Page 1 of 12
Coding: Words which are struck through are deletions from existing law;
words in boldface type and underscored are additions.
Regular Session, 2010 ENROLLED
SENATE BILL NO. 217
BY SENATOR CLAITOR (On Recommendation of the Louisiana State Law Institute)
AN ACT1
To amend and reenact Part V of Chapter 2 of Code Title II of Code Book III of Title 9 of the2
Louisiana Revised Statutes of 1950, to be comprised of R.S. 9:2337.1 through3
2337.10, relative to the Uniform Prudent Management of Institutional Funds; to4
provide for a new title for Part V; to provide for definitions for Part V; to provide for5
the standard of conduct in managing and investing an institutional fund; to provide6
for the appropriation for expenditure or the accumulation of an endowment fund; to7
provide for the rules of construction; to provide for the delegation of management8
and investment functions; to provide for the release or modification of restrictions9
on management, investment, or purpose of an institutional fund; to provide for10
reviewing compliance; to provide for the application of this Part upon existing11
institutional funds; to provide for the relationship of this Part to the Electronic12
Signatures in Global and National Commerce Act; to provide for the uniformity of13
application and construction of this Part; to provide for an effective date; and to14
provide for related matters.15
Be it enacted by the Legislature of Louisiana:16
Section 1. Part V of Chapter 2 of Code Title II of Code Book III of Title 9 of the17
Louisiana Revised Statutes of 1950, comprised of R.S. 9:2337.1 through 2337.10 is18
hereby amended and reenacted to read as follows:19
PART V. UNIFORM PRUDENT MANAGEMENT OF INSTITUTIONAL20
FUNDS ACT21
§2337.1. Short title22
This Part may be cited as the "Uniform Prudent Management of Institutional23
Funds Act."24
§2337.1. Definitions25
As used in this Part:26
(1) "Institution" means an incorporated or unincorporated organization27
ACT No. 168 SB NO. 217 ENROLLED
Page 2 of 12
Coding: Words which are struck through are deletions from existing law;
words in boldface type and underscored are additions.
organized and operated exclusively for educational, religious, charitable, or other1
eleemosynary purposes, or a governmental organization to the extent that it holds2
funds exclusively for any of these purposes.3
(2) "Institutional fund" means a fund held by an institution for its exclusive4
use, benefit, or purposes, but does not include (i) a fund held for an institution by a5
trustee that is not an institution or (ii) a fund in which a beneficiary that is not an6
institution has an interest, other than possible rights that could arise upon violation7
or failure of the purposes of the fund.8
(3) "Endowment fund" means an institutional fund, or any part thereof, not9
wholly expendable by the institution on a current basis under the terms of the10
applicable gift instrument.11
(4) "Governing board" means the body responsible for the management of12
an institution or of an institutional fund.13
(5) "Historic dollar value" means the aggregate fair value in dollars of (i) an14
endowment fund at the time it became an endowment fund, (ii) each subsequent15
donation to the fund at the time it is made, and (iii) each accumulation made16
pursuant to a direction in the applicable gift instrument at the time the accumulation17
is added to the fund. The determination of historic dollar value made in good faith18
by the institution is conclusive.19
(6) "Gift instrument" means a will, deed, grant, donation, conveyance,20
agreement, memorandum, writing, or other governing document (including the terms21
of any institutional solicitations from which an institutional fund resulted) under22
which property is transferred to or held by an institution as an institutional fund.23
§2337.2. Definitions24
For the purposes of this Part, the following terms shall have the25
meanings ascribed to them, unless the context clearly indicates otherwise:26
(1) "Charitable purpose" means the relief of poverty, the advancement27
of education or religion, the promotion of health, the promotion of a28
governmental purpose, or any other purpose the achievement of which is29
beneficial to the community.30 SB NO. 217 ENROLLED
Page 3 of 12
Coding: Words which are struck through are deletions from existing law;
words in boldface type and underscored are additions.
