CS/CS/HB 599

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
23	Be It Enacted by the Legislature of the State of Florida:
24
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;
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; or
62	4.  A fund managed or administered by the State Board of
63	Administration pursuant to its constitutional or statutory
64	authority.
65	(f)  "Person" means an individual, corporation, business
66	trust, estate, trust, partnership, limited liability company,
67	association, joint venture, public corporation, government or
68	governmental subdivision, agency, or instrumentality, or any
69	other legal or commercial entity.
70	(g)  "Program-related asset" means an asset held by an
71	institution primarily to accomplish a charitable purpose of the
72	institution and not primarily for investment.
73	(h)  "Record" means information that is inscribed on a
74	tangible medium or that is stored in an electronic or other
75	medium and is retrievable in perceivable form.
76	(3)  STANDARD OF CONDUCT IN MANAGING AND INVESTING
77	INSTITUTIONAL FUND.-
78	(a)  Subject to the intent of a donor expressed in a gift
79	instrument, an institution, in managing and investing an
80	institutional fund, shall consider the charitable purposes of
81	the institution and the purposes of the institutional fund.
82	(b)  In addition to complying with the duty of loyalty
83	imposed by law other than this section, each person responsible
84	for managing and investing an institutional fund shall manage
85	and invest the fund in good faith and with the care an
86	ordinarily prudent person in a like position would exercise
87	under similar circumstances.
88	(c)  In managing and investing an institutional fund, an
89	institution:
90	1.  May incur only costs that are appropriate and
91	reasonable in relation to the assets, the purposes of the
92	institution, and the skills available to the institution.
93	2.  Shall make a reasonable effort to verify facts relevant
94	to the management and investment of the fund.
95	(d)  An institution may pool two or more institutional
96	funds for purposes of management and investment.
97	(e)  Except as otherwise provided by a gift instrument, the
98	following rules apply:
99	1.  In managing and investing an institutional fund, the
100	following 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
104	decisions or strategies.
105	d.  The role that each investment or course of action plays
106	within the overall investment portfolio of the fund.
107	e.  The expected total return from income and the
108	appreciation of investments.
109	f.  Other resources of the institution.
110	g.  The needs of the institution and the fund to make
111	distributions and to preserve capital.
112	h.  An asset's special relationship or special value, if
113	any, to the charitable purposes of the institution.
114	2.  Management and investment decisions about an individual
115	asset must be made not in isolation but rather in the context of
116	the institutional fund's portfolio of investments as a whole and
117	as a part of an overall investment strategy having risk and
118	return objectives reasonably suited to the fund and to the
119	institution.
120	3.  Except as otherwise provided by law other than this
121	section, an institution may invest in any kind of property or
122	type of investment consistent with this section.
123	4.  An institution shall diversify the investments of an
124	institutional fund unless the institution reasonably determines
125	that, because of special circumstances, the purposes of the fund
126	are better served without diversification.
127	5.  Within a reasonable time after receiving property, an
128	institution shall make and carry out decisions concerning the
129	retention or disposition of the property or to rebalance a
130	portfolio in order to bring the institutional fund into
131	compliance with the purposes, terms, and distribution
132	requirements of the institution as necessary to meet other
133	circumstances of the institution and the requirements of this
134	section.
135	6.  A person that has special skills or expertise, or is
136	selected in reliance upon the person's representation that the
137	person has special skills or expertise, has a duty to use those
138	skills or that expertise in managing and investing institutional
139	funds.
140	(4)  APPROPRIATION FOR EXPENDITURE OR ACCUMULATION OF
141	ENDOWMENT FUND; RULES OF CONSTRUCTION.-
142	(a)  Subject to the intent of a donor expressed in the gift
143	instrument, an institution may appropriate for expenditure or
144	accumulate so much of an endowment fund as the institution
145	determines is prudent for the uses, benefits, purposes, and
146	duration for which the endowment fund is established. Unless
147	stated otherwise in the gift instrument, the assets in an
148	endowment fund are donor-restricted assets until appropriated
149	for expenditure by the institution. In making a determination to
150	appropriate or accumulate, the institution shall act in good
151	faith with the care that an ordinarily prudent person in a like
152	position would exercise under similar circumstances and shall
153	consider, 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
159	appreciation 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
163	or accumulate under paragraph (a), a gift instrument must
164	specifically state the limitation.
165	(c)  Terms in a gift instrument designating a gift as an
166	endowment, or a direction or authorization in the gift
167	instrument to use only "income," "interest," "dividends," or
168	"rents, issues, or profits," or "to preserve the principal
169	intact," or words of similar import:
170	1.  Create an endowment fund of permanent duration unless
171	other language in the gift instrument limits the duration or
172	purpose of the fund.
173	2.  Do not otherwise limit the authority to appropriate for
174	expenditure 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
177	instrument or in law other than this section, an institution may
178	delegate to an external agent the management and investment of
179	an institutional fund to the extent that an institution could
180	prudently delegate under the circumstances. An institution shall
181	act in good faith, with the care that an ordinarily prudent
182	person in a like position would exercise under similar
183	circumstances, in:
184	1.  Selecting an agent.
185	2.  Establishing the scope and terms of the delegation,
186	consistent with the purposes of the institution and the
187	institutional fund.
188	3.  Periodically reviewing the agent's actions in order to
189	monitor the agent's performance and compliance with the scope
190	and terms of the delegation.
191	(b)  In performing a delegated function, an agent owes a
192	duty to the institution to exercise reasonable care to comply
193	with the scope and terms of the delegation.
194	(c)  An institution that complies with paragraph (a) is not
195	liable for the decisions or actions of an agent to which the
196	function was delegated.
197	(d)  By accepting delegation of a management or investment
198	function from an institution that is subject to the laws of this
199	state, an agent submits to the jurisdiction of the courts of
200	this state in all proceedings arising from or related to the
201	delegation or the performance of the delegated function.
202	(e)  An institution may delegate management and investment
203	functions to its committees, officers, or employees as
204	authorized by law other than this section.
205	(6)  RELEASE OR MODIFICATION OF RESTRICTIONS ON MANAGEMENT,
206	INVESTMENT, OR PURPOSE.-
207	(a)  If the donor consents in a record, an institution may
208	release or modify, in whole or in part, a restriction contained
209	in a gift instrument on the management, investment, or purpose
210	of an institutional fund. A release or modification may not
211	allow a fund to be used for a purpose other than a charitable
212	purpose of the institution.
213	(b)  The circuit court for the circuit in which an
214	institution is located, upon application of that institution,
215	may modify a restriction contained in a gift instrument
216	regarding the management or investment of an institutional fund
217	if the restriction has become impracticable or wasteful, if it
218	impairs the management or investment of the fund, or if, because
219	of circumstances not anticipated by the donor, a modification of
220	a restriction will further the purposes of the fund. The
221	institution shall notify the Attorney General of the
222	application. To the extent practicable, any modification must be
223	made in accordance with the donor's probable intention.
224	(c)  If a particular charitable purpose or a restriction
225	contained in a gift instrument on the use of an institutional
226	fund becomes unlawful, impracticable, impossible to achieve, or
227	wasteful, the circuit court for the circuit in which an
228	institution is located, upon application of that institution,
229	may modify the purpose of the fund or the restriction on the use
230	of the fund in a manner consistent with the charitable purposes
231	expressed in the gift instrument. The institution shall notify
232	the Attorney General of the application.
233	(d)  If consent of the donor in a record cannot be obtained
234	by reason of the donor's death, disability, unavailability, or
235	impossibility of identification, a governing board may modify a
236	restriction contained in a gift instrument regarding the
237	management, investment, or use of an institutional fund if the
238	fund has a total value of $100,000 or less and the restriction
239	has become impracticable or wasteful, impairs the management,
240	investment, or use of the fund or if, because of circumstances
241	not anticipated by the donor, a modification of a restriction
242	will further the purposes of the fund.
243	(e)  If an institution determines that a restriction
244	contained in a gift instrument on the management, investment, or
245	purpose of an institutional fund is unlawful, impracticable,
246	impossible to achieve, or wasteful, the institution, after
247	providing written notice to the Attorney General, may release or
248	modify the restriction, in whole or part, if:
249	1.  The institutional fund subject to the restriction has a
250	total value of at least $100,000 and not more than $250,000;
251	2.  More than 20 years have elapsed since the fund was
252	established; and
253	3.  The institution uses the property in a manner
254	consistent with the charitable purposes expressed in the gift
255	instrument.
256	(7)  REVIEWING COMPLIANCE.-Compliance with this section is
257	determined in light of the facts and circumstances existing at
258	the time a decision is made or action is taken, and not by
259	hindsight.
260	(8)  APPLICATION TO EXISTING INSTITUTIONAL FUNDS.-This
261	section applies to institutional funds existing on or
262	established after the effective date of this section. As applied
263	to institutional funds existing on the effective date of this
264	section, this section governs only decisions made or actions
265	taken on or after that date.
266	(9)  RELATION TO ELECTRONIC SIGNATURES IN GLOBAL AND
267	NATIONAL COMMERCE ACT.-This section modifies, limits, and
268	supersedes the federal Electronic Signatures in Global and
269	National Commerce Act, 15 U.S.C. ss. 7001 et seq., but does not
270	modify, limit, or supersede s. 101(c) of that act, 15 U.S.C. s.
271	7001(c), or authorize electronic delivery of any of the notices
272	described in s. 103(b) of that act, 15 U.S.C. s. 7003(b).
273	(10)  UNIFORMITY OF APPLICATION AND CONSTRUCTION.-In
274	applying and construing this uniform act, consideration must be
275	given to the need to promote uniformity of the law with respect
276	to 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.