Florida Senate - 2011                       CS for CS for SB 952
       
       
       
       By the Committees on Higher Education; and Commerce and Tourism;
       and Senators Richter and Gaetz
       
       
       
       589-03780-11                                           2011952c2
    1                        A bill to be entitled                      
    2         An act relating to uniform prudent management of
    3         institutional funds; creating s. 617.2104, F.S.;
    4         creating a short title; providing definitions;
    5         providing requirements for the management of funds
    6         held by an institution exclusively for charitable
    7         purposes; providing standards of conduct in managing
    8         and investing institutional funds; providing
    9         requirements for appropriation for expenditure or
   10         accumulation of an endowment fund by an institution;
   11         authorizing an institution to delegate to an external
   12         agent the management and investment of an
   13         institutional fund; authorizing the release or
   14         modification of a restriction on management,
   15         investment, or purpose of an institutional fund;
   16         providing for determination of compliance; providing
   17         for application to existing or newly established
   18         institutional funds; providing relationship to federal
   19         law; providing requirements for uniformity of
   20         application and construction of the act; repealing s.
   21         1010.10, F.S., relating to the Florida Uniform
   22         Management of Institutional Funds Act; providing an
   23         effective date.
   24  
   25  Be It Enacted by the Legislature of the State of Florida:
   26  
   27         Section 1. Section 617.2104, Florida Statutes, is created
   28  to read:
   29         617.2104 Uniform Prudent Management of Institutional Funds
   30  Act.—
   31         (1) SHORT TITLE.—This section may be cited as the “Uniform
   32  Prudent Management of Institutional Funds Act.”
   33         (2) DEFINITIONS.—For purposes of this section, the term:
   34         (a) “Charitable purpose” means the relief of poverty, the
   35  advancement of education or religion, the promotion of health,
   36  the promotion of a governmental purpose, or any other purpose
   37  the achievement of which is beneficial to the community.
   38         (b) “Endowment fund” means an institutional fund or part
   39  thereof that, under the terms of a gift instrument, is not
   40  wholly expendable by the institution on a current basis. The
   41  term does not include assets that an institution designates as
   42  an endowment fund for its own use.
   43         (c) “Gift instrument” means a record or records, including
   44  an institutional solicitation, under which property is granted
   45  to, transferred to, or held by an institution as an
   46  institutional fund.
   47         (d) “Institution” means:
   48         1. A person, other than an individual, organized and
   49  operated exclusively for charitable purposes;
   50         2. A government or governmental subdivision, agency, or
   51  instrumentality to the extent that it holds funds exclusively
   52  for a charitable purpose; or
   53         3. A trust that had both charitable and noncharitable
   54  interests after all noncharitable interests have terminated.
   55         (e) “Institutional fund” means a fund held by an
   56  institution exclusively for charitable purposes. The term does
   57  not include:
   58         1. Program-related assets;
   59         2. A fund held for an institution by a trustee that is not
   60  an institution;
   61         3. A fund in which a beneficiary that is not an institution
   62  has an interest, other than an interest that could arise upon
   63  violation or failure of the purposes of the fund; or
   64         4. A fund managed or administered by the State Board of
   65  Administration pursuant to its constitutional or statutory
   66  authority.
   67         (f) “Person” means an individual, corporation, business
   68  trust, estate, trust, partnership, limited liability company,
   69  association, joint venture, public corporation, government or
   70  governmental subdivision, agency, or instrumentality, or any
   71  other legal or commercial entity.
   72         (g) “Program-related asset” means an asset held by an
   73  institution primarily to accomplish a charitable purpose of the
   74  institution and not primarily for investment.
   75         (h) “Record” means information that is inscribed on a
   76  tangible medium or that is stored in an electronic or other
   77  medium and is retrievable in perceivable form.
   78         (3) STANDARD OF CONDUCT IN MANAGING AND INVESTING
   79  INSTITUTIONAL FUND.—
   80         (a) Subject to the intent of a donor expressed in a gift
   81  instrument, an institution, in managing and investing an
   82  institutional fund, shall consider the charitable purposes of
   83  the institution and the purposes of the institutional fund.
   84         (b) In addition to complying with the duty of loyalty
   85  imposed by law other than this section, each person responsible
   86  for managing and investing an institutional fund shall manage
   87  and invest the fund in good faith and with the care an
   88  ordinarily prudent person in a like position would exercise
   89  under similar circumstances.
   90         (c) In managing and investing an institutional fund, an
   91  institution:
   92         1. May incur only costs that are appropriate and reasonable
   93  in relation to the assets, the purposes of the institution, and
   94  the skills available to the institution.
   95         2. Shall make a reasonable effort to verify facts relevant
   96  to the management and investment of the fund.
