LBD11125-27-0
S. 4778--C 2
557. APPLICATION TO EXISTING INSTITUTIONAL FUNDS.
558. RELATION TO ELECTRONIC SIGNATURES IN GLOBAL AND NATIONAL
COMMERCE ACT.
S 550. SHORT TITLE.
THIS ARTICLE MAY BE KNOWN AND MAY BE CITED AS THE "NEW YORK PRUDENT
MANAGEMENT OF INSTITUTIONAL FUNDS ACT".
S 551. DEFINITIONS.
AS USED IN THIS ARTICLE:
(A) "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 INCLUDING ANY PURPOSE THAT IS CHARITABLE
UNDER THE LAWS OF THE STATE OF NEW YORK.
(A-1) "DONOR" MEANS THE PERSON WHO GRANTS OR TRANSFERS PROPERTY TO AN
INSTITUTION PURSUANT TO A GIFT INSTRUMENT, OR A PERSON DESIGNATED IN THE
APPLICABLE GIFT INSTRUMENT TO ACT IN THE PLACE OF THE DONOR, BUT DOES
NOT OTHERWISE INCLUDE THE PERSON'S EXECUTORS, HEIRS, SUCCESSORS,
ASSIGNS, TRANSFEREES, OR DISTRIBUTEES.
(B) "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 MAY DESIGNATE AS AN ENDOWMENT FUND FOR ITS OWN USE, CONSIST-
ENT WITH THE TERMS OF THE APPLICABLE GIFT INSTRUMENT.
(C) "GIFT INSTRUMENT" MEANS A RECORD OR RECORDS, INCLUDING AN INSTITU-
TIONAL SOLICITATION, UNDER WHICH PROPERTY IS GRANTED TO, TRANSFERRED TO,
OR HELD BY AN INSTITUTION AS AN INSTITUTIONAL FUND.
(D) "INSTITUTION" MEANS: (1) A PERSON, OTHER THAN AN INDIVIDUAL,
ORGANIZED AND OPERATED EXCLUSIVELY FOR CHARITABLE PURPOSES; (2) A TRUST
THAT HAD BOTH CHARITABLE AND NONCHARITABLE INTERESTS, AFTER ALL NONCHAR-
ITABLE INTERESTS HAVE TERMINATED; OR (3) ANY CORPORATION DESCRIBED IN
SUBPARAGRAPH FIVE OF PARAGRAPH (A) OF SECTION 102 (DEFINITIONS). WHEN-
EVER ANY PROVISION OF THIS ARTICLE IMPOSES ANY OBLIGATION ON, OR
REQUIRES ANY ACTION TO BE TAKEN BY, AN INSTITUTION, SUCH OBLIGATION IS
IMPOSED ON, AND SUCH ACTION SHALL BE AUTHORIZED BY, THE GOVERNING BOARD
OF SUCH INSTITUTION.
(E) "INSTITUTIONAL FUND" MEANS A FUND HELD BY AN INSTITUTION. THIS
TERM SHALL NOT INCLUDE: (1) PROGRAM-RELATED ASSETS; (2) A FUND HELD FOR
AN INSTITUTION BY A TRUSTEE THAT IS NOT AN INSTITUTION; OR (3) 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.
(F) "NOTICE" MEANS INFORMATION GIVEN BY AN INSTITUTION AS REQUIRED BY
THIS ARTICLE. AN INSTITUTION WILL BE CONSIDERED TO HAVE GIVEN NOTICE IF
NOTICE IS GIVEN PERSONALLY IN WRITING OR SENT TO THE RECIPIENT'S LAST
KNOWN ADDRESS ON RECORD WITH THE INSTITUTION, OR, IF NO ADDRESS IS ON
RECORD WITH THE INSTITUTION, IF THE INSTITUTION MAKES REASONABLE EFFORTS
TO ATTEMPT TO FIND AND NOTIFY THE RECIPIENT. IF THE NOTICE IS MAILED,
SUCH NOTICE IS GIVEN WHEN DEPOSITED IN THE UNITED STATES MAIL, WITH
POSTAGE THEREON PREPAID. IF THE NOTICE IS DELIVERED BY ELECTRONIC MEANS,
SUCH AS VIA FACSIMILE OR EMAIL, SUCH NOTICE IS GIVEN WHEN THE NOTICE IS
SENT.
(G) "PERSON" MEANS AN INDIVIDUAL, CORPORATION, BUSINESS TRUST, ESTATE,
TRUST, PARTNERSHIP, LIMITED LIABILITY COMPANY, ASSOCIATION, JOINT
VENTURE, OR ANY OTHER LEGAL ENTITY.
