Enrolled HB 416: Adopting and relating to the Uniform Prudent Management of Institutional Funds Act; relating to the investment of money for charitable purposes by institutions, including governmental institutions; and relating to the University of Alaska.
00Enrolled HB 416 01 Adopting and relating to the Uniform Prudent Management of Institutional Funds Act; 02 relating to the investment of money for charitable purposes by institutions, including 03 governmental institutions; and relating to the University of Alaska. 04 _______________ 05 * Section 1. AS 13 is amended by adding a new chapter to read: 06 Chapter 70. Uniform Prudent Management of Institutional Funds. 07 Sec. 13.70.010. Standard of conduct in managing and investing 08 institutional funds. (a) Subject to the intent of a donor expressed in a gift instrument, 09 an institution, in managing and investing an institutional fund, shall consider the 10 charitable purposes of the institution and the purposes of the institutional fund. 11 (b) In addition to complying with the duty of loyalty imposed by law other 12 than this chapter, each person responsible for managing and investing an institutional 13 fund shall manage and invest the fund in good faith and with the care an ordinarily 14 prudent person in a like position would exercise under similar circumstances.
01 (c) In managing and investing an institutional fund, an institution 02 (1) may incur only costs that are appropriate and reasonable in relation 03 to the assets, the purposes of the institution, and the skills available to the institution; 04 and 05 (2) shall make a reasonable effort to verify facts relevant to the 06 management and investment of the fund. 07 (d) An institution may pool two or more institutional funds for purposes of 08 management and investment. 09 (e) Except as otherwise provided by a gift instrument, the following rules 10 apply: 11 (1) in managing and investing an institutional fund, the following 12 factors, if relevant, must be considered: 13 (A) general economic conditions; 14 (B) the possible effect of inflation or deflation; 15 (C) the expected tax consequences, if any, of investment 16 decisions or strategies; 17 (D) the role that each investment or course of action plays 18 within the overall investment portfolio of the fund; 19 (E) the expected total return from income and the appreciation 20 of investments; 21 (F) other resources of the institution; 22 (G) the needs of the institution and the fund to make 23 distributions and to preserve capital; and 24 (H) an asset's special relationship or special value, if any, to the 25 charitable purposes of the institution; 26 (2) management and investment decisions about an individual asset 27 may not be made in isolation but rather in the context of the institutional fund's 28 portfolio of investments as a whole and as a part of an overall investment strategy 29 having risk and return objectives reasonably suited to the fund and to the institution; 30 (3) except as otherwise provided by law other than this chapter, an 31 institution may invest in any kind of property or type of investment consistent with the
01 standards of this section; 02 (4) an institution shall diversify the investments of an institutional fund 03 unless the institution reasonably determines that, because of special circumstances, the 04 purposes of the fund are better served without diversification; 05 (5) within a reasonable time after receiving property, an institution 06 shall make and implement decisions concerning the retention or disposition of the 07 property or to rebalance a portfolio in order to bring the institutional fund into 08 compliance with the purposes, terms, distribution requirements, and other 09 circumstances of the institution and the requirements of this chapter; 10 (6) a person who has special skills or expertise, or is selected in 11 reliance on the person's representation that the person has special skills or expertise, 12 has a duty to use those special skills or that expertise in managing and investing 13 institutional funds. 14 Sec. 13.70.020. Appropriation for expenditure or accumulation of 15 endowment fund; rules of construction. (a) Subject to the intent of a donor 16 expressed in a gift instrument, an institution may appropriate for expenditure or 17 accumulate so much of an endowment fund as the institution determines is prudent for 18 the uses, benefits, purposes, and duration for which the endowment fund is 19 established. Unless stated otherwise in a gift instrument, the assets in an endowment 20 fund are donor-restricted assets until appropriated for expenditure by the institution. In 21 making a determination to appropriate or accumulate, the institution shall act in good 22 faith, with the care that an ordinarily prudent person in a like position would exercise 23 under similar circumstances, and shall consider, if relevant, the following factors: 24 (1) the duration and preservation of the endowment fund; 25 (2) the purposes of the institution and the endowment fund; 26 (3) general economic conditions; 27 (4) the possible effect of inflation or deflation; 28 (5) the expected total return from income and the appreciation of 29 investments; 30 (6) other resources of the institution; and 31 (7) the investment policy of the institution.
01 (b) To limit the authority to appropriate for expenditure or accumulate under 02 (a) of this section, a gift instrument must specifically state the limitation. 03 (c) Terms in a gift instrument designating a gift as an endowment, a direction 04 or authorization in the gift instrument to use only "income," "interest," "dividends," or 05 "rents, issues, or profits," or "to preserve the principal intact," or words of similar 06 meaning 07 (1) create an endowment fund of permanent duration unless other 08 language in the gift instrument limits the duration or purpose of the fund; and 09 (2) do not otherwise limit the authority to appropriate for expenditure 10 or accumulate under (a) of this section. 11 Sec. 13.70.030. Delegation of management and investment functions. (a) 12 Subject to a specific limitation set out in a gift instrument or in law other than this 13 chapter, an institution may delegate to an external agent the management and 14 investment of an institutional fund to the extent that an institution could prudently 15 delegate under the circumstances. An institution shall act in good faith, with the care 16 that an ordinarily prudent person in a like position would exercise under similar 17 circumstances, in 18 (1) selecting an agent; 19 (2) establishing the scope and terms of the delegation, consistent with 20 the purposes of the institution and the institutional fund; and 21 (3) periodically reviewing the agent's actions in order to monitor the 22 agent's performance and compliance with the scope and terms of the delegation. 23 (b) In performing a delegated function, an agent owes a duty to the institution 24 to exercise reasonable care to comply with the scope and terms of the delegation. 25 (c) An institution that complies with (a) of this section is not liable for the 26 decisions or actions of an agent to whom the function was delegated. 27 (d) By accepting delegation of a management or investment function from an 28 institution that is subject to the laws of this state, an agent submits to the jurisdiction 29 of the courts of this state in all proceedings arising from or related to the delegation or 30 the performance of the delegated function. 31 (e) An institution may delegate management and investment functions to its
01 committees, officers, or employees as authorized by law other than this chapter. 02 Sec. 13.70.040. Release or modification of restrictions on management, 03 investment, or purpose. (a) With the donor's consent in a record, an institution may 04 release or modify, in whole or in part, a restriction contained in a gift instrument on 05 the management, investment, or purpose of an institutional fund. A release or 06 modification may not allow a fund to be used for a purpose other than a charitable 07 purpose of the institution. 08 (b) If a restriction contained in a gift instrument on the management or 09 investment of an institutional fund becomes impracticable or wasteful or impairs the 10 management or investment of the fund, or if, because of circumstances not anticipated 11 by the donor, a modification of a restriction will further the purposes of the fund, the 12 court, on application of the institution, may modify the restriction. The institution shall 13 notify the attorney general of the application. To the extent practicable, a modification 14 shall be made in accordance with the donor's probable intention. 15 (c) If a particular charitable purpose or a restriction contained in a gift 16 instrument on the use of an institutional fund becomes unlawful, impracticable, 17 impossible to achieve, or wasteful, the court, on application of an institution, may 18 modify the purpose of the fund or the restriction on the use of the fund in a manner 19 consistent with the charitable purposes expressed in the gift instrument. 20 (d) If an institution determines that a restriction contained in a gift instrument 21 on the management, investment, or purpose of an institutional fund is unlawful, 22 impracticable, impossible to achieve, or wasteful, the institution, 90 days or more after 23 notification of the attorney general, may release or modify the restriction, in whole or 24 part, if 25 (1) the institutional fund subject to the restriction has a total value of 26 less than $50,000; 27 (2) more than 20 years have elapsed since the fund was established; 28 and 29 (3) the institution uses the property in a manner the institution 30 reasonably determines to be consistent with the charitable purposes expressed in the 31 gift instrument.
01 Sec. 13.70.050. Reviewing compliance. Compliance with this chapter is 02 determined in light of the facts and circumstances existing at the time a decision is 03 made or an action is taken. 04 Sec. 13.70.060. Relation to Electronic Signatures in Global and National 05 Commerce Act. This chapter modifies, limits, and supersedes 15 U.S.C. 7001 - 7031 06 (Electronic Signatures in Global and National Commerce Act), but does not modify, 07 limit, or supersede 15 U.S.C. 7001(c) or authorize electronic delivery of a notice 08 described in 15 U.S.C. 7003(b). 09 Sec. 13.70.070. Application. If another provision of law or of a governing 10 instrument of an institution applies to an institutional fund but conflicts with this 11 chapter, the other provision governs. 12 Sec. 13.70.080. Uniformity of application and construction. In applying and 13 construing this chapter, consideration shall be given to the need to promote uniformity 14 of the law with respect to its subject matter among states that enact it. 15 Sec. 13.70.090. Definitions. In this chapter, 16 (1) "charitable purpose" means the relief of poverty, the advancement 17 of education or religion, the promotion of health, the promotion of a governmental 18 purpose, or another purpose the achievement of which is beneficial to the community; 19 (2) "endowment fund" means an institutional fund, or part of an 20 institutional fund, not wholly expendable by the institution on a current basis under the 21 terms of a gift instrument; the term does not include assets of an institution designated 22 by an institution as an endowment fund for its own use; 23 (3) "gift instrument" means a record, including an institutional 24 solicitation, under which property is granted to, transferred to, or held by an 25 institutional fund; 26 (4) "institution" means 27 (A) a person, other than an individual, organized and operated 28 exclusively for charitable purposes; 29 (B) a government or governmental subdivision, agency, or 30 instrumentality, to the extent that it holds funds exclusively for a charitable 31 purpose; or
01 (C) a trust that had both charitable and noncharitable interests, 02 after all noncharitable interests have terminated; 03 (5) "institutional fund" means a fund held by an institution exclusively 04 for charitable purposes; the term does not include 05 (A) program-related assets; 06 (B) a fund held for an institution by a trustee who is not an 07 institution; or 08 (C) a fund in which a beneficiary who is not an institution has 09 an interest, other than an interest that could arise on a violation or failure of the 10 purposes of the fund; 11 (6) "person" means an individual, corporation, business trust, estate, 12 trust, partnership, limited liability company, association, joint venture, public 13 corporation, government or governmental subdivision, agency, or instrumentality, or 14 another legal or commercial entity; 15 (7) "program-related asset" means an asset held by an institution 16 primarily to accomplish a charitable purpose of the institution and not primarily for 17 appreciation or the production of income; 18 (8) "record" means information that is inscribed on a tangible medium 19 or that is stored in an electronic or other medium and is retrievable in perceivable 20 form. 21 Sec. 13.70.095. Short title. This chapter may be cited as the Uniform Prudent 22 Management of Institutional Funds Act. 23 * Sec. 2. AS 14.40.280(c) is amended to read: 24 (c) Except as provided by (b) of this section, the monetary gifts, bequests, or 25 endowments that are made to the University of Alaska shall be managed and invested 26 by the Board of Regents. In carrying out its management and investment 27 responsibilities under this subsection, the Board of Regents has the same powers 28 [POWER] and [OBLIGATIONS TO CARRY OUT] duties with respect to the gifts, 29 bequests, and endowments of the University of Alaska as are provided or [TO AND] 30 required [OF THE ALASKA RETIREMENT MANAGEMENT BOARD] under 31 AS 37.10.071 and AS 13.70 (Uniform Prudent Management of Institutional
01 Funds Act). Notwithstanding any other provision of law, AS 37.10.071 governs 02 the management and investment responsibilities established under this subsection 03 if 04 (1) both AS 37.10.071 and AS 13.70 apply to the management and 05 investment responsibilities established under this subsection; and 06 (2) AS 37.10.071 conflicts with AS 13.70 [AS 37.10.220]. 07 * Sec. 3. AS 14.40.400(b) is amended to read: 08 (b) The Board of Regents is the fiduciary of the fund. The Board of Regents 09 shall account for and invest the fund. In carrying out its investment responsibilities 10 under this subsection, the Board of Regents has the same powers and duties with 11 respect to the fund as are provided or [TO AND] required [OF THE ALASKA 12 RETIREMENT MANAGEMENT BOARD] under AS 37.10.071 and AS 13.70 13 (Uniform Prudent Management of Institutional Funds Act). Notwithstanding any 14 other provision of law, AS 37.10.071 governs the investment responsibilities 15 established under this subsection if 16 (1) both AS 37.10.071 and AS 13.70 apply to the investment 17 responsibilities established under this subsection; and 18 (2) AS 37.10.071 conflicts with AS 13.70 [AS 37.10.220]. 19 * Sec. 4. The uncodified law of the State of Alaska is amended by adding a new section to 20 read: 21 APPLICABILITY. AS 13.70, enacted by sec. 1 of this Act, applies to an institutional 22 fund held by an institution on or after the effective date of this Act and to decisions made or 23 action taken by the institution relating to the institutional fund on or after the effective date of 24 this Act. In this section, "institution" and "institutional fund" have the meanings given in 25 AS 13.70.090, enacted by sec. 1 of this Act.