FIRST REGULAR SESSION
HOUSE BILL NO. 1038
94TH GENERAL ASSEMBLY
INTRODUCED BY REPRESENTATIVE SKAGGS.
Read 1st time March 1, 2007 and copies ordered printed.
D. ADAM CRUMBLISS, Chief Clerk
To amend chapter 469, RSMo, by adding thereto eight new sections relating to the uniform prudent management of institutional funds.
Be it enacted by the General Assembly of the state of Missouri, as follows:
Section A. Chapter 469, RSMo, is amended by adding thereto eight new sections, to be known as sections 469.950, 469.952, 469.954, 469.956, 469.958, 469.960, 469.962, and 469.964, to read as follows:
469.950. This section may be known and shall be cited as the "Uniform Prudent Management of Institutional Funds Act".
469.952. As used in sections 469.950 to 469.964, the following terms shall mean:
(1) "Charitable purpose", 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", an institutional fund or part thereof under the terms of a gift instrument is not wholly expendable by the institution on a current basis. The term shall not include assets that an institution designates as an endowment fund for its own use;
(3) "Gift instrument", a record or records, including an institutional solicitation under which property is granted to, transferred to, or held by an institutional fund;
(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", a fund held by an institution exclusively for charitable purposes. It shall 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;
(6) "Person", 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", an asset held by an institution primarily to accomplish a charitable purpose of the institution and not primarily for investment;
(8) "Record", information that is inscribed on tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.
469.954. 1. Subject to the intent of a donor expressed in a gift, 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 in sections 469.950 to 469.964, each person responsible for managing and investing an institutional fund shall manage and invest the fund in good faith and with the care an ordinary prudent person in a like position would exercise under similar circumstances;
3. In managing and investing an institutional fund, an institution:
(1) May incur only costs that are appropriate and reasonable in relation to the assets, the purpose of the institution, and the skills available to the institution; and
(2) 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 the purposes of management and investment;
5. Except as otherwise provided by a gift instrument, the following rules apply:
(1) In managing and investing an institutional fund, the following factors, if relevant, shall 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 the income and the appreciation of investments;
(f) Other resources of the institution;
(g) The needs of the institution and the fund to make the distributions and to preserve capital; and
(h) An asset's special relationship or special value, if any, to the charitable purposes of the institution;
(2) Management and investment decisions about an individual asset shall not be made in isolation but 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;
(3) Except as otherwise provided by law other than in sections 469.950 to 469.964, an institution may invest in any kind of property or type of investment consistent with this section;
(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;
(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 or necessary to meet other circumstances of the institution and the requirements of sections 469.950 to 469.964;
(6) A person that has a special skill 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.
469.956. 1. Subject to the intent of the donor expressed in the gift instrument, an institution may appropriate for expenditure or accumulate so much of an endowment fund as the institution determines if prudent for the uses, benefits, purposes, and duration for which the endowment fund is established. Unless otherwise stated 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 ordinary prudent person in a like position would exercise under similar circumstances and shall consider, if relevant, the following factors:
(1) The duration and preservation of the endowment fund;
(2) The purposes of the institution and the endowment fund;
(3) General economic conditions;
(4) The possible effect of inflation or deflation;
(5) The expected total return from income and the appreciation of investments;
(6) Other resources of the institution; and
(7) 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 shall 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 that:
(1) Create an endowment fund of permanent duration unless other language in the gift instrument limits the duration or purpose of the fund; and
(2) Do not otherwise limit the authority to appropriate for expenditure or accumulate under subsection 1 of this section.
469.958. 1. Subject to any specific limitation set forth in a gift instrument or law not within sections 469.950 to 469.964, 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 ordinary prudent person in a like position would exercise under similar circumstances in:
(1) Selecting an agent;
(2) Establishing the scope and terms of the delegation consistent with the purposes of the institution and the institutional fund;
(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;
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 other than provided for in sections 469.950 to 469.964.
469.960. 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 of 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 shall be given an opportunity to be heard. To the extent practicable, any modification shall be made in accordance with the donor's probable intention.
3. If a particular charitable purpose or 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 shall 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, sixty days after notification to the attorney general, may release or modify the restrictions in whole or in part if:
(1) The institutional fund subject to the restriction has a total value of less than twenty-five thousand dollars;
(2) More than twenty years have lapsed 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.
469.962. Sections 469.950 to 469.964 shall apply to institutional funds existing on or established after August 28, 2008.
469.964. As authorized in 15 U.S.C. 7002, as amended, sections 469.950 to 469.964 modifies, limits, or supersedes the federal Electronic Signatures in Global and National Commerce Act, 15 U.S.C. Section 7001, et seq., but do not modify, limit, or supersede 15 U.S.C. Section 7001(a), or authorize electronic delivery of any of the notices described in 15 U.S.C. Section 7003(b).