In this subtitle the following words have the meanings indicated. “Charitable purpose” means 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. “Endowment fund” means an institutional fund or part of an institutional fund that, under the terms of a gift instrument, is not wholly expendable by the institution on a current basis. “Endowment fund” does not include assets that an institution designates as an endowment fund for the use of the institution. “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. “Institution” means: A person, other than an individual, organized and operated exclusively for charitable purposes; A government or governmental subdivision, agency, or instrumentality, to the extent that the subdivision, agency, or instrumentality holds funds exclusively for a charitable purpose; or A trust that had both charitable and noncharitable interests, after all noncharitable interests have terminated. “Institutional fund” means a fund held by an institution exclusively for charitable purposes. “Institutional fund” does not include: Program–related assets; A fund held for an institution by a trustee that is not an institution; or A fund in which a beneficiary that is not an institution has an interest, other than an interest that could arise on violation or failure of the purposes of the fund. “Person” means an individual, corporation, business trust, statutory 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. “Program–related asset” means an asset held by an institution primarily to accomplish a charitable purpose of the institution and not primarily for investment. “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.

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. In addition to complying with the duty of loyalty imposed by law other than this subtitle, each person responsible for managing and investing an institutional fund shall manage and invest the fund exercising ordinary business care and prudence under the facts and circumstances prevailing at the time of the action or decision. 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. An institution may pool two or more institutional funds for purposes of management and investment. The provisions of this subsection apply except as otherwise provided by a gift instrument. In managing and investing an institutional fund, the following factors, if relevant, shall be considered: General economic conditions; The possible effect of inflation or deflation; The expected tax consequences, if any, of investment decisions or strategies; The role that each investment or course of action plays within the overall investment portfolio of the fund; The expected total return from income and the appreciation of investments; Other resources of the institution; The needs of the institution and the fund to make distributions and to preserve capital; and The special relationship or special value of the asset, if any, to the charitable purposes of the institution. Management and investment decisions about an individual asset shall be made not in isolation but in the context of the portfolio of investments of the institutional fund 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. Except as otherwise provided by law other than this subtitle, an institution may invest in any kind of property or type of investment consistent with this section. 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. 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 subtitle. A person that has special skills or expertise, or is selected in reliance on the representation by the person that the person has special skills or expertise, has a duty to use those skills or that expertise in managing and investing institutional funds.

Subject to the intent of a donor expressed in the gift instrument, 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. In making a determination to appropriate for expenditure or accumulate under paragraph (1) of this subsection, the institution shall exercise ordinary business care and prudence under the facts and circumstances prevailing at the time of the action or decision, and shall consider, if relevant, the following factors: The duration and preservation of the endowment fund; The purposes of the institution and the endowment fund; General economic conditions; The possible effect of inflation or deflation; The expected total return from income and the appreciation of investments; Other resources of the institution; and The investment policy of the institution. To limit the authority to appropriate for expenditure or accumulate under subsection (a) of this section, a gift instrument must specifically state the limitation. 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 (a) of this section. In this subsection, fair market value shall be calculated: If an endowment fund has existed at least 3 years, on the basis of the market value determined at least quarterly and averaged over a period of not less than 3 years immediately preceding the year in which the appropriation for expenditure is made; or If an endowment fund has existed for fewer than 3 years, for the period the endowment fund has existed. The appropriation for expenditure in any year of an amount greater than 7 percent of the fair market value of an endowment fund creates a rebuttable presumption of imprudence. The institution shall notify the Attorney General of the appropriation for expenditure in any year of an amount greater than 7 percent of the fair market value of an endowment fund. This subsection does not: Apply to an appropriation for expenditure permitted under law other than this subtitle or by the gift instrument; or Create a presumption of prudence for an appropriation for expenditure of an amount less than or equal to 7 percent of the fair market value of the endowment fund.

Subject to any specific limitation set forth in a gift instrument or in law other than this subtitle, 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 exercise ordinary business care and prudence under the facts and circumstances prevailing at the time of the action or decision, in: Selecting an agent; Establishing the scope and terms of the delegation, consistent with the purposes of the institution and the institutional fund; and Periodically reviewing the actions of the agent in order to monitor the performance and compliance of the agent with the scope and terms of the delegation. 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. The standard established by § 15–402(b) of this subtitle is not limited or extinguished by the appointment of an external agent. By accepting delegation of a management or investment function from an institution that is subject to the laws of the State, an agent submits to the jurisdiction of the courts of the State in all proceedings arising from or related to the delegation or the performance of the delegated function. An institution may delegate management and investment functions to the committees, officers, or employees of the institution as authorized by law other than this subtitle.

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. If written consent of the donor cannot be obtained by reason of the death, disability, unavailability, or impossibility of identification of the donor, a court of competent jurisdiction, on 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 obsolete, inappropriate, or impracticable, or if, because of circumstances not anticipated by the donor, a modification of a restriction will clearly further the purposes of the fund. The institution shall notify the Attorney General of the institution’s application under paragraph (1) of this subsection, and the Attorney General shall be given an opportunity to be heard. To the extent practicable, any modification made under paragraph (1) of this subsection must be made in accordance with the donor’s probable intention. If a particular charitable purpose or a restriction contained in a gift instrument on the use of an institutional fund becomes unlawful, impracticable, or impossible to achieve and written consent of the donor cannot be obtained by reason of the death, disability, unavailability, or impossibility of identification of the donor, a court of competent jurisdiction, on application of an institution, may modify the purpose of the fund or the restriction on the use of the fund if the donor manifested a general charitable intent. The institution shall notify the Attorney General of the institution’s application under paragraph (1) of this subsection, and the Attorney General shall be given an opportunity to be heard. 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, or impossible to achieve, the institution, 60 days after notification to the Attorney General, may release or modify the restriction, in whole or in part, if: The institutional fund subject to the restriction has a total value of less than $50,000; More than 20 years have elapsed since the fund was established; and The institution uses the property in a manner clearly consistent with the charitable purposes expressed in the gift instrument.

Compliance with this subtitle shall be determined in light of the facts and circumstances existing at the time a decision is made or action is taken.

Except as provided in subsection (b) of this section, this subtitle applies to institutional funds existing on or established after the effective date of Chapter 134 of the Acts of the General Assembly of 2009. As applied to institutional funds existing on the effective date of Chapter 134 of the Acts of the General Assembly of 2009, this subtitle governs only decisions made or actions taken on or after that date.

This subtitle 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 § 101(c) of that act, 15 U.S.C. § 7001(c), or authorize electronic delivery of the notices described in § 103(b) of that act, 15 U.S.C. § 7003(b).

In applying and construing this subtitle, which is a uniform act, consideration shall be given to the need to promote uniformity of the law with respect to the subject matter of the law among the states that enact the law.

This subtitle may be cited as the “Maryland Uniform Prudent Management of Institutional Funds Act”.