   97         (d) An institution may pool two or more institutional funds
   98  for purposes of management and investment.
   99         (e) Except as otherwise provided by a gift instrument, the
  100  following rules apply:
  101         1. In managing and investing an institutional fund, the
  102  following factors, if relevant, must be considered:
  103         a. General economic conditions.
  104         b. The possible effect of inflation or deflation.
  105         c. The expected tax consequences, if any, of investment
  106  decisions or strategies.
  107         d. The role that each investment or course of action plays
  108  within the overall investment portfolio of the fund.
  109         e. The expected total return from income and the
  110  appreciation of investments.
  111         f. Other resources of the institution.
  112         g. The needs of the institution and the fund to make
  113  distributions and to preserve capital.
  114         h. An asset’s special relationship or special value, if
  115  any, to the charitable purposes of the institution.
  116         2. Management and investment decisions about an individual
  117  asset must be made not in isolation but rather in the context of
  118  the institutional fund’s portfolio of investments as a whole and
  119  as a part of an overall investment strategy having risk and
  120  return objectives reasonably suited to the fund and to the
  121  institution.
  122         3. Except as otherwise provided by law other than this
  123  section, an institution may invest in any kind of property or
  124  type of investment consistent with this section.
  125         4. An institution shall diversify the investments of an
  126  institutional fund unless the institution reasonably determines
  127  that, because of special circumstances, the purposes of the fund
  128  are better served without diversification.
  129         5. Within a reasonable time after receiving property, an
  130  institution shall make and carry out decisions concerning the
  131  retention or disposition of the property or to rebalance a
  132  portfolio in order to bring the institutional fund into
  133  compliance with the purposes, terms, and distribution
  134  requirements of the institution as necessary to meet other
  135  circumstances of the institution and the requirements of this
  136  section.
  137         6. A person that has special skills or expertise, or is
  138  selected in reliance upon the person’s representation that the
  139  person has special skills or expertise, has a duty to use those
  140  skills or that expertise in managing and investing institutional
  141  funds.
  142         (4) APPROPRIATION FOR EXPENDITURE OR ACCUMULATION OF
  143  ENDOWMENT FUND; RULES OF CONSTRUCTION.—
  144         (a) Subject to the intent of a donor expressed in the gift
  145  instrument, an institution may appropriate for expenditure or
  146  accumulate so much of an endowment fund as the institution
  147  determines is prudent for the uses, benefits, purposes, and
  148  duration for which the endowment fund is established. Unless
  149  stated otherwise in the gift instrument, the assets in an
  150  endowment fund are donor-restricted assets until appropriated
  151  for expenditure by the institution. In making a determination to
  152  appropriate or accumulate, the institution shall act in good
  153  faith with the care that an ordinarily prudent person in a like
  154  position would exercise under similar circumstances and shall
  155  consider, if relevant, the following factors:
  156         1. The duration and preservation of the endowment fund.
  157         2. The purposes of the institution and the endowment fund.
  158         3. General economic conditions.
  159         4. The possible effect of inflation or deflation.
  160         5. The expected total return from income and the
  161  appreciation of investments.
  162         6. Other resources of the institution.
  163         7. The investment policy of the institution.
  164         (b) To limit the authority to appropriate for expenditure
  165  or accumulate under paragraph (a), a gift instrument must
  166  specifically state the limitation.
  167         (c) Terms in a gift instrument designating a gift as an
  168  endowment, or a direction or authorization in the gift
  169  instrument to use only “income,” “interest,” “dividends,” or
  170  “rents, issues, or profits,” or “to preserve the principal
  171  intact,” or words of similar import:
  172         1. Create an endowment fund of permanent duration unless
  173  other language in the gift instrument limits the duration or
  174  purpose of the fund.
  175         2. Do not otherwise limit the authority to appropriate for
  176  expenditure or accumulate under paragraph (a).
  177         (5) DELEGATION OF MANAGEMENT AND INVESTMENT FUNCTIONS.—
  178         (a) Subject to any specific limitation set forth in a gift
  179  instrument or in law other than this section, an institution may
  180  delegate to an external agent the management and investment of
  181  an institutional fund to the extent that an institution could
  182  prudently delegate under the circumstances. An institution shall
  183  act in good faith, with the care that an ordinarily prudent
  184  person in a like position would exercise under similar
  185  circumstances, in:
  186         1. Selecting an agent.
  187         2. Establishing the scope and terms of the delegation,
  188  consistent with the purposes of the institution and the
  189  institutional fund.
  190         3. Periodically reviewing the agent’s actions in order to
  191  monitor the agent’s performance and compliance with the scope
  192  and terms of the delegation.
