CS/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;
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; or
62     4.  A fund managed or administered by the State Board of
63Administration pursuant to its constitutional or statutory
64authority.
65     (f)  "Person" means an individual, corporation, business
66trust, estate, trust, partnership, limited liability company,
67association, joint venture, public corporation, government or
68governmental subdivision, agency, or instrumentality, or any
69other legal or commercial entity.
70     (g)  "Program-related asset" means an asset held by an
71institution primarily to accomplish a charitable purpose of the
72institution and not primarily for investment.
73     (h)  "Record" means information that is inscribed on a
74tangible medium or that is stored in an electronic or other
75medium and is retrievable in perceivable form.
76     (3)  STANDARD OF CONDUCT IN MANAGING AND INVESTING
77INSTITUTIONAL FUND.-
78     (a)  Subject to the intent of a donor expressed in a gift
79instrument, an institution, in managing and investing an
80institutional fund, shall consider the charitable purposes of
81the institution and the purposes of the institutional fund.
82     (b)  In addition to complying with the duty of loyalty
83imposed by law other than this section, each person responsible
84for managing and investing an institutional fund shall manage
85and invest the fund in good faith and with the care an
86ordinarily prudent person in a like position would exercise
87under similar circumstances.
88     (c)  In managing and investing an institutional fund, an
89institution:
90     1.  May incur only costs that are appropriate and
91reasonable in relation to the assets, the purposes of the
92institution, and the skills available to the institution.
93     2.  Shall make a reasonable effort to verify facts relevant
94to the management and investment of the fund.
95     (d)  An institution may pool two or more institutional
96funds for purposes of management and investment.
97     (e)  Except as otherwise provided by a gift instrument, the
98following rules apply:
99     1.  In managing and investing an institutional fund, the
100following factors, if relevant, must be considered:
101     a.  General economic conditions.
102     b.  The possible effect of inflation or deflation.
103     c.  The expected tax consequences, if any, of investment
104decisions or strategies.
105     d.  The role that each investment or course of action plays
106within the overall investment portfolio of the fund.
107     e.  The expected total return from income and the
108appreciation of investments.
109     f.  Other resources of the institution.
110     g.  The needs of the institution and the fund to make
111distributions and to preserve capital.
112     h.  An asset's special relationship or special value, if
113any, to the charitable purposes of the institution.
114     2.  Management and investment decisions about an individual
115asset must be made not in isolation but rather in the context of
116the institutional fund's portfolio of investments as a whole and
117as a part of an overall investment strategy having risk and
118return objectives reasonably suited to the fund and to the
119institution.
120     3.  Except as otherwise provided by law other than this
121section, an institution may invest in any kind of property or
122type of investment consistent with this section.
123     4.  An institution shall diversify the investments of an
124institutional fund unless the institution reasonably determines
125that, because of special circumstances, the purposes of the fund
126are better served without diversification.
127     5.  Within a reasonable time after receiving property, an
128institution shall make and carry out decisions concerning the
129retention or disposition of the property or to rebalance a
130portfolio in order to bring the institutional fund into
131compliance with the purposes, terms, and distribution
132requirements of the institution as necessary to meet other
133circumstances of the institution and the requirements of this
134section.
135     6.  A person that has special skills or expertise, or is
136selected in reliance upon the person's representation that the
137person has special skills or expertise, has a duty to use those
138skills or that expertise in managing and investing institutional
139funds.
140     (4)  APPROPRIATION FOR EXPENDITURE OR ACCUMULATION OF
141ENDOWMENT FUND; RULES OF CONSTRUCTION.-
142     (a)  Subject to the intent of a donor expressed in the gift
143instrument, an institution may appropriate for expenditure or
144accumulate so much of an endowment fund as the institution
145determines is prudent for the uses, benefits, purposes, and
146duration for which the endowment fund is established. Unless
147stated otherwise in the gift instrument, the assets in an
148endowment fund are donor-restricted assets until appropriated
149for expenditure by the institution. In making a determination to
150appropriate or accumulate, the institution shall act in good
151faith with the care that an ordinarily prudent person in a like
152position would exercise under similar circumstances and shall
153consider, if relevant, the following factors:
154     1.  The duration and preservation of the endowment fund.
155     2.  The purposes of the institution and the endowment fund.
156     3.  General economic conditions.
157     4.  The possible effect of inflation or deflation.
158     5.  The expected total return from income and the
159appreciation of investments.
160     6.  Other resources of the institution.
161     7.  The investment policy of the institution.
162     (b)  To limit the authority to appropriate for expenditure
163or accumulate under paragraph (a), a gift instrument must
164specifically state the limitation.
165     (c)  Terms in a gift instrument designating a gift as an
166endowment, or a direction or authorization in the gift
167instrument to use only "income," "interest," "dividends," or
168"rents, issues, or profits," or "to preserve the principal
169intact," or words of similar import:
170     1.  Create an endowment fund of permanent duration unless
171other language in the gift instrument limits the duration or
172purpose of the fund.
173     2.  Do not otherwise limit the authority to appropriate for
174expenditure or accumulate under paragraph (a).
175     (5)  DELEGATION OF MANAGEMENT AND INVESTMENT FUNCTIONS.-
176     (a)  Subject to any specific limitation set forth in a gift
177instrument or in law other than this section, an institution may
178delegate to an external agent the management and investment of
179an institutional fund to the extent that an institution could
180prudently delegate under the circumstances. An institution shall
181act in good faith, with the care that an ordinarily prudent
182person in a like position would exercise under similar
183circumstances, in:
184     1.  Selecting an agent.
185     2.  Establishing the scope and terms of the delegation,
186consistent with the purposes of the institution and the
187institutional fund.
188     3.  Periodically reviewing the agent's actions in order to
189monitor the agent's performance and compliance with the scope
190and terms of the delegation.
191     (b)  In performing a delegated function, an agent owes a
192duty to the institution to exercise reasonable care to comply
193with the scope and terms of the delegation.
194     (c)  An institution that complies with paragraph (a) is not
195liable for the decisions or actions of an agent to which the
196function was delegated.
197     (d)  By accepting delegation of a management or investment
198function from an institution that is subject to the laws of this
199state, an agent submits to the jurisdiction of the courts of
200this state in all proceedings arising from or related to the
201delegation or the performance of the delegated function.
202     (e)  An institution may delegate management and investment
203functions to its committees, officers, or employees as
204authorized by law other than this section.
205     (6)  RELEASE OR MODIFICATION OF RESTRICTIONS ON MANAGEMENT,
206INVESTMENT, OR PURPOSE.-
207     (a)  If the donor consents in a record, an institution may
208release or modify, in whole or in part, a restriction contained
209in a gift instrument on the management, investment, or purpose
210of an institutional fund. A release or modification may not
211allow a fund to be used for a purpose other than a charitable
212purpose of the institution.
213     (b)  The circuit court for the circuit in which an
214institution is located, upon application of that institution,
215may modify a restriction contained in a gift instrument
216regarding the management or investment of an institutional fund
217if the restriction has become impracticable or wasteful, if it
218impairs the management or investment of the fund, or if, because
219of circumstances not anticipated by the donor, a modification of
220a restriction will further the purposes of the fund. The
221institution shall notify the Attorney General of the
222application. To the extent practicable, any modification must be
223made in accordance with the donor's probable intention.
224     (c)  If a particular charitable purpose or a restriction
225contained in a gift instrument on the use of an institutional
226fund becomes unlawful, impracticable, impossible to achieve, or
227wasteful, the circuit court for the circuit in which an
228institution is located, upon application of that institution,
229may modify the purpose of the fund or the restriction on the use
230of the fund in a manner consistent with the charitable purposes
231expressed in the gift instrument. The institution shall notify
232the Attorney General of the application.
233     (d)  If consent of the donor in a record cannot be obtained
234by reason of the donor's death, disability, unavailability, or
235impossibility of identification, a governing board may modify a
236restriction contained in a gift instrument regarding the
237management, investment, or use of an institutional fund if the
238fund has a total value of $100,000 or less and the restriction
239has become impracticable or wasteful, impairs the management,
240investment, or use of the fund or if, because of circumstances
241not anticipated by the donor, a modification of a restriction
242will further the purposes of the fund.
243     (e)  If an institution determines that a restriction
244contained in a gift instrument on the management, investment, or
245purpose of an institutional fund is unlawful, impracticable,
246impossible to achieve, or wasteful, the institution, after
247providing written notice to the Attorney General, may release or
248modify the restriction, in whole or part, if:
249     1.  The institutional fund subject to the restriction has a
250total value of at least $100,000 and not more than $250,000;
251     2.  More than 20 years have elapsed since the fund was
252established; and
253     3.  The institution uses the property in a manner
254consistent with the charitable purposes expressed in the gift
255instrument.
256     (7)  REVIEWING COMPLIANCE.-Compliance with this section is
257determined in light of the facts and circumstances existing at
258the time a decision is made or action is taken, and not by
259hindsight.
260     (8)  APPLICATION TO EXISTING INSTITUTIONAL FUNDS.-This
261section applies to institutional funds existing on or
262established after the effective date of this section. As applied
263to institutional funds existing on the effective date of this
264section, this section governs only decisions made or actions
265taken on or after that date.
266     (9)  RELATION TO ELECTRONIC SIGNATURES IN GLOBAL AND
267NATIONAL COMMERCE ACT.-This section modifies, limits, and
268supersedes the federal Electronic Signatures in Global and
269National Commerce Act, 15 U.S.C. ss. 7001 et seq., but does not
270modify, limit, or supersede s. 101(c) of that act, 15 U.S.C. s.
2717001(c), or authorize electronic delivery of any of the notices
272described in s. 103(b) of that act, 15 U.S.C. s. 7001(b).
273     (10)  UNIFORMITY OF APPLICATION AND CONSTRUCTION.-In
274applying and construing this uniform act, consideration must be
275given to the need to promote uniformity of the law with respect
276to its subject matter among states that enact it.
277     Section 2.  Section 1010.10, Florida Statutes, is repealed.
278     Section 3.  This act shall take effect July 1, 2012.


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