  An asset's special relationship or special value, if
110any, to the charitable purposes of the institution.
111     2.  Management and investment decisions about an individual
112asset must be made not in isolation but rather in the context of
113the institutional fund's portfolio of investments as a whole and
114as a part of an overall investment strategy having risk and
115return objectives reasonably suited to the fund and to the
116institution.
117     3.  Except as otherwise provided by law other than this
118section, an institution may invest in any kind of property or
119type of investment consistent with this section.
120     4.  An institution shall diversify the investments of an
121institutional fund unless the institution reasonably determines
122that, because of special circumstances, the purposes of the fund
123are better served without diversification.
124     5.  Within a reasonable time after receiving property, an
125institution shall make and carry out decisions concerning the
126retention or disposition of the property or to rebalance a
127portfolio in order to bring the institutional fund into
128compliance with the purposes, terms, and distribution
129requirements of the institution as necessary to meet other
130circumstances of the institution and the requirements of this
131section.
132     6.  A person that has special skills or expertise, or is
133selected in reliance upon the person's representation that the
134person has special skills or expertise, has a duty to use those
135skills or that expertise in managing and investing institutional
136funds.
137     (4)  APPROPRIATION FOR EXPENDITURE OR ACCUMULATION OF
138ENDOWMENT FUND; RULES OF CONSTRUCTION.-
139     (a)  Subject to the intent of a donor expressed in the gift
140instrument, an institution may appropriate for expenditure or
141accumulate so much of an endowment fund as the institution
142determines is prudent for the uses, benefits, purposes, and
143duration for which the endowment fund is established. Unless
144stated otherwise in the gift instrument, the assets in an
145endowment fund are donor-restricted assets until appropriated
146for expenditure by the institution. In making a determination to
147appropriate or accumulate, the institution shall act in good
148faith with the care that an ordinarily prudent person in a like
149position would exercise under similar circumstances and shall
150consider, 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
156appreciation 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
160or accumulate under paragraph (a), a gift instrument must
161specifically state the limitation.
162     (c)  Terms in a gift instrument designating a gift as an
163endowment, or a direction or authorization in the gift
164instrument to use only "income," "interest," "dividends," or
165"rents, issues, or profits," or "to preserve the principal
166intact," or words of similar import:
167     1.  Create an endowment fund of permanent duration unless
168other language in the gift instrument limits the duration or
169purpose of the fund.
170     2.  Do not otherwise limit the authority to appropriate for
171expenditure 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
174instrument or in law other than this section, an institution may
175delegate to an external agent the management and investment of
176an institutional fund to the extent that an institution could
177prudently delegate under the circumstances. An institution shall
178act in good faith, with the care that an ordinarily prudent
179person in a like position would exercise under similar
180circumstances, in:
181     1.  Selecting an agent.
182     2.  Establishing the scope and terms of the delegation,
183consistent with the purposes of the institution and the
184institutional fund.
185     3.  Periodically reviewing the agent's actions in order to
186monitor the agent's performance and compliance with the scope
187and terms of the delegation.
188     (b)  In performing a delegated function, an agent owes a
189duty to the institution to exercise reasonable care to comply
190with the scope and terms of the delegation.
191     (c)  An institution that complies with paragraph (a) is not
192liable for the decisions or actions of an agent to which the
193function was delegated.
194     (d)  By accepting delegation of a management or investment
195function from an institution that is subject to the laws of this
196state, an agent submits to the jurisdiction of the courts of
197this state in all proceedings arising from or related to the
198delegation or the performance of the delegated function.
199     (e)  An institution may delegate management and investment
200functions to its committees, officers, or employees as
201authorized by law other than this section.
202     (6)  RELEASE OR MODIFICATION OF RESTRICTIONS ON MANAGEMENT,
203INVESTMENT, OR PURPOSE.-
204     (a)  If the donor consents in a record, an institution may
205release or modify, in whole or in part, a restriction contained
206in a gift instrument on the management, investment, or purpose
207of an institutional fund. A release or modification may not
208allow a fund to be used for a purpose other than a charitable
209purpose of the institution.
210     (b)  The court, upon application of an institution, may
211modify a restriction contained in a gift instrument regarding
212the management or investment of an institutional fund if the
213restriction has become impracticable or wasteful, if it impairs
214the management or investment of the fund, or if, because of
215circumstances not anticipated by the donor, a modification of a
216restriction will further the purposes of the fund. The
217institution shall notify the Attorney General of the
218application, and the Attorney General must be given an
219opportunity to be heard. To the extent practicable, any
220modification must be made in accordance with the donor's
221probable intention.
222     (c)  If a particular charitable purpose or a restriction
223contained in a gift instrument on the use of an institutional
224fund becomes unlawful, impracticable, impossible to achieve, or
225wasteful, the court, upon application of an institution, may
226modify the purpose of the fund or the restriction on the use of
227the fund in a manner consistent with the charitable purposes
228expressed in the gift instrument. The institution shall notify
229the Attorney General of the application, and the Attorney
230General must be given an opportunity to be heard.
231     (d)  If consent of the donor in a record cannot be obtained
232by reason of the donor's death, disability, unavailability, or
233impossibility of identification, a governing board may modify a
234restriction contained in a gift instrument regarding the
235management, investment, or purpose of an institutional fund if
236the fund has a total value of $100,000 or less and the
237restriction has become impracticable or wasteful, impairs the
238management, investment, or use of the fund or if, because of
239circumstances not anticipated by the donor, a modification of a
240restriction will further the purposes of the fund.
241     (e)  If an institution determines that a restriction
242contained in a gift instrument on the management, investment, or
243purpose of an institutional fund is unlawful, impracticable,
244impossible to achieve, or wasteful, the institution, 60 days
245after obtaining written approval from the Attorney General, may
246release or modify the restriction, in whole or part, if:
247     1.  The institutional fund subject to the restriction has a
248total value of at least $100,000 and not more than $250,000;
249     2.  More than 20 years have elapsed since the fund was
250established; and
251     3.  The institution uses the property in a manner
252consistent with the charitable purposes expressed in the gift
253instrument.
254     (7)  REVIEWING COMPLIANCE.-Compliance with this section is
255determined in light of the facts and circumstances existing at
256the time a decision is made or action is taken, and not by
257hindsight.
258     (8)  APPLICATION TO EXISTING INSTITUTIONAL FUNDS.-This
259section applies to institutional funds existing on or
260established after the effective date of this section. As applied
261to institutional funds existing on the effective date of this
262section, this section governs only decisions made or actions
263taken on or after that date.
264     (9)  RELATION TO ELECTRONIC SIGNATURES IN GLOBAL AND
265NATIONAL COMMERCE ACT.-This section modifies, limits, and
266supersedes the federal Electronic Signatures in Global and
267National Commerce Act, 15 U.S.C. ss. 7001 et seq., but does not
268modify, limit, or supersede s. 101(c) of that act, 15 U.S.C. s.
2697001(c), or authorize electronic delivery of any of the notices
270described in s. 103(b) of that act, 15 U.S.C. s. 7001(b).
271     (10)  UNIFORMITY OF APPLICATION AND CONSTRUCTION.-In
272applying and construing this uniform act, consideration must be
273given to the need to promote uniformity of the law with respect
274to 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.


CODING: Words stricken are deletions; words underlined are additions.