(2) "Endowment fund" means an institutional fund or part thereof that,1
under the terms of a gift instrument, is not wholly expendable by the institution2
on a current basis. The term does not include assets that an institution3
designates as an endowment fund for its own use.4
(3) "Gift instrument" means a record or records, including an5
institutional solicitation, under which property is granted to, transferred to, or6
held by an institution as an institutional fund.7
(4) "Institution" may mean any of the following:8
(a) A person, other than an individual, organized and operated9
exclusively for charitable purposes.10
(b) A government or governmental subdivision, agency, or11
instrumentality, to the extent that it holds funds exclusively for a charitable12
purpose.13
(c) A trust that had both charitable and noncharitable interests, after14
all noncharitable interests have terminated.15
(5) "Institutional fund" means a fund held by an institution exclusively16
for charitable purposes. The term does not include any of the following:17
(a) Program-related assets.18
(b) A fund held for an institution by a trustee that is not an institution.19
(c) A fund in which a beneficiary that is not an institution has an20
interest, other than an interest that could arise upon violation or failure of the21
purposes of the fund.22
(6) "Person" means an individual, any legal or commercial entity,23
including a corporation, business trust, partnership, limited liability company,24
association, joint venture, public corporation, government or governmental25
subdivision, agency, or instrumentality, the trustee of a trust, or the succession26
representative of a succession.27
(7) "Program-related asset" means an asset held by an institution28
primarily to accomplish a charitable purpose of the institution and not29
primarily for investment.30 SB NO. 217 ENROLLED
Page 4 of 12
Coding: Words which are struck through are deletions from existing law;
words in boldface type and underscored are additions.
(8) "Record" means information that is inscribed on a tangible medium1
or that is stored in an electronic or other medium and is retrievable in2
perceivable form.3
§2337.2. Appropriation of appreciation4
The governing board may appropriate for expenditure for the uses and5
purposes for which an endowment fund is established so much of the net6
appreciation, realized and unrealized, in the fair value of the assets of an endowment7
fund over the historic dollar value of the fund as is prudent under the standard8
established by Section 2337.6. This Section does not limit the authority of the9
governing board to expend funds as permitted under other law, the terms of the10
applicable gift instrument, or the charter of the institution.11
§2337.3. Standard of conduct in managing and investing institutional fund12
A. Subject to the intent of a donor expressed in a gift instrument, an13
institution, in managing and investing an institutional fund, shall consider the14
charitable purposes of the institution and the purposes of the institutional fund.15
B. In addition to complying with the duty of loyalty imposed by law16
other than this Part, each person responsible for managing and investing an17
institutional fund shall manage and invest the fund in good faith and with the18
care an ordinarily prudent person in a like position would exercise under19
similar circumstances.20
C. In managing and investing an institutional fund, an institution shall21
be bound by the following obligations:22
(1) It may incur only costs that are appropriate and reasonable in23
relation to the assets, the purposes of the institution, and the skills available to24
the institution.25
(2) It shall make a reasonable effort to verify facts relevant to the26
management and investment of the fund.27
D. An institution may pool two or more institutional funds for purposes28
of management and investment.29
E. Except as otherwise provided by a gift instrument, all of the following30 SB NO. 217 ENROLLED
Page 5 of 12
Coding: Words which are struck through are deletions from existing law;
words in boldface type and underscored are additions.
rules apply:1
(1) In managing and investing an institutional fund, the following2
factors, if relevant, shall be considered:3
(a) General economic conditions.4
(b) The possible effect of inflation or deflation.5
(c) The expected tax consequences, if any, of investment decisions or6
strategies.7
(d) The role that each investment or course of action plays within the8
overall investment portfolio of the fund.9
(e) The expected total return from income and the appreciation of10
investments.11
(f) Other resources of the institution.12
(g) The needs of the institution and the fund to make distributions and13
to preserve capital.14
(h) An asset's special relationship or special value, if any, to the15
charitable purposes of the institution.16
(2) Management and investment decisions about an individual asset17
must be made not in isolation but rather in the context of the institutional fund's18
portfolio of investments as a whole and as a part of an overall investment19
strategy having risk and return objectives reasonably suited to the fund and to20
the institution.21
(3) Except as otherwise provided by law other than this Part, an22
institution may invest in any kind of property or type of investment consistent23
with this Section.24
(4) An institution shall diversify the investments of an institutional fund25
unless the institution reasonably determines that, because of special26
circumstances, the purposes of the fund are better served without27
diversification.28
(5) Within a reasonable time after receiving property, an institution29
shall make and carry out decisions concerning the retention or disposition of the30 SB NO. 217 ENROLLED
Page 6 of 12
Coding: Words which are struck through are deletions from existing law;
words in boldface type and underscored are additions.
