H.P. 981 - L.D. 1402
An Act To Enact the Uniform Prudent Management of Institutional Funds Act
Be it enacted by the People of the State of Maine as follows:
Sec. 1. 13 MRSA c. 97, as amended, is repealed.
Sec. 2. 13 MRSA c. 99 is enacted to read:
uniform prudent management of institutional funds act
This chapter may be known and cited as "the Uniform Prudent Management of Institutional Funds Act."
As used in this chapter, unless the context otherwise indicates, the following terms have the following meanings.
1. Charitable purpose.
"Charitable purpose" means the relief of poverty, the advancement of education or religion, the promotion of health, the promotion of a governmental purpose or any other purpose the achievement of which is beneficial to the community.
2. Endowment fund.
"Endowment fund" means an institutional fund or part thereof that, under the terms of a gift instrument, is not wholly expendable by the institution on a current basis. "Endowment fund" does not include assets that an institution designates as an endowment fund for its own use.
3. Gift instrument.
"Gift instrument" means a record or records, including an institutional solicitation, under which property is granted to, transferred to or held by an institution as an institutional fund.
4. Historic dollar value.
"Historic dollar value" means the aggregate value in dollars of:
A. Each endowment fund at the time it became an endowment fund;
B. Each subsequent donation to the fund at the time the donation is made; and
C. Each accumulation made pursuant to a direction in the applicable gift instrument at the time the accumulation is added to the fund.
An institution's determination of historic dollar value made in good faith is conclusive.
A. A person, other than an individual, organized and operated exclusively for charitable purposes;
B. A government or governmental subdivision, agency or instrumentality, to the extent that it holds funds exclusively for a charitable purpose; or
C. A trust that had both charitable and noncharitable interests, after all noncharitable interests have terminated.
6. Institutional fund.
"Institutional fund" means a fund held by an institution exclusively for charitable purposes. "Institutional fund" does not include:
A. Program-related assets;
B. A fund held for an institution by a trustee that is not an institution; or
C. A fund in which a beneficiary that is not an institution has an interest, other than an interest that could arise upon violation or failure of the purposes of the fund.
"Person" means an individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, public corporation, government or governmental subdivision, agency or instrumentality or any other legal or commercial entity.
8. Program-related asset.
"Program-related asset" means an asset held by an institution primarily to accomplish a charitable purpose of the institution and not primarily for investment.
"Record" means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.
1. Consideration of purposes.
Subject to the intent of a donor expressed in a gift instrument, an institution, in managing and investing an institutional fund, shall consider the charitable purposes of the institution and the purposes of the institutional fund.
2. Loyalty; good faith; care.
In addition to complying with the duty of loyalty imposed by law other than this chapter, each person responsible for managing and investing an institutional fund shall manage and invest the fund in good faith and with the care an ordinarily prudent person in a like position would exercise under similar circumstances.
3. Costs; facts.
In managing and investing an institutional fund, an institution:
A. May incur only costs that are appropriate and reasonable in relation to the assets, the purposes of the institution and the skills available to the institution; and
B. Shall make a reasonable effort to verify facts relevant to the management and investment of the fund.
4. Pooling funds.
An institution may pool 2 or more institutional funds for purposes of management and investment.
Except as otherwise provided by a gift instrument, the following rules apply.
. In managing and investing an institutional fund, the following factors, if relevant, must be considered:
(1) General economic conditions;
(2) The possible effect of inflation or deflation;
(3) The expected tax consequences, if any, of investment decisions or strategies;
(4) The role that each investment or course of action plays within the overall investment portfolio of the fund;
(5) The expected total return from income and the appreciation of investments;
(6) Other resources of the institution;
(7) The needs of the institution and the fund to make distributions and to preserve capital; and
(8) An asset's special relationship or special value, if any, to the charitable purposes of the institution.
B. Management and investment decisions about an individual asset must be made not in isolation but rather in the context of the institutional fund's portfolio of investments as a whole and as a part of an overall investment strategy having risk and return objectives reasonably suited to the fund and to the institution.
C. Except as otherwise provided by law other than this chapter, an institution may invest in any kind of property or type of investment consistent with this section.
D. An institution shall diversify the investments of an institutional fund unless the institution reasonably determines that, because of special circumstances, the purposes of the fund are better served without diversification.
E. Within a reasonable time after receiving property, an institution shall make and carry out decisions concerning the retention or disposition of the property or to rebalance a portfolio, in order to bring the institutional fund into compliance with the purposes, terms and distribution requirements of the institution as necessary to meet other circumstances of the institution and the requirements of this chapter.
F. A person that has special skills or expertise, or is selected in reliance upon the person's representation that the person has special skills or expertise, has a duty to use those skills or that expertise in managing and investing institutional funds.
. An institution shall track the historic dollar value of its institutional funds. For purposes of this paragraph, “historic dollar value” means the aggregate value in dollars of:
(1) Each endowment fund at the time it became an endowment fund;
(2) Each subsequent donation to the fund at the time the donation is made; and
(3) Each accumulation made pursuant to a direction in the applicable gift instrument at the time the accumulation is added to the fund.
1. Appropriate; accumulate; donor-restricted; good faith; care.
Subject to the intent of a donor expressed in the gift instrument, an institution may appropriate for expenditure or accumulate so much of an endowment fund as the institution determines is prudent for the uses, benefits, purposes and duration for which the endowment fund is established. Unless stated otherwise in the gift instrument, the assets in an endowment fund are donor-restricted assets until appropriated for expenditure by the institution. In making a determination to appropriate or accumulate, the institution shall act in good faith, with the care that an ordinarily prudent person in a like position would exercise under similar circumstances, and shall consider, if relevant, the following factors:
A. The duration and preservation of the endowment fund;
B. The purposes of the institution and the endowment fund;
C. General economic conditions;
D. The possible effect of inflation or deflation;
E. The expected total return from income and the appreciation of investments;
F. Other resources of the institution; and
G. The investment policy of the institution.
To limit the authority to appropriate for expenditure or accumulate under subsection 1, a gift instrument must specifically state the limitation.
Terms in a gift instrument designating a gift as an endowment, or a direction or authorization in the gift instrument to use only "income," "interest," "dividends" or "rents, issues or profits," or "to preserve the principal intact" or words of similar import:
A. Create an endowment fund of permanent duration unless other language in the gift instrument limits the duration or purpose of the fund; and
B. Do not otherwise limit the authority to appropriate for expenditure or accumulate under subsection 1.
4. Track historic dollar value.
An institution shall track the historic dollar value of its institutional funds.
5. Aggregate value of $2,000,000 or more.
An institution administering endowment funds with an aggregate value of $2,000,000 or more shall notify the Attorney General upon its adoption of the provisions of this Act.
6. Aggregate value of less than $2,000,000.
An institution administering endowment funds with an aggregate value of less than $2,000,000 shall notify the Attorney General at least 60 days prior to an appropriation for expenditure of an amount that would cause the value of the institution’s endowment funds to fall below the aggregate historic dollar value of the institution’s endowment funds. During the 60-day period, the Attorney General may require the institution to obtain court approval for the proposed expenditure.
7. Rebuttable presumption.
The appropriation for expenditure in any year of an amount greater than 7% of the fair market value of an endowment fund, calculated on the basis of market values determined at least quarterly and averaged over a period of not less than 3 years immediately preceding the year in which the appropriation for expenditure is made, creates a rebuttable presumption of imprudence. For an endowment fund in existence for less than 3 years, the fair market value of the endowment fund must be calculated for the period the endowment fund has been in existence. This subsection does not apply to an appropriation for expenditure permitted under law other than this chapter or by the gift instrument.
Subject to any specific limitation set forth in a gift instrument or in law other than this chapter, an institution may delegate to an external agent the management and investment of an institutional fund to the extent that an institution could prudently delegate under the circumstances. An institution shall act in good faith, with the care that an ordinarily prudent person in a like position would exercise under similar circumstances, in:
A. Selecting an agent;
B. Establishing the scope and terms of the delegation, consistent with the purposes of the institution and the institutional fund; and
C. Periodically reviewing the agent's actions in order to monitor the agent's performance and compliance with the scope and terms of the delegation.
2. Agent's duty.
In performing a delegated function, an agent owes a duty to the institution to exercise reasonable care to comply with the scope and terms of the delegation.
3. Liability of institution.
An institution that complies with subsection 1 is not liable for the decisions or actions of an agent to which the function was delegated.
4. Submits to jurisdiction.
By accepting delegation of a management or investment function from an institution that is subject to the laws of this State, an agent submits to the jurisdiction of the courts of this State in all proceedings arising from or related to the delegation or the performance of the delegated function.
5. Committees; officers; employees.
An institution may delegate management and investment functions to its committees, officers or employees as authorized by the laws of this State other than provisions of this chapter.
1. Release or modification of restriction with consent.
If the donor consents in a record, an institution may release or modify, in whole or in part, a restriction contained in a gift instrument on the management, investment or purpose of an institutional fund. A release or modification may not allow a fund to be used for a purpose other than a charitable purpose of the institution.
2. Modification of restriction by court.
The court, upon application of an institution, may modify a restriction contained in a gift instrument regarding the management or investment of an institutional fund if the restriction has become impracticable or wasteful, if it impairs the management or investment of the fund or if, because of circumstances not anticipated by the donor, a modification of a restriction will further the purposes of the fund. The institution shall notify the Attorney General of the application and the Attorney General must be given an opportunity to be heard. To the extent practicable, any modification must be made in accordance with the donor's probable intention.
3. Modification by court when unlawful, impracticable, impossible or wasteful restriction.
If a particular charitable purpose or a restriction contained in a gift instrument on the use of an institutional fund becomes unlawful, impracticable, impossible to achieve or wasteful, the court, upon application of an institution, may modify the purpose of the fund or the restriction on the use of the fund in a manner consistent with the charitable purposes expressed in the gift instrument. The institution shall notify the Attorney General of the application and the Attorney General must be given an opportunity to be heard.
4. Release or modification by institution.
This subsection governs the release or modification of a restriction contained in a gift instrument on the management, investment or purpose of an institutional fund that the institution determines is unlawful, impracticable, impossible to achieve or wasteful.
. If an institution determines that a restriction contained in a gift instrument on the management, investment or purpose of an institutional fund is unlawful, impracticable, impossible to achieve or wasteful, the institution, 60 days after notification to the Attorney General and if the Attorney General does not object, may release or modify the restriction, in whole or part, if:
(1) The institutional fund subject to the restriction has a total value of less than $25,000, except that the dollar limit established in this paragraph must be adjusted to reflect changes in the Consumer Price Index for all Urban Consumers, CPI-U, as compiled by the United States Department of Labor, Bureau of Labor Statistics, or its successor index, using 2009 as the base year. On or before January 1, 2011, and each odd-numbered year thereafter, the dollar value must be adjusted for the next 2-year cycle if the cumulative percentage of change in the index, from the base year or from a later year that was the basis of an adjustment of this amount pursuant to this subparagraph, rounded to the nearest whole percentage point, is in excess of 10%. The adjusted exemption must be rounded upward to the nearest $5,000 increment. The dollar value must not be reduced below $25,000;
(2) More than 20 years have elapsed since the fund was established; and
(3) The institution uses the property in a manner consistent with the charitable purposes expressed in the gift instrument.
B. If the Attorney General objects under paragraph A, the institution may seek to release or modify the restriction in court pursuant to subsection 3.
Compliance with this chapter is determined in light of the facts and circumstances existing at the time a decision is made or action is taken and not by hindsight.
This chapter applies to institutional funds existing on or established after July 1, 2009. As applied to institutional funds existing on July 1, 2009, this chapter governs only decisions made or actions taken on or after that date.
This chapter modifies, limits and supersedes the federal Electronic Signatures in Global and National Commerce Act, 15 United States Code, Section 7001 et seq., but does not modify, limit or supersede 15 United States Code, Section 7001(a), or authorize electronic delivery of any of the notices described in 15 United States Code, Section 7003(b).
In applying and construing this uniform Act, consideration must be given to the need to promote uniformity of the law with respect to its subject matter among states that enact it.
This chapter takes effect July 1, 2009.
Sec. 3. Retroactivity. This Act applies retroactively to July 1, 2009.
Effective September 12, 2009