S. 4778--C 3
(H) "PROGRAM-RELATED ASSET" MEANS AN ASSET HELD BY AN INSTITUTION NOT
FOR INVESTMENT UNDER THE TERMS OF THE GIFT INSTRUMENT, BUT PRIMARILY TO
ACCOMPLISH A PROGRAMMATIC PURPOSE OF THE INSTITUTION.
(I) "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.
(J) A DONOR IS "AVAILABLE" IF SUCH DONOR (1) IS LIVING OR, IF THE
DONOR IS NOT A NATURAL PERSON, IS IN EXISTENCE AND CONDUCTING ACTIV-
ITIES; AND (2) CAN BE IDENTIFIED AND LOCATED WITH REASONABLE EFFORTS.
(K) "EXTERNAL AGENT" MEANS AN INDEPENDENT INVESTMENT ADVISOR, INVEST-
MENT COUNSEL OR MANAGER, BANK, OR TRUST COMPANY.
S 552. STANDARD OF CONDUCT IN MANAGING AND INVESTING AN INSTITUTIONAL
FUND.
(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 PURPOSES OF THE INSTITUTION AND THE PURPOSES OF THE INSTI-
TUTIONAL FUND.
(B) IN ADDITION TO COMPLYING WITH THE DUTY OF LOYALTY IMPOSED BY LAW
OTHER THAN THIS ARTICLE, 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.
(C) IN MANAGING AND INVESTING AN INSTITUTIONAL FUND, AN INSTITUTION
CONSISTENT WITH SECTION 717 (DUTY OF DIRECTORS AND OFFICERS):
(1) 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
(2) 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, THE FOLLOWING
RULES APPLY:
(1) IN MANAGING AND INVESTING AN INSTITUTIONAL FUND, THE FOLLOWING
FACTORS, IF RELEVANT, MUST BE CONSIDERED: (A) GENERAL ECONOMIC CONDI-
TIONS; (B) THE POSSIBLE EFFECT OF INFLATION OR DEFLATION; (C) THE
EXPECTED TAX CONSEQUENCES, IF ANY, OF INVESTMENT DECISIONS OR STRATE-
GIES; (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 NEEDS OF THE INSTITUTION AND THE
FUND TO MAKE DISTRIBUTIONS AND TO PRESERVE CAPITAL; AND (H) AN ASSET'S
SPECIAL RELATIONSHIP OR SPECIAL VALUE, IF ANY, TO THE PURPOSES OF THE
INSTITUTION.
(2) 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.
(3) EXCEPT AS OTHERWISE PROVIDED BY LAW OTHER THAN THIS ARTICLE, AN
INSTITUTION MAY INVEST IN ANY KIND OF PROPERTY OR TYPE OF INVESTMENT
CONSISTENT WITH THIS ARTICLE.
(4) AN INSTITUTION SHALL DIVERSIFY THE INVESTMENTS OF AN INSTITUTIONAL
FUND UNLESS THE INSTITUTION PRUDENTLY DETERMINES THAT, BECAUSE OF
SPECIAL CIRCUMSTANCES, THE PURPOSES OF THE FUND ARE BETTER SERVED WITH-
S. 4778--C 4
OUT DIVERSIFICATION. AN INSTITUTION SHALL REVIEW A DECISION NOT TO
DIVERSIFY AS FREQUENTLY AS CIRCUMSTANCES REQUIRE, BUT AT LEAST ANNUALLY.
(5) WITHIN A REASONABLE TIME AFTER RECEIVING PROPERTY, AN INSTITUTION
SHALL MAKE AND CARRY OUT DECISIONS CONCERNING THE RETENTION OR DISPOSI-
TION 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 ARTICLE.
(6) 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.
(F) EACH INSTITUTION SHALL ADOPT A WRITTEN INVESTMENT POLICY SETTING
FORTH GUIDELINES ON INVESTMENTS AND DELEGATION OF MANAGEMENT AND INVEST-
MENT FUNCTIONS IN ACCORD WITH THE STANDARDS OF THIS ARTICLE.
S 553. APPROPRIATION FOR EXPENDITURE OR ACCUMULATION OF ENDOWMENT FUND;
RULES OF CONSTRUCTION.
(A) 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 ESTAB-
LISHED. 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
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:
(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) WHERE APPROPRIATE AND CIRCUMSTANCES WOULD OTHERWISE WARRANT,
ALTERNATIVES TO EXPENDITURE OF THE ENDOWMENT FUND, GIVING DUE CONSIDER-
ATION TO THE EFFECT THAT SUCH ALTERNATIVES MAY HAVE ON THE INSTITUTION;
AND
(8) THE INVESTMENT POLICY OF THE INSTITUTION.
