Chapter 554
AN ACT
HB 2905
Relating to Uniform Prudent Management of Institutional Funds Act;
creating new provisions; and repealing ORS 128.310, 128.315, 128.320, 128.325,
128.330, 128.335, 128.340, 128.345, 128.350 and 128.355.
Be It Enacted by the People of
the State of
SECTION 1. Definitions.
As used in sections 1 to 10 of this 2007 Act:
(1) “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”
means an institutional fund or part of an institutional fund 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 the institution’s own use.
(3) “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) “Institution” means:
(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; and
(c) A trust that had
both charitable and noncharitable interests, after all noncharitable interests
have terminated.
(5) “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;
(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; or
(d) A fund managed by
the State Treasurer, moneys held by the State Treasurer for investment or
moneys managed or held for investment by or on behalf of the State Treasurer
under ORS chapter 293 or 348.
(6) “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.
(7) “Program-related
asset” means an asset held by an institution primarily to accomplish a
charitable purpose of the institution and not primarily for investment.
(8) “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.
SECTION 2. Standard
of conduct in managing and investing institutional fund. (1) 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) In addition to
complying with the duty of loyalty imposed by law other than sections 1 to 10
of this 2007 Act, 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) 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) An institution may
pool two or more institutional funds for purposes of management and investment.
(5) Except as otherwise
provided by a gift instrument, the following rules apply:
(a) In managing and
investing an institutional fund, the following factors, if relevant, must be
considered:
(A) General economic
conditions;
(B) The possible effect
of inflation or deflation;
(C) The expected tax
consequences, if any, of investment decisions or strategies;
(D) The role that each
investment or course of action plays within the overall investment portfolio of
the fund;
(E) The expected total
return from income and the appreciation of investments;
(F) Other resources of
the institution;
(G) The needs of the
institution and the fund to make distributions and to preserve capital; and
(H) 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 instead 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 sections 1 to 10 of this 2007 Act, 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 sections 1 to 10 of this 2007 Act.
(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.
SECTION 3. Appropriation
for expenditure or accumulation of endowment fund; rules of construction.
(1) Subject to subsection (4) of this section and 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.
(2) To limit the
authority to appropriate for expenditure or accumulate under subsection (1) of
this section, a gift instrument must specifically state the limitation.
(3) 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) of this section.
(4) The appropriation
for expenditure in any year of an amount greater than seven percent 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 three
years immediately preceding the year in which the appropriation for expenditure
was made, creates a rebuttable presumption of imprudence. For an endowment fund
in existence for fewer than three 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:
(a) Apply to an
appropriation for expenditure permitted under law other than sections 1 to 10
of this 2007 Act or by the gift instrument; or
(b) Create a presumption
of prudence for an appropriation for expenditure of an amount less than or
equal to seven percent of the fair market value of the endowment fund.
SECTION 4. Delegation
of management and investment functions.(1) Subject to any specific
limitation set forth in a gift instrument or in law other than sections 1 to 10
of this 2007 Act, 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) 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) An institution that
complies with subsection (1) of this section is not liable for the decisions or
actions of an agent to which the function was delegated.
(4) 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) An institution may
delegate management and investment functions to its committees, officers or
employees as authorized by law of this state other than sections 1 to 10 of
this 2007 Act.
SECTION 5. Release
or modification of restrictions on management, investment or purpose. (1)
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) 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, the restriction impairs
the management or investment of the fund or, 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) 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) 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, within 60 days after
notification to the Attorney General, may release or modify the restriction, in
whole or part, if:
(a) The institutional
fund subject to the restriction has a total value of less than $25,000;
(b) More than 20 years
have elapsed since the fund was established; and
(c) The institution uses
the property in a manner consistent with the charitable purposes expressed in
the gift instrument.
(5) The provisions of
this section apply to property and other interests given by private donors as a
gift to a public body, as defined by ORS 174.109, or to any instrumentality of
a public body. This subsection does not limit any other authority that a public
body or an instrumentality of a public body may have to release or modify a
restriction contained in a gift instrument on the management, investment or
purpose of funds.
SECTION 6. Reviewing
compliance. Compliance with sections 1 to 10 of this 2007 Act 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.
SECTION 7. Application
to existing institutional funds. Sections 1 to 10 of this 2007 Act apply to
institutional funds existing on or established after the effective date of this
2007 Act. As applied to institutional funds existing before the effective date
of this 2007 Act, sections 1 to 10 of this 2007 Act governs only decisions made
or actions taken on or after the effective date of this 2007 Act.
SECTION 8. Relation
to Electronic Signatures in Global and National Commerce Act. Sections 1 to
10 of this 2007 Act modify, limit and supersede the Electronic Signatures in
Global and National Commerce Act, 15 U.S.C. 7001 et seq., but do not modify,
limit or supersede 15 U.S.C. 7001(a), or authorize electronic delivery of any
of the notices described in 15 U.S.C. 7003(b).
SECTION 9. Uniformity
of application and construction. In applying and construing sections 1 to
10 of this 2007 Act, consideration must be given to the need to promote
uniformity of the law with respect to its subject matter among states that
enact the Uniform Prudent Management of Institutional Funds Act.
SECTION 10. Short
title. Sections 1 to 10 of this 2007 Act may be cited as the Uniform
Prudent Management of Institutional Funds Act.
SECTION 11. ORS
128.310, 128.315, 128.320, 128.325, 128.330, 128.335, 128.340, 128.345, 128.350
and 128.355 are repealed.
SECTION 12. The
section captions used in this 2007 Act are provided only for the convenience of
the reader and do not become part of the statutory law of this state or express
any legislative intent in the enactment of this 2007 Act.
Approved by the Governor June 22, 2007
Filed in the office of Secretary of State June 27, 2007
Effective date January 1, 2008
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