property or to rebalance a portfolio, in order to bring the institutional fund into1
compliance with the purposes, terms, and distribution requirements of the2
institution as necessary to meet other circumstances of the institution and the3
requirements of this Part.4
(6) A person that has special skills or expertise, or is selected in reliance5
upon the person's representation that the person has special skills or expertise,6
has a duty to use those skills or that expertise in managing and investing7
institutional funds.8
§2337.3. Interpretation9
Section 2337.2 does not apply if the applicable gift instrument indicates the10
donor's intention that net appreciation shall not be expended. A restriction upon the11
expenditure of net appreciation may not be implied from a designation of a gift as12
an endowment, or from a direction or authorization in the applicable gift instrument13
to use only "income," "interest," "dividends," "usufruct," or "rents, issues or profits,"14
or "to preserve the principal intact," or "to preserve the naked ownership intact," or15
a direction which contains other words of similar import. This interpretation applies16
to gift instruments executed or in effect before or after the effective date of this Part.17
§2337.4. Appropriation for expenditure or accumulation of endowment fund;18
rules of construction19
A. Subject to the intent of a donor expressed in the gift instrument, an20
institution may appropriate for expenditure or accumulate so much of an21
endowment fund as the institution determines is prudent for the uses, benefits,22
purposes, and duration for which the endowment fund is established. Unless23
stated otherwise in the gift instrument, the assets in an endowment fund are24
donor-restricted assets until appropriated for expenditure by the institution.25
In making a determination to appropriate or accumulate, the institution shall26
act in good faith, with the care that an ordinarily prudent person in a like27
position would exercise under similar circumstances, and shall consider, if28
relevant, all of the following factors:29
(1) The duration and preservation of the endowment fund.30 SB NO. 217 ENROLLED
Page 7 of 12
Coding: Words which are struck through are deletions from existing law;
words in boldface type and underscored are additions.
(2) The purposes of the institution and the endowment fund.1
(3) General economic conditions.2
(4) The possible effect of inflation or deflation.3
(5) The expected total return from income and the appreciation of4
investments.5
(6) Other resources of the institution.6
(7) The investment policy of the institution.7
B. To limit the authority to appropriate for expenditure or accumulate8
under Subsection A of this Section, a gift instrument must specifically state the9
limitation.10
C. Terms in a gift instrument designating a gift as an endowment, or a11
direction or authorization in the gift instrument to use only "income",12
"interest", "dividends", "usufruct", or "rents, issues, or profits", or "to13
preserve the principal intact", or "to preserve the naked ownership intact", or14
words of similar import have the following implications:15
(1) Create an endowment fund of permanent duration unless other16
language in the gift instrument limits the duration or purpose of the fund.17
(2) Do not otherwise limit the authority to appropriate for expenditure18
or accumulate under Subsection A of this Section.19
§2337.4. Authority to invest20
In addition to an investment otherwise authorized by law or by the applicable21
gift instrument, and without restriction to investments a fiduciary may make, the22
governing board, subject to any specific limitations set forth in the applicable gift23
instrument or in the applicable law other than law relating to investments by a24
fiduciary, may: 25
(1) Invest and reinvest an institutional fund in any corporeal or incorporeal26
immovable or movable property deemed advisable by the governing board, whether27
or not it produces a current return, including mortgages, stocks, bonds, debentures,28
and other securities of profit or nonprofit corporations, shares in or obligations of29
associations, partnerships, or individuals, and obligations of any government or30 SB NO. 217 ENROLLED
Page 8 of 12
Coding: Words which are struck through are deletions from existing law;
words in boldface type and underscored are additions.
subdivision or instrumentality thereof.1
(2) Retain property contributed by a donor to an institutional fund for as long2
as the governing board deems advisable.3
(3) Include all or any part of an institutional fund in any pooled or common4
fund maintained by the institution; and5
(4) Invest all or any part of an institutional fund in any other pooled or6
common fund available for investment, including shares or interests in regulated7
investment companies, mutual funds, common trust funds, investment partnerships,8
real estate investment trusts, or similar organizations in which funds are commingled9
and investment determinations are made by persons other than the governing board.10
§2337.5. Delegation of management and investment functions11
A. Subject to any specific limitation set forth in a gift instrument or in12
law other than this Part, an institution may delegate to an external agent the13
management and investment of an institutional fund to the extent that an14
institution could prudently delegate under the circumstances. An institution15
shall act in good faith, with the care that an ordinarily prudent person in a like16
position would exercise under similar circumstances, in taking any of the17
following steps:18
(1) Selecting an agent.19
(2) Establishing the scope and terms of the delegation, consistent with20
the purposes of the institution and the institutional fund.21
(3) Periodically reviewing the agent's actions in order to monitor the22
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 the24
institution to exercise reasonable care to comply with the scope and terms of the25
delegation.26
C. An institution that complies with Subsection A of this Section is not27
liable for the decisions or actions of an agent to which the function was28
delegated.29
D. By accepting delegation of a management or investment function30 SB NO. 217 ENROLLED
Page 9 of 12
Coding: Words which are struck through are deletions from existing law;
words in boldface type and underscored are additions.
from an institution that is subject to the laws of this state, an agent submits to1
the jurisdiction of the courts of this state in all proceedings arising from or2
related to the delegation or the performance of the delegated function.3
E. An institution may delegate management and investment functions4
to its committees, officers, or employees as authorized by law of this state other5
than this Part. 6
§2337.5. Delegation of investment management7
Except as otherwise provided by the applicable gift instrument or by8
applicable law relating to governmental institutions funds, the governing board may9
(1) delegate to its committees, officers or employees of the institution or the fund,10
or agents, including investment counsel, the authority to act in place of the board in11
investment and reinvestment of institutional funds, (2) contract with independent12
investment advisors, investment counsel of managers, banks, or trust companies, so13
to act, and (3) authorize the payment of compensation for investment advisory or14
management services.15
§2337.6. Release or modification of restrictions on management, investment, or16
purpose17
A. If the donor consents in a record, an institution may release or18
modify, in whole or in part, a restriction contained in a gift instrument on the19
management, investment, or purpose of an institutional fund. A release or20
modification shall not allow a fund to be used for a purpose other than a21
charitable purpose of the institution.22
B. The court, upon application of an institution, may modify a23
restriction contained in a gift instrument regarding the management or24
investment of an institutional fund if the restriction has become impracticable25
or wasteful, if it impairs the management or investment of the fund, or if,26
because of circumstances not anticipated by the donor, a modification of a27
restriction will further the purposes of the fund. Notification of interested28
parties shall be made in accordance with R.S. 9:2332. To the extent practicable,29
any modification shall be made in accordance with the donor's probable30 SB NO. 217 ENROLLED
Page 10 of 12
Coding: Words which are struck through are deletions from existing law;
words in boldface type and underscored are additions.