FOR EACH DETERMINATION TO APPROPRIATE FOR EXPENDITURE, THE INSTITUTION
SHALL KEEP A CONTEMPORANEOUS RECORD DESCRIBING THE CONSIDERATION THAT
WAS GIVEN BY THE GOVERNING BOARD TO EACH OF THE FACTORS ENUMERATED IN
THIS PARAGRAPH.
(B) TO LIMIT THE AUTHORITY TO APPROPRIATE FOR EXPENDITURE OR ACCUMU-
LATE UNDER PARAGRAPH (A) OF THIS SECTION, A GIFT INSTRUMENT MUST SPECIF-
ICALLY STATE THE LIMITATION. TERMS IN A GIFT INSTRUMENT SETTING FORTH A
SPECIFIC SPENDING LEVEL, RATE, OR AMOUNT, OR EXPLICITLY MODIFYING OR
OVERRIDING THE PROVISIONS OF PARAGRAPH (A) OF THIS SECTION, WILL LIMIT
THE AUTHORITY OF THE INSTITUTION TO APPROPRIATE FOR EXPENDITURE OR ACCU-
MULATE UNDER PARAGRAPH (A) OF THIS SECTION.
(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:
S. 4778--C 5
(1) CREATE AN ENDOWMENT FUND OF PERMANENT DURATION UNLESS OTHER
LANGUAGE IN THE GIFT INSTRUMENT LIMITS THE DURATION OR PURPOSE OF THE
FUND; AND
(2) DO NOT OTHERWISE LIMIT THE AUTHORITY TO APPROPRIATE FOR EXPENDI-
TURE OR ACCUMULATE UNDER PARAGRAPH (A) OF THIS SECTION.
(D) A REBUTTABLE PRESUMPTION OF IMPRUDENCE SHALL APPLY TO GIFT INSTRU-
MENTS EXECUTED UPON OR AFTER THE EFFECTIVE DATE OF THIS ARTICLE AS
FOLLOWS: 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 QUAR-
TERLY AND AVERAGED OVER A PERIOD OF NOT LESS THAN FIVE YEARS IMMEDIATELY
PRECEDING THE YEAR IN WHICH THE APPROPRIATION FOR EXPENDITURE IS MADE,
CREATES A REBUTTABLE PRESUMPTION OF IMPRUDENCE. FOR AN ENDOWMENT FUND IN
EXISTENCE FOR FEWER THAN FIVE YEARS, THE FAIR MARKET VALUE OF THE ENDOW-
MENT FUND MUST BE CALCULATED FOR THE PERIOD THE ENDOWMENT FUND HAS BEEN
IN EXISTENCE. THIS SUBSECTION DOES NOT:
(1) APPLY TO AN APPROPRIATION FOR EXPENDITURE PERMITTED UNDER LAW
OTHER THAN THE CHAPTER OF THE LAWS OF 2010 THAT ENACTED THIS ARTICLE OR
BY THE GIFT INSTRUMENT; OR
(2) CREATE A PRESUMPTION OF PRUDENCE FOR AN APPROPRIATION FOR EXPENDI-
TURE OF AN AMOUNT LESS THAN OR EQUAL TO SEVEN PERCENT OF THE FAIR MARKET
VALUE OF THE ENDOWMENT FUND.
(E)(1) WITH RESPECT TO A GIFT INSTRUMENT EXECUTED BY THE DONOR BEFORE
THE EFFECTIVE DATE OF THIS ARTICLE AN INSTITUTION MUST PROVIDE NINETY
DAYS NOTICE TO THE DONOR, IF THE DONOR IS THEN AVAILABLE, BEFORE APPLY-
ING PARAGRAPH (A) OF THIS SECTION FOR THE FIRST TIME, DURING WHICH TIME
THE DONOR MAY CLARIFY OR AMEND THE GIFT INSTRUMENT TO PROHIBIT THE
APPLICATION OF PARAGRAPH (A) OF THIS SECTION. SUCH NOTICE SHALL INCLUDE
A FORM FOR USE BY THE DONOR, WHICH SHALL CONTAIN LANGUAGE SUBSTANTIALLY
AS FOLLOWS:
ATTENTION, DONOR:
PLEASE CHECK BOX #1 OR #2 BELOW AND RETURN TO THE ADDRESS SHOWN ABOVE.
( ) #1 THE INSTITUTION MAY SPEND AS MUCH OF MY GIFT AS MAY BE PRUDENT.
( ) #2 THE INSTITUTION MAY NOT SPEND BELOW THE ORIGINAL DOLLAR VALUE OF
MY GIFT.
IF YOU CHECK BOX #1 ABOVE, THE INSTITUTION MAY SPEND AS MUCH OF
YOUR ENDOWMENT GIFT (INCLUDING ALL OR PART OF THE ORIGINAL VALUE
OF YOUR GIFT) AS MAY BE PRUDENT UNDER THE CRITERIA SET FORTH IN
ARTICLE 5-A OF THE NOT-FOR-PROFIT CORPORATION LAW (THE PRUDENT
MANAGEMENT OF INSTITUTIONAL FUNDS ACT).
IF YOU CHECK BOX #2 ABOVE, THE INSTITUTION MAY NOT SPEND BELOW
THE ORIGINAL DOLLAR VALUE OF YOUR ENDOWMENT GIFT BUT MAY SPEND
THE INCOME AND THE APPRECIATION OVER THE ORIGINAL DOLLAR VALUE IF
IT IS PRUDENT TO DO SO. THE CRITERIA FOR THE EXPENDITURE OF
ENDOWMENT FUNDS SET FORTH IN ARTICLE 5-A OF THE NOT-FOR-PROFIT
CORPORATION LAW (THE PRUDENT MANAGEMENT OF INSTITUTIONAL FUNDS
ACT) WILL NOT APPLY TO YOUR GIFT.
IF THE DONOR DOES NOT RESPOND WITHIN NINETY DAYS FROM THE DATE NOTICE
WAS GIVEN, PARAGRAPHS (A), (B), AND (C) OF THIS SECTION SHALL BE
APPLIED.
(2) THIS PARAGRAPH SHALL NOT APPLY IF: (A) THE GIFT INSTRUMENT PERMITS
APPROPRIATION FOR EXPENDITURE FROM THE ENDOWMENT FUND WITHOUT REGARD FOR
THE FUND'S HISTORIC DOLLAR VALUE; (B) THE GIFT INSTRUMENT LIMITS THE
INSTITUTION'S AUTHORITY TO APPROPRIATE FOR EXPENDITURE IN ACCORDANCE
WITH PARAGRAPH (B) OF THIS SECTION; OR (C) THE GIFT CONSISTS OF FUNDS
S. 4778--C 6
RECEIVED AS A RESULT OF AN INSTITUTIONAL SOLICITATION WITHOUT A SEPARATE
STATEMENT BY THE DONOR EXPRESSING A RESTRICTION ON THE USE OF FUNDS.
(F) WHEN AN INSTITUTION ACTS PURSUANT TO PARAGRAPH (A) OR (E) OF THIS
SECTION, IT SHALL KEEP A RECORD OF SUCH ACTION.
S 554. DELEGATION OF MANAGEMENT AND INVESTMENT FUNCTIONS.
(A) SUBJECT TO ANY SPECIFIC LIMITATION SET FORTH IN A GIFT INSTRUMENT
OR IN LAW OTHER THAN THIS ARTICLE, 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 AN ORDINARILY PRUDENT PERSON IN A LIKE POSITION WOULD EXERCISE
UNDER SIMILAR CIRCUMSTANCES AS REQUIRED BY SECTION SEVEN HUNDRED SEVEN-
TEEN OF THIS CHAPTER, IN:
(1) SELECTING, CONTINUING OR TERMINATING AN AGENT, INCLUDING ASSESSING
THE AGENT'S INDEPENDENCE INCLUDING ANY CONFLICTS OF INTEREST SUCH AGENT
HAS OR MAY HAVE;
(2) ESTABLISHING THE SCOPE AND TERMS OF THE DELEGATION, INCLUDING THE
PAYMENT OF COMPENSATION, CONSISTENT WITH THE PURPOSES OF THE INSTITUTION
AND THE INSTITUTIONAL FUND; AND
(3) MONITORING THE AGENT'S PERFORMANCE AND COMPLIANCE WITH THE SCOPE
AND TERMS OF THE DELEGATION.
(B) IN PERFORMING A DELEGATED FUNCTION, AN AGENT OWES A DUTY TO THE
INSTITUTION TO EXERCISE REASONABLE CARE, SKILL AND CAUTION TO COMPLY
WITH THE SCOPE AND TERMS OF THE DELEGATION.
(C) AN INSTITUTION THAT COMPLIES WITH PARAGRAPH (A) OF THIS SECTION IS
NOT LIABLE FOR THE DECISIONS OR ACTIONS OF AN AGENT TO WHICH THE FