Minnesota Session Laws - 2008, Regular Session

CHAPTER 188--H.F.No. 1499

An act

relating to commerce; enacting the Uniform Prudent Management of Institutional Funds Act approved and recommended by the National Conference of Commissioners on Uniform State Laws;

proposing coding for new law in Minnesota Statutes, chapter 309; repealing Minnesota Statutes 2006, sections 309.62; 309.63; 309.64; 309.65; 309.66; 309.67; 309.68; 309.69; 309.70; 309.71.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

new text begin [309.73] SHORT TITLE. new text end

new text begin This act may be cited as the Uniform Prudent Management of Institutional Funds Act. new text end

Sec. 2.

new text begin [309.735] DEFINITIONS. new text end

new text begin In this act: new text end

new text begin (1) "Charitable purpose" means the relief of poverty, the advancement of education or religion, the promotion of health, or any other eleemosynary purpose. new text end

new text begin (2) "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. The term does not include assets that an institution designates as an endowment fund for its own use. new text end

new text begin (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. new text end

new text begin (4) "Institution" means: new text end

new text begin (A) a person, other than an individual, organized and operated exclusively for charitable purposes; new text end

new text begin (B) a government or governmental subdivision, agency, or instrumentality, to the extent that it holds funds exclusively for a charitable purpose; and new text end

new text begin (C) a trust that had both charitable and noncharitable interests, after all noncharitable interests have terminated. new text end

new text begin (5) "Institutional fund" means a fund held by an institution exclusively for charitable purposes. The term does not include: new text end

new text begin (A) program-related assets; new text end

new text begin (B) a fund held for an institution by a trustee that is not an institution; or new text end

new text begin (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. new text end

new text begin (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. new text end

new text begin (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. new text end

new text begin (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. new text end

Sec. 3.

new text begin [309.74] STANDARD OF CONDUCT IN MANAGING AND INVESTING INSTITUTIONAL FUND. new text end

new text begin (a) 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. new text end

new text begin (b) In addition to complying with the duty of loyalty imposed by law other than this 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. new text end

new text begin (c) In managing and investing an institutional fund, an institution: new text end

new text begin (1) 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 new text end

new text begin (2) shall make a reasonable effort to verify facts relevant to the management and investment of the fund. new text end

new text begin (d) An institution may pool two or more institutional funds for purposes of management and investment. new text end

new text begin (e) Except as otherwise provided by a gift instrument, the following rules apply: new text end

new text begin (1) In managing and investing an institutional fund, the following factors, if relevant, must be considered: new text end

new text begin (A) general economic conditions; new text end

new text begin (B) the possible effect of inflation or deflation; new text end

new text begin (C) the expected tax consequences, if any, of investment decisions or strategies; new text end

new text begin (D) the role that each investment or course of action plays within the overall investment portfolio of the fund; new text end

new text begin (E) the expected total return from income and the appreciation of investments; new text end

new text begin (F) other resources of the institution; new text end

new text begin (G) the needs of the institution and the fund to make distributions and to preserve capital; and new text end

new text begin (H) the asset's special relationship or special value, if any, to the charitable purposes of the institution. new text end

new text begin (2) 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. new text end

new text begin (3) Except as otherwise provided by law other than this act, an institution may invest in any kind of property or type of investment consistent with this section. new text end

new text begin (4) 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. new text end

new text begin (5) 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 act. new text end

new text begin (6) 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. new text end

Sec. 4.

new text begin [309.745] APPROPRIATION FOR EXPENDITURE OR ACCUMULATION OF ENDOWMENT FUND; RULES OF CONSTRUCTION. new text end

new text begin (a) Subject to the intent of a donor expressed in the gift instrument and to subsection (d), 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: new text end

new text begin (1) the duration and preservation of the endowment fund; new text end

new text begin (2) the purposes of the institution and the endowment fund; new text end

new text begin (3) general economic conditions; new text end

new text begin (4) the possible effect of inflation or deflation; new text end

new text begin (5) the expected total return from income and the appreciation of investments; new text end

new text begin (6) other resources of the institution; and new text end

new text begin (7) the investment policy of the institution. new text end

new text begin (b) To limit the authority to appropriate for expenditure or accumulate under subsection (a), a gift instrument must specifically state the limitation. new text end

new text begin (c) 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: new text end

new text begin (1) create an endowment fund of permanent duration unless other language in the gift instrument limits the duration or purpose of the fund; and new text end

new text begin (2) do not otherwise limit the authority to appropriate for expenditure or accumulate under subsection (a). new text end

Sec. 5.

new text begin [309.75] DELEGATION OF MANAGEMENT AND INVESTMENT FUNCTIONS. new text end

new text begin (a) Subject to any specific limitation set forth in a gift instrument or in law other than this act, an institution may delegate to an external agent the management and investment of an institutional fund to the extent that 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: new text end

new text begin (1) selecting an agent; new text end

new text begin (2) establishing the scope and terms of the delegation, consistent with the purposes of the institution and the institutional fund; and new text end

new text begin (3) periodically reviewing the agent's actions in order to monitor the agent's performance and compliance with the scope and terms of the delegation. new text end

new text begin (b) 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. new text end

new text begin (c) An institution that complies with subsection (a) is not liable for the decisions or actions of an agent to which the function was delegated. new text end

new text begin (d) 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. new text end

new text begin (e) An institution may delegate management and investment functions to its committees, officers, or employees as authorized by law of this state other than this act. new text end

Sec. 6.

new text begin [309.755] RELEASE OR MODIFICATION OF RESTRICTIONS ON MANAGEMENT, INVESTMENT, OR PURPOSE. new text end

new text begin (a) 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. new text end

new text begin (b) The court, upon application of an institution, may modify a restriction contained in the gift instrument of an institutional fund pursuant to the procedure, and in accordance with the standards, set forth in section 501B.31, subdivision 2 or 4, whichever is applicable. new text end

new text begin (c) 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, may release or modify the restriction, in whole or part, if: new text end

new text begin (1) the institutional fund subject to the restriction has a total value of less than $50,000; new text end

new text begin (2) more than 20 years have elapsed since the fund was established; and new text end

new text begin (3) the institution uses the property in a manner consistent with the charitable purposes expressed in the gift instrument. new text end

Sec. 7.

new text begin [309.76] REVIEWING COMPLIANCE. new text end

new text begin Compliance with this 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. new text end

Sec. 8.

new text begin [309.765] APPLICATION TO EXISTING INSTITUTIONAL FUNDS. new text end

new text begin This act applies to institutional funds existing on or established after the effective date of this act. As applied to institutional funds existing on the effective date of this act, this act governs only decisions made or actions taken on or after that date. new text end

Sec. 9.

new text begin [309.77] RELATION TO ELECTRONIC SIGNATURES IN GLOBAL AND NATIONAL COMMERCE ACT. new text end

new text begin This act modifies, limits, and supersedes the Electronic Signatures in Global and National Commerce Act, United States Code, title 15, section 7001 et seq., but does not modify, limit, or supersede section 101 of that act, United States Code, title 15, section 7001(a), or authorize electronic delivery of any of the notices described in section 103 of that act, United States Code, title 15, section 7003(b). new text end

Sec. 10.

new text begin REPEALER. new text end

new text begin Minnesota Statutes 2006, sections 309.62; 309.63; 309.64; 309.65; 309.66; 309.67; 309.68; 309.69; 309.70; and 309.71, new text end new text begin are repealed. new text end

Presented to the governor April 9, 2008

Signed by the governor April 10, 2008, 3:46 p.m.