intention.1
C. If a particular charitable purpose or a restriction contained in a gift2
instrument on the use of an institutional fund becomes unlawful, impracticable,3
impossible to achieve, or wasteful, the court, upon application of an institution,4
may modify the purpose of the fund or the restriction on the use of the fund in5
a manner consistent with the charitable purposes expressed in the gift6
instrument. Notification of interested parties shall be made in accordance with7
R.S. 9:2332.8
D. If all of the following occur, the institution, if there is no written9
objection within sixty days after giving notice as provided in Subsection E of10
this Section, may release or modify the restriction, in whole or part:11
(1) The institutional fund subject to the restriction has a total value of12
less than one hundred thousand dollars.13
(2) More than twenty years have elapsed since the fund was established.14
(3) The institution uses the property in a manner consistent with the15
charitable purposes expressed in the gift instrument.16
(4) The institution determines that a restriction contained in the gift17
instrument on the management, investment, or purpose of the institutional fund18
is unlawful, impracticable, impossible to achieve, or wasteful.19
E. Notice under Subsection D of this Section shall be made by the20
institution by certified mail upon all existing donors. If there is no existing21
donor, notice shall be made upon at least one person who has succeeded to any22
rights that a donor would have had to the return of the property if the donation23
had failed or upon a conditional donee who would have had any right to the24
property if the donation had failed. If, after a reasonable effort, the institution25
is unable to give notice to any existing donor or successor, or to a conditional26
donee, then notice by certified mail may be made upon the attorney general.27
§2337.6. Standard of care28
In the administration of the powers to appropriate appreciation, to make and29
retain investments, and to delegate investment management of institutional funds,30 SB NO. 217 ENROLLED
Page 11 of 12
Coding: Words which are struck through are deletions from existing law;
words in boldface type and underscored are additions.
members of a governing board shall exercise ordinary business care and prudence1
under the facts and circumstances prevailing at the time of the action or decision.2
In so doing they shall consider long and short term needs of the institution in3
carrying out its educational, religious, charitable, or other eleemosynary purposes its4
present and anticipated financial requirements, expected total return on its5
investments, price level trends, and general economic conditions.6
§2337.7. Reviewing compliance7
Compliance with this Part is determined in light of the facts and8
circumstances existing at the time a decision is made or action is taken, and not9
by hindsight.10
§2337.7. Release of use or investment restrictions11
A. With the written consent of the donor, the governing board may release,12
in whole or in part, a restriction imposed by the applicable gift instrument on the use13
or investment of an institutional fund.14
B. If written consent of the donor cannot be obtained by reason of his death,15
disability, unavailability, or impossibility of identification, the governing board may16
apply by petition in the name of the institution to a district court of competent17
jurisdiction for release of a restriction imposed by the applicable gift instrument on18
the use or investment of an institutional fund. Notification of interested parties shall19
be made in accordance with R.S. 9:2332. If the court finds that the restriction is20
obsolete, inappropriate, or impracticable, it may by order release the restriction in21
whole or in part. A release under this Subsection may not change an endowment22
fund to a fund that is not an endowment fund.23
C. A release under this Section may not allow a fund to be used for purposes24
other than the educational, religious, charitable, or other eleemosynary purposes of25
the institution affected.26
D. This Section does not limit the application of the doctrine of cy pres.27
§2337.8. Application to existing institutional funds28
This Part applies to institutional funds existing on or established after29
July 1, 2010. As applied to institutional funds existing on the effective date of30 SB NO. 217 ENROLLED
Page 12 of 12
Coding: Words which are struck through are deletions from existing law;
words in boldface type and underscored are additions.
this Act, this Part governs only decisions made or actions taken on or after July1
1, 2010.2
§2337.9. Relation to Electronic Signatures in Global and National Commerce3
Act4
This Part modifies, limits, and supersedes the Electronic Signatures in5
Global and National Commerce Act, 15 U.S.C. Section 7001 et seq., but does not6
modify, limit, or supersede Section 101(c) of that Act, 15 U.S.C. Section 7001(c),7
or authorize electronic delivery of any of the notices described in Section 103(b)8
of that act, 15 U.S.C. Section 7003(b).9
§2337.10. Uniformity of application and construction10
In applying and construing this uniform act, consideration must be given11
to the need to promote uniformity of the law with respect to its subject matter12
among states that enact it.13
Section 2. This Act shall become effective on July 1, 2010; if vetoed by the governor14
and subsequently approved by the legislature, this Act shall become effective on July 1,15
2010, or on the day following such approval by the legislature, whichever is later.16
PRESIDENT OF THE SENATE
SPEAKER OF THE HOUSE OF REPRESENTATIVES
GOVERNOR OF THE STATE OF LOUISIANA
APPROVED: