59-21 Uniform Prudent Management of Institutional Funds Act - North Dakota Statutes

Download pdf

Loading PDF...

CHAPTER 59-21UNIFORM PRUDENT MANAGEMENT OF INSTITUTIONAL FUNDS ACT59-21-01. Definitions. In this chapter:1."Charitable purpose" means the relief of poverty, the advancement of education, the
advancement of religion, the promotion of health, or any other purpose the
achievement of which is beneficial to the community.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.3."Gift instrument" means a record, 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 entity, to the extent that it holds funds
exclusively for a charitable purpose; orc.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. The term 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;
ord.Perpetual trust funds established by article IX of the Constitution of North
Dakota.6."Program-related asset" means an asset held by an institution primarily to
accomplish a charitable purpose of the institution and not primarily for investment.7."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.59-21-02. 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 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.Page No. 13.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;
andb.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:(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.Page No. 2f.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.59-21-03.Appropriation for expenditure or accumulation of endowment fund -Rules of construction.1.Subject to the intent of a donor, as expressed in the gift instrument and subject to
subsection 4, 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.Inmaking 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; andg.The investment policy of the institution.2.To limit the authority to appropriate for expenditure or accumulate under
subsection 1, a gift instrument specifically must 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 create
an endowment fund of permanent duration unless other language in the gift
instrument limits the duration or purpose of the fund and do not otherwise limit the
authority to appropriate for expenditure or accumulate under subsection 1.4.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 is made, creates a rebuttable presumption of imprudence.For anendowment 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 this
chapter or by the gift instrument; orb.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.59-21-04. Management and investment functions - Delegation.Page No. 31.Except as otherwise provided in a gift instrument or by 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 anordinarily 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; andc.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 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.59-21-05. Release or modification of restrictions on management, investment, orpurpose.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, 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.The court shall provide theattorney general with the 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 court shall provide the attorney general
with the 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 restriction, in whole or
part, if:Page No. 4a.The institutional fund subject to the restriction has a total value of less than
twenty-five thousand dollars;b.More than twenty years have elapsed since the fund was established; andc.The institution uses the property in a manner consistent with the charitable
purposes expressed in the gift instrument.59-21-06. Compliance - Determination. Compliance with this chapter is determined inlight of the facts and circumstances existing at the time a decision is made or at the time action is
taken, and not by hindsight.59-21-07.Application to existing institutional funds.This chapter applies toinstitutional funds existing on or established after April 22, 2009. As applied to institutional funds
existing on April 22, 2009, this chapter governs only decisions made or actions taken on or after
that date.59-21-08. Relation to Electronic Signatures in Global and National Commerce Act.This chapter modifies, limits, and supersedes the Electronic Signatures in Global and National
Commerce Act [15 U.S.C. 7001 et seq.] but does 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).Page No. 5Document Outlinechapter 59-21 uniform prudent management of institutional funds act