  193         (b) In performing a delegated function, an agent owes a
  194  duty to the institution to exercise reasonable care to comply
  195  with the scope and terms of the delegation.
  196         (c) An institution that complies with paragraph (a) is not
  197  liable for the decisions or actions of an agent to which the
  198  function was delegated.
  199         (d) By accepting delegation of a management or investment
  200  function from an institution that is subject to the laws of this
  201  state, an agent submits to the jurisdiction of the courts of
  202  this state in all proceedings arising from or related to the
  203  delegation or the performance of the delegated function.
  204         (e) An institution may delegate management and investment
  205  functions to its committees, officers, or employees as
  206  authorized by law other than this section.
  207         (6) RELEASE OR MODIFICATION OF RESTRICTIONS ON MANAGEMENT,
  208  INVESTMENT, OR PURPOSE.—
  209         (a) If the donor consents in a record, an institution may
  210  release or modify, in whole or in part, a restriction contained
  211  in a gift instrument on the management, investment, or purpose
  212  of an institutional fund. A release or modification may not
  213  allow a fund to be used for a purpose other than a charitable
  214  purpose of the institution.
  215         (b) If consent of the donor in a record cannot be obtained
  216  by reason of the donor’s death, disability, unavailability, or
  217  impossibility of identification, a governing board may modify a
  218  restriction contained in a gift instrument regarding the
  219  management, investment, or use of an institutional fund if the
  220  fund has a total value of $100,000 or less and the restriction
  221  has become impracticable or wasteful, impairs the management,
  222  investment, or use of the fund or if, because of circumstances
  223  not anticipated by the donor, a modification of a restriction
  224  will further the purposes of the fund.
  225         (c) If an institution determines that a restriction
  226  contained in a gift instrument on the management, investment, or
  227  purpose of an institutional fund is unlawful, impracticable,
  228  impossible to achieve, or wasteful, the institution, after
  229  providing written notice to the Attorney General, may release or
  230  modify the restriction, in whole or part, if:
  231         1. The institutional fund subject to the restriction has a
  232  total value of at least $100,000 and not more than $250,000;
  233         2. More than 20 years have elapsed since the fund was
  234  established; and
  235         3. The institution uses the property in a manner consistent
  236  with the charitable purposes expressed in the gift instrument.
  237         (d) The circuit court for the circuit in which an
  238  institution is located, upon application of that institution,
  239  may modify a restriction contained in a gift instrument
  240  regarding the management or investment of an institutional fund
  241  if the restriction has become impracticable or wasteful, if it
  242  impairs the management or investment of the fund, or if, because
  243  of circumstances not anticipated by the donor, a modification of
  244  a restriction will further the purposes of the fund. The
  245  institution shall notify the Attorney General of the
  246  application. To the extent practicable, any modification must be
  247  made in accordance with the donor’s probable intention.
  248         (e) If a particular charitable purpose or a restriction
  249  contained in a gift instrument on the use of an institutional
  250  fund becomes unlawful, impracticable, impossible to achieve, or
  251  wasteful, the circuit court for the circuit in which an
  252  institution is located, upon application of that institution,
  253  may modify the purpose of the fund or the restriction on the use
  254  of the fund in a manner consistent with the charitable purposes
  255  expressed in the gift instrument. The institution shall notify
  256  the Attorney General of the application.
  257         (7) REVIEWING COMPLIANCE.—Compliance with this section is
  258  determined in light of the facts and circumstances existing at
  259  the time a decision is made or action is taken, and not by
  260  hindsight.
  261         (8) APPLICATION TO EXISTING INSTITUTIONAL FUNDS.—This
  262  section applies to institutional funds existing on or
  263  established after the effective date of this section. As applied
  264  to institutional funds existing on the effective date of this
  265  section, this section governs only decisions made or actions
  266  taken on or after that date.
  267         (9) RELATION TO ELECTRONIC SIGNATURES IN GLOBAL AND
  268  NATIONAL COMMERCE ACT.—This section modifies, limits, and
  269  supersedes the federal Electronic Signatures in Global and
  270  National Commerce Act, 15 U.S.C. ss. 7001 et seq., but does not
  271  modify, limit, or supersede s. 101(c) of that act, 15 U.S.C. s.
  272  7001(c), or authorize electronic delivery of any of the notices
  273  described in s. 103(b) of that act, 15 U.S.C. s. 7003(b).
  274         (10) UNIFORMITY OF APPLICATION AND CONSTRUCTION.—In
  275  applying and construing this uniform act, consideration must be
  276  given to the need to promote uniformity of the law with respect
  277  to its subject matter among states that enact it.
  278         Section 2. Section 1010.10, Florida Statutes, is repealed.
  279         Section 3. This act shall take effect July 1, 2012.