Florida Senate - 2011 COMMITTEE AMENDMENT Bill No. SB 952 Barcode 651460 LEGISLATIVE ACTION Senate . House Comm: RCS . 03/22/2011 . . . . ————————————————————————————————————————————————————————————————— ————————————————————————————————————————————————————————————————— The Committee on Commerce and Tourism (Gaetz) recommended the following: 1 Senate Amendment (with title amendment) 2 3 Delete everything after the enacting clause 4 and insert: 5 Section 1. Section 617.2104, Florida Statutes, is created 6 to read: 7 617.2104 Uniform Prudent Management of Institutional Funds 8 Act.— 9 (1) SHORT TITLE.—This section may be cited as the “Uniform 10 Prudent Management of Institutional Funds Act.” 11 (2) DEFINITIONS.—For purposes of this section, the term: 12 (a) “Charitable purpose” means the relief of poverty, the 13 advancement of education or religion, the promotion of health, 14 the promotion of a governmental purpose, or any other purpose 15 the achievement of which is beneficial to the community. 16 (b) “Endowment fund” means an institutional fund or part 17 thereof that, under the terms of a gift instrument, is not 18 wholly expendable by the institution on a current basis. The 19 term does not include assets that an institution designates as 20 an endowment fund for its own use. 21 (c) “Gift instrument” means a record or records, including 22 an institutional solicitation, under which property is granted 23 to, transferred to, or held by an institution as an 24 institutional fund. 25 (d) “Institution” means: 26 1. A person, other than an individual, organized and 27 operated exclusively for charitable purposes; 28 2. A government or governmental subdivision, agency, or 29 instrumentality to the extent that it holds funds exclusively 30 for a charitable purpose; or 31 3. A trust that had both charitable and noncharitable 32 interests after all noncharitable interests have terminated. 33 (e) “Institutional fund” means a fund held by an 34 institution exclusively for charitable purposes. The term does 35 not include: 36 1. Program-related assets; 37 2. A fund held for an institution by a trustee that is not 38 an institution; 39 3. A fund in which a beneficiary that is not an institution 40 has an interest, other than an interest that could arise upon 41 violation or failure of the purposes of the fund; or 42 4. A fund managed or administered by the State Board of 43 Administration pursuant to its constitutional or statutory 44 authority. 45 (f) “Person” means an individual, corporation, business 46 trust, estate, trust, partnership, limited liability company, 47 association, joint venture, public corporation, government or 48 governmental subdivision, agency, or instrumentality, or any 49 other legal or commercial entity. 50 (g) “Program-related asset” means an asset held by an 51 institution primarily to accomplish a charitable purpose of the 52 institution and not primarily for investment. 53 (h) “Record” means information that is inscribed on a 54 tangible medium or that is stored in an electronic or other 55 medium and is retrievable in perceivable form. 56 (3) STANDARD OF CONDUCT IN MANAGING AND INVESTING 57 INSTITUTIONAL FUND.— 58 (a) Subject to the intent of a donor expressed in a gift 59 instrument, an institution, in managing and investing an 60 institutional fund, shall consider the charitable purposes of 61 the institution and the purposes of the institutional fund. 62 (b) In addition to complying with the duty of loyalty 63 imposed by law other than this section, each person responsible 64 for managing and investing an institutional fund shall manage 65 and invest the fund in good faith and with the care an 66 ordinarily prudent person in a like position would exercise 67 under similar circumstances. 68 (c) In managing and investing an institutional fund, an 69 institution: 70 1. May incur only costs that are appropriate and reasonable 71 in relation to the assets, the purposes of the institution, and 72 the skills available to the institution. 73 2. Shall make a reasonable effort to verify facts relevant 74 to the management and investment of the fund. 75 (d) An institution may pool two or more institutional funds 76 for purposes of management and investment. 77 (e) Except as otherwise provided by a gift instrument, the 78 following rules apply: 79 1. In managing and investing an institutional fund, the 80 following factors, if relevant, must be considered: 81 a. General economic conditions. 82 b. The possible effect of inflation or deflation. 83 c. The expected tax consequences, if any, of investment 84 decisions or strategies. 85 d. The role that each investment or course of action plays 86 within the overall investment portfolio of the fund. 87 e. The expected total return from income and the 88 appreciation of investments. 89 f. Other resources of the institution. 90 g. The needs of the institution and the fund to make 91 distributions and to preserve capital. 92 h. An asset’s special relationship or special value, if 93 any, to the charitable purposes of the institution. 94 2. Management and investment decisions about an individual 95 asset must be made not in isolation but rather in the context of 96 the institutional fund’s portfolio of investments as a whole and 97 as a part of an overall investment strategy having risk and 98 return objectives reasonably suited to the fund and to the 99 institution. 100 3. Except as otherwise provided by law other than this 101 section, an institution may invest in any kind of property or 102 type of investment consistent with this section. 103 4. An institution shall diversify the investments of an 104 institutional fund unless the institution reasonably determines 105 that, because of special circumstances, the purposes of the fund 106 are better served without diversification. 107 5. Within a reasonable time after receiving property, an 108 institution shall make and carry out decisions concerning the 109 retention or disposition of the property or to rebalance a 110 portfolio in order to bring the institutional fund into 111 compliance with the purposes, terms, and distribution 112 requirements of the institution as necessary to meet other 113 circumstances of the institution and the requirements of this 114 section. 115 6. A person that has special skills or expertise, or is 116 selected in reliance upon the person’s representation that the 117 person has special skills or expertise, has a duty to use those 118 skills or that expertise in managing and investing institutional 119 funds. 120 (4) APPROPRIATION FOR EXPENDITURE OR ACCUMULATION OF 121 ENDOWMENT FUND; RULES OF CONSTRUCTION.— 122 (a) Subject to the intent of a donor expressed in the gift 123 instrument, an institution may appropriate for expenditure or 124 accumulate so much of an endowment fund as the institution 125 determines is prudent for the uses, benefits, purposes, and 126 duration for which the endowment fund is established. Unless 127 stated otherwise in the gift instrument, the assets in an 128 endowment fund are donor-restricted assets until appropriated 129 for expenditure by the institution. In making a determination to 130 appropriate or accumulate, the institution shall act in good 131 faith with the care that an ordinarily prudent person in a like 132 position would exercise under similar circumstances and shall 133 consider, if relevant, the following factors: 134 1. The duration and preservation of the endowment fund. 135 2. The purposes of the institution and the endowment fund. 136 3. General economic conditions. 137 4. The possible effect of inflation or deflation. 138 5. The expected total return from income and the 139 appreciation of investments. 140 6. Other resources of the institution. 141 7. The investment policy of the institution. 142 (b) To limit the authority to appropriate for expenditure 143 or accumulate under paragraph (a), a gift instrument must 144 specifically state the limitation. 145 (c) Terms in a gift instrument designating a gift as an 146 endowment, or a direction or authorization in the gift 147 instrument to use only “income,” “interest,” “dividends,” or 148 “rents, issues, or profits,” or “to preserve the principal 149 intact,” or words of similar import: 150 1. Create an endowment fund of permanent duration unless 151 other language in the gift instrument limits the duration or 152 purpose of the fund. 153 2. Do not otherwise limit the authority to appropriate for 154 expenditure or accumulate under paragraph (a). 155 (5) DELEGATION OF MANAGEMENT AND INVESTMENT FUNCTIONS.— 156 (a) Subject to any specific limitation set forth in a gift 157 instrument or in law other than this section, an institution may 158 delegate to an external agent the management and investment of 159 an institutional fund to the extent that an institution could 160 prudently delegate under the circumstances. An institution shall 161 act in good faith, with the care that an ordinarily prudent 162 person in a like position would exercise under similar 163 circumstances, in: 164 1. Selecting an agent. 165 2. Establishing the scope and terms of the delegation, 166 consistent with the purposes of the institution and the 167 institutional fund. 168 3. Periodically reviewing the agent’s actions in order to 169 monitor the agent’s performance and compliance with the scope 170 and terms of the delegation. 171 (b) In performing a delegated function, an agent owes a 172 duty to the institution to exercise reasonable care to comply 173 with the scope and terms of the delegation. 174 (c) An institution that complies with paragraph (a) is not 175 liable for the decisions or actions of an agent to which the 176 function was delegated. 177 (d) By accepting delegation of a management or investment 178 function from an institution that is subject to the laws of this 179 state, an agent submits to the jurisdiction of the courts of 180 this state in all proceedings arising from or related to the 181 delegation or the performance of the delegated function. 182 (e) An institution may delegate management and investment 183 functions to its committees, officers, or employees as 184 authorized by law other than this section. 185 (6) RELEASE OR MODIFICATION OF RESTRICTIONS ON MANAGEMENT, 186 INVESTMENT, OR PURPOSE.— 187 (a) If the donor consents in a record, an institution may 188 release or modify, in whole or in part, a restriction contained 189 in a gift instrument on the management, investment, or purpose 190 of an institutional fund. A release or modification may not 191 allow a fund to be used for a purpose other than a charitable 192 purpose of the institution. 193 (b) The circuit court for the circuit in which an 194 institution is located, upon application of that institution, 195 may modify a restriction contained in a gift instrument 196 regarding the management or investment of an institutional fund 197 if the restriction has become impracticable or wasteful, if it 198 impairs the management or investment of the fund, or if, because 199 of circumstances not anticipated by the donor, a modification of 200 a restriction will further the purposes of the fund. The 201 institution shall notify the Attorney General of the 202 application. To the extent practicable, any modification must be 203 made in accordance with the donor’s probable intention. 204 (c) If a particular charitable purpose or a restriction 205 contained in a gift instrument on the use of an institutional 206 fund becomes unlawful, impracticable, impossible to achieve, or 207 wasteful, the circuit court for the circuit in which an 208 institution is located, upon application of that institution, 209 may modify the purpose of the fund or the restriction on the use 210 of the fund in a manner consistent with the charitable purposes 211 expressed in the gift instrument. The institution shall notify 212 the Attorney General of the application. 213 (d) If consent of the donor in a record cannot be obtained 214 by reason of the donor’s death, disability, unavailability, or 215 impossibility of identification, a governing board may modify a 216 restriction contained in a gift instrument regarding the 217 management, investment, or use of an institutional fund if the 218 fund has a total value of $100,000 or less and the restriction 219 has become impracticable or wasteful, impairs the management, 220 investment, or use of the fund or if, because of circumstances 221 not anticipated by the donor, a modification of a restriction 222 will further the purposes of the fund. 223 (e) If an institution determines that a restriction 224 contained in a gift instrument on the management, investment, or 225 purpose of an institutional fund is unlawful, impracticable, 226 impossible to achieve, or wasteful, the institution, after 227 providing written notice to the Attorney General, may release or 228 modify the restriction, in whole or part, if: 229 1. The institutional fund subject to the restriction has a 230 total value of at least $100,000 and not more than $250,000; 231 2. More than 20 years have elapsed since the fund was 232 established; and 233 3. The institution uses the property in a manner consistent 234 with the charitable purposes expressed in the gift instrument. 235 (7) REVIEWING COMPLIANCE.—Compliance with this section is 236 determined in light of the facts and circumstances existing at 237 the time a decision is made or action is taken, and not by 238 hindsight. 239 (8) APPLICATION TO EXISTING INSTITUTIONAL FUNDS.—This 240 section applies to institutional funds existing on or 241 established after the effective date of this section. As applied 242 to institutional funds existing on the effective date of this 243 section, this section governs only decisions made or actions 244 taken on or after that date. 245 (9) RELATION TO ELECTRONIC SIGNATURES IN GLOBAL AND 246 NATIONAL COMMERCE ACT.—This section modifies, limits, and 247 supersedes the federal Electronic Signatures in Global and 248 National Commerce Act, 15 U.S.C. ss. 7001 et seq., but does not 249 modify, limit, or supersede s. 101(c) of that act, 15 U.S.C. s. 250 7001(c), or authorize electronic delivery of any of the notices 251 described in s. 103(b) of that act, 15 U.S.C. s. 7001(b). 252 (10) UNIFORMITY OF APPLICATION AND CONSTRUCTION.—In 253 applying and construing this uniform act, consideration must be 254 given to the need to promote uniformity of the law with respect 255 to its subject matter among states that enact it. 256 Section 2. Section 1010.10, Florida Statutes, is repealed. 257 Section 3. This act shall take effect July 1, 2012. 258 259 ================= T I T L E A M E N D M E N T ================ 260 And the title is amended as follows: 261 Delete everything before the enacting clause 262 and insert: 263 A bill to be entitled 264 An act relating to uniform prudent management of 265 institutional funds; creating s. 617.2104, F.S.; 266 creating a short title; providing definitions; 267 providing requirements for the management of funds 268 held by an institution exclusively for charitable 269 purposes; providing standards of conduct in managing 270 and investing institutional funds; providing 271 requirements for appropriation for expenditure or 272 accumulation of an endowment fund by an institution; 273 authorizing an institution to delegate to an external 274 agent the management and investment of an 275 institutional fund; authorizing the release or 276 modification of a restriction on management, 277 investment, or purpose of an institutional fund; 278 providing for determination of compliance; providing 279 for application to existing or newly established 280 institutional funds; providing relationship to federal 281 law; providing requirements for uniformity of 282 application and construction of the act; repealing s. 283 1010.10, F.S., relating to the Florida Uniform 284 Management of Institutional Funds Act; providing an 285 effective date.