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Am. H. B. No. 522 As Reported by the House Civil and Commercial Law CommitteeAs Reported by the House Civil and Commercial Law Committee
127th General Assembly | Regular Session | 2007-2008 |
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Cosponsors:
Representatives McGregor, J., Combs, Coley
A BILL
To amend sections 1715.51, 1715.52, 1715.55, 1715.56,
1715.57, 1715.58, 1715.59, 3345.05, and 5813.06;
to amend, for the purpose of adopting new section
numbers as indicated in parentheses, sections
1715.52 (1715.53), 1715.55 (1715.54), 1715.56
(1715.52), and 1715.57 (1715.55); to enact new
sections 1715.56 and 1715.57; and to repeal
sections 1715.53 and 1715.54 of the Revised Code
for the purpose of adopting the Uniform Prudent
Management of Institutional Funds Act by revising
the Ohio Uniform Management of Institutional Funds
Act.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:
Section 1. That sections 1715.51, 1715.52, 1715.55, 1715.56,
1715.57, 1715.58, 1715.59, 3345.05, and 5813.06 be amended;
sections 1715.52 (1715.53), 1715.55 (1715.54), 1715.56 (1715.52),
and 1715.57 (1715.55) be amended for the purpose of adopting new
section numbers as indicated in parentheses; and new sections
1715.56 and 1715.57 of the Revised Code be enacted to read as
follows:
Sec. 1715.51. As used in sections 1715.51 to 1715.59 of the
Revised Code:
(A) "Charitable purpose" means any purpose the achievement of
which is beneficial to the community, including the relief of
poverty, the advancement of education or religion, the promotion
of health, and the promotion of a governmental purpose.
(B) "Institution" means an incorporated or unincorporated
organization
that is any of the following:
(1) A person, other than an individual, organized and
operated exclusively for educational, religious,
charitable, or
other eleemosynary
purposes or a;
(2) A
governmental organization to the extent that it holds
funds exclusively for
any of those purposes a charitable purpose;
(3) A trust that had both charitable and noncharitable
interests and the noncharitable interests have terminated.
(B)(C) "Institutional fund" means a fund that is held by an
institution exclusively
for its
exclusive use, benefit, or
charitable purposes.
"Institutional fund" does not include either
any of the
following:
(1) Program related assets;
(2) A fund held for an institution by a trustee that is not
an institution;
(2)(3) A fund in which a beneficiary that is not an
institution has an interest
other than a right an interest that
may arise upon a violation of or the failure of the
purposes of
the fund.
(C)(D) "Endowment fund" means an institutional fund, or a any
part
of an institutional fund, thereof that, under the terms of a
gift instrument, is not wholly expendable
by the institution on a
current basis under the terms of the
applicable gift instrument.
"Endowment fund" does not include assets that an institution
designates as an endowment fund for its own use.
(D) "Governing board" means the body responsible for the
management of an
institution or an institutional fund.
(E)(1) "Historic dollar value" means the aggregate fair value
in
dollars of the following:
(a) An endowment fund at the time it became an endowment
fund;
(b) Each subsequent donation to an
endowment fund at the time
it is made;
(c) Each accumulation made pursuant to a direction in the
applicable gift
instrument at the time the accumulation is added
to an
endowment fund.
(2) A determination of historic dollar value made in good
faith by an institution is conclusive.
(F) "Gift instrument" means a will, deed, grant, conveyance,
agreement,
memorandum, writing, or other governing document record
or records, including the terms of any an
institutional
solicitations from which an institutional fund resulted
solicitation, under
which property is granted to, transferred to,
or held by an institution as an institutional
fund.
(F) "Person" means an individual, corporation, business
trust, estate, trust, partnership, limited liability company,
association, joint venture, public corporation, governmental
organization, or any other legal or commercial entity.
(G) "Program related asset" means an asset held by an
institution primarily to accomplish a charitable purpose of the
institution and not primarily for investment.
(H) "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.
Sec. 1715.56 1715.52. In the administration of the powers to
appropriate
appreciation, to make and retain investments, and to
delegate investment
management of (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.
(B) In addition to complying with any other duty of loyalty
imposed by law, each person responsible for managing and investing
an institutional funds, members of a governing board of an
institution fund shall exercise ordinary business manage and
invest the fund in good faith and with the care and prudence an
ordinarily prudent person in a like position would exercise under
the facts
and similar circumstances prevailing at the time of the
action or decision. In so
doing, they shall consider the long and
short term needs of the
institution in
carrying out its
educational, religious,
charitable, or other eleemosynary
purposes, its present and
anticipated financial requirements, the
expected total return on its
investments, price level trends, and
general
(C) In managing and investing an institutional fund, an
institution 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
shall make a reasonable effort to verify facts relevant to the
management and investment of the fund.
(D) An institution may pool two or more institutional funds
for purposes of management and investment.
(E) Except as otherwise provided by a gift instrument, all of
the following 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 income and the
appreciation of investments;
(f) Other resources of the institution;
(g) The need of the institution and of the fund to make
distributions and preserve capital;
(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 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.
(3) Except as otherwise provided by law, 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 the rebalancing of a
portfolio, in order to bring the institutional fund into
compliance with the purposes, terms, and distribution requirements
of the institution and as necessary to meet other circumstances of
the institution and the requirements of sections 1715.51 to
1715.59 of the Revised Code.
(6) A person that has special skills or expertise, or is
selected in reliance upon the person's representation of the
person's special skills or expertise, has a duty to use those
skills or that expertise in managing and investing institutional
funds.
Sec. 1715.52 1715.53. The governing board of (A) Subject to
the intent of a donor expressed in the gift instrument and to
division (D) of this section, an institution may appropriate for
expenditure or accumulate so much of an endowment fund as the
institution determines is prudent for the uses and, benefits,
purposes, and duration for which an endowment fund is
established
so much of the net
appreciation, realized and
unrealized, in the
fair value of. Unless stated otherwise in the gift instrument, the
assets of the in an
endowment fund over the
historic dollar value
of the fund as is 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 under the standard
established
by
section 1715.56 of the Revised Code. This section
does not limit the
authority of a governing board to expend funds
as permitted
under other law, the terms of the applicable gift
instrument, or the charter
of the institution 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;
(7) The investment policy of the institution.
(B) To limit the authority to appropriate for expenditure or
accumulate under division (A) of this section, a gift instrument
shall specifically state the limitation.
(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, 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
under division (A) of this section to appropriate for expenditure
or accumulate.
(D)(1) The appropriation for expenditure in any year of an
amount not greater than five per cent of the fair market value of
an endowment fund, whether or not the total expenditure from it
exceeds five per cent, calculated on the basis of market values
that are 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 an
irrebuttable presumption of prudence. With respect to an endowment
fund in existence for fewer than three years, the fair market
value of the endowment fund shall be calculated for the period the
endowment fund has been in existence.
(2) Nothing in division (D)(1) of this section shall be
construed to restrict an appropriation for expenditure permitted
by the gift instrument or to create a presumption of imprudence or
prudence for that part, if any, of an appropriation for
expenditure that exceeds five per cent of the fair market value of
the endowment fund.
Sec. 1715.55 1715.54. Except as otherwise provided by the
applicable (A)(1) Subject to any specific limitation set forth in
a gift instrument
or by applicable in any other provision of law
relating to governmental institutions or funds, the
governing
board of an institution may do all of the following:
(A) Delegate 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 doing all of the following:
(b) Establishing the scope and terms of the delegation,
consistent with the purposes of the institution and the
institutional fund;
(c) Periodically reviewing the agent's actions to monitor the
agent's performance and compliance with the scope and terms of the
delegation.
(2) An agent, in performing a delegated function, shall owe a
duty to the institution to exercise reasonable care to comply with
the scope and terms of the delegation. 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.
(3) An institution that complies with division (A)(1) of this
section is not liable for the decisions or actions of an agent to
which the function was delegated.
(B) An institution may delegate management and investment
functions to its committees, officers, or employees of the
institution or of an institutional fund, or agents,
including
investment counsel, the authority to act in
place of the board in
investment and reinvestment of institutional funds;
(B) Contract with independent investment advisors, investment
counsel or
managers, banks, or trust companies, to act in the
manner
described in division (A) of this section;
(C) Authorize the payment of compensation for investment
advisory or
management services as otherwise provided by law.
Sec. 1715.57 1715.55. (A) With the written consent of the If
a donor consents in a record, the governing board
of an
institution may release or modify, in whole or in part, a
restriction imposed by
the applicable contained in a gift
instrument on the use or management, investment, or purpose of an
institutional
fund. A release or modification shall not, however,
permit a fund to be used for a purpose other than a charitable
purpose of the institution.
(B) If written consent of a donor as described in
division
(A) of this section cannot be obtained by reason of
the donor's
death, disability, unavailability, or
impossibility of
identification, the
governing board of an institution may apply in
the name of the
institution to the The appropriate
court for
release of, upon application of an institution, may modify a
restriction imposed by the applicable contained in a gift
instrument
on regarding the use 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 attorney general is a
necessary party to and shall be
served with process in all
proceedings pertaining to an
application of that nature, and
a judgment rendered in proceedings
pertaining to an
application of that nature without the service of
process upon the
attorney general is void. To the extent
practicable, any modification shall be made in accordance with the
donor's probable intention.
If the court finds in proceedings pertaining to an
application of
that nature that the restriction involved is
obsolete,
inappropriate, inpracticable, or impossible, it may
order the release of the restriction in whole or in part.
(C) A release of a restriction by a court order under
division (B) of this section may not change an
endowment fund to a
fund that is not an endowment fund. A
release of a restriction
under division (A)
or (B) of this section may not allow a fund to
be used for
purposes
other than the educational, religious,
charitable,
or other eleemosynary purposes of the institution
involved The court, upon application of an institution, may modify
the charitable purpose of an institutional fund or a restriction
contained in a gift instrument on the use of the fund if the
particular charitable purpose or restriction becomes unlawful,
impracticable, impossible to achieve, or wasteful. The attorney
general is a necessary party to and shall be served with process
in all proceedings pertaining to an application of that nature.
Any modification shall be made in a manner consistent with the
charitable purposes expressed in the gift instrument.
(D) This section does not limit the application of the
doctrine of cy pres 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
may, after providing sixty-days advanced notice to the attorney
general, release or modify the restriction, in whole or in part,
if all of the following conditions are met:
(1) The institutional fund subject to the restriction has a
total value of less than two hundred fifty thousand dollars;
(2) More than ten years have elapsed since the fund was
established;
(3) The institution uses the property in a manner consistent
with the charitable purposes expressed in the gift instrument.
Sec. 1715.56. Compliance with sections 1715.51 to 1715.59 of
the Revised Code shall be determined in light of the facts and
circumstances existing at the time a decision is made or action is
taken, and not by hindsight.
Sec. 1715.57. (A) Sections 1715.51 to 1715.59 of the Revised
Code shall be construed as modifying, limiting, and superseding
the "Electronic Signatures in Global and
National Commerce Act,"
114 Stat. 464, 15 U.S.C. 7001 et seq., with the exception of
section 101 of that act, 15 U.S.C. 7001(a).
(B) Sections 1715.51 to 1715.59 of the Revised Code shall not
be construed as authorizing electronic delivery of any of the
orders, notices, or documents described in section
103 of that
act, 15 U.S.C. 7003(b).
Sec. 1715.58. In so far as is possible on and after the
effective date of this amendment January 1, 2009, sections 1715.51
to 1715.59 of the
Revised Code shall be applied and construed to
effectuate
the general purpose to make uniform
the law with
respect to the subject of those sections
among the states that
enact the
uniform prudent management of institutional funds act.
Sec. 1715.59. Sections 1715.51 to 1715.59 of the Revised
Code may be cited as
the uniform prudent management of
institutional funds act.
Sec. 3345.05.
(A) All registration fees, nonresident
tuition
fees, academic fees for the support of off-campus
instruction,
laboratory and course fees when so assessed and
collected,
student
health fees for the support of a student health
service,
all other
fees, deposits, charges, receipts, and income
from all
or part of
the students, all subsidy or other payments
from state
appropriations, and all other fees, deposits, charges,
receipts,
income, and revenue received by each state institution of higher
education, the
Ohio state university hospitals and their
ancillary
facilities,
the Ohio agricultural research and
development
center,
and the
Ohio state university cooperative
extension
service shall
be held
and administered by the
respective
boards
of trustees of
the
state institution of
higher
education;
provided, that such
fees, deposits, charges,
receipts,
income and revenue, to the extent
required by
resolutions, trust
agreements,
indentures, leases, and
agreements
adopted, made, or
entered into
under Chapter 154. or
section
3345.07, 3345.11, or
3345.12 of the
Revised Code, shall be
held,
administered,
transferred, and
applied in accordance
therewith.
(B) The Ohio board of regents shall require annual reporting
by
the Ohio agricultural research and development center and by
each
university and college receiving state aid in such form and
detail as determined by the board in consultation with such
center, universities and colleges, and the director of budget and
management.
(C) Notwithstanding any provision of the Revised Code to the
contrary, the title to investments made by the board of trustees
of a state institution of
higher education with funds derived
from
any of the
sources described
in division (A) of this section
shall not be
vested in the
state or the political subdivision but
shall be held
in trust by the board. Such
investments
shall be
made pursuant to
an investment policy adopted
by the
board in
public session that
requires all fiduciaries to
discharge
their
duties with the care,
skill, prudence, and
diligence under
the
circumstances then
prevailing that a prudent
person acting in
like capacity and
familiar with such matters
would use in the
conduct of an
enterprise of a like character and
with like aims.
The policy also
shall require at least the
following:
(1) A stipulation that investment of at least twenty-five per
cent of
the
average amount of the investment portfolio over the
course of
the
previous fiscal year be invested in securities of
the United
States
government or of its agencies or
instrumentalities, the
treasurer
of state's pooled investment
program, obligations of
this state or
any political subdivision
of this state,
certificates of deposit
of any national bank
located in this
state, written repurchase
agreements with any
eligible Ohio
financial institution that is a
member of the
federal reserve
system or federal home loan bank,
money market
funds, or bankers
acceptances maturing in two hundred
seventy
days or less which are
eligible for purchase by the
federal
reserve system, as a reserve;
(2) Eligible funds above those that meet the conditions of
division (C)(1) of this section may be pooled with other
institutional funds and invested in accordance with section
1715.54 1715.52 of the Revised Code.
(3) The establishment of an investment committee.
(D) The investment committee established under division
(C)(3) of this section shall meet at least quarterly. The
committee shall review and recommend revisions to the board's
investment policy and shall advise the board on its investments
made under division (C) of this section in an effort to assist it
in meeting its obligations as a fiduciary as described in division
(C) of this section. The committee
shall be authorized to retain
the services of an investment
advisor who meets both of the
following qualifications:
(1) The advisor is either:
(a) Licensed by the division of
securities under section
1707.141 of the Revised Code;
(b) Registered with the securities and exchange commission.
(a) Has experience in the management of investments of
public
funds, especially in the investment of state-government
investment
portfolios;
(b) Is an eligible institution referenced in section 135.03
of the Revised Code.
(E) As used in this section, "state institution of higher
education" means a state institution of higher education as
defined in section 3345.011 of the Revised Code.
Sec. 5813.06. (A) Nothing in sections 5813.01 to 5813.05 of
the
Revised Code
affects the construction or interpretation of
sections 1715.51 to 1715.59 of
the Revised Code
relating to the
uniform prudent management of institutional funds act.
Specifically, neither the percentage set forth in division
(B) of
section 1340.32 5813.02 of the
Revised Code
nor the amount
actually requested by a governing board pursuant to that
section
5813.02 of the Revised Code shall be construed or interpreted to
limit
or expand what
is a prudent
amount that can be expended by a
governing board of an institution under
sections 1715.51 to
1715.59 of the Revised Code.
(B) If an institutional trust fund is also an institutional
fund
as defined in division (B)(C) of section 1715.51 of the
Revised Code
with the result that sections 1715.51 to 1715.59 of
the
Revised Code
also are applicable to the institutional trust
fund, then sections 1715.51 to
1715.59 of the Revised Code
apply
to the institutional trust fund, and sections 5813.01 to 5813.07
of the
Revised Code do not apply to the institutional trust fund.
Section 2. That existing sections 1715.51, 1715.52, 1715.55,
1715.56, 1715.57, 1715.58, 1715.59, 3345.05, and 5813.06 and
sections 1715.53 and 1715.54 of the Revised Code are hereby
repealed.
Section 3. Sections 1 and 2 of this act shall take effect
January 1, 2009, and apply only to the following:
(A) Institutional funds established after that date.
(B) Institutional funds existing on that date, but only with
respect to decisions made or actions taken on or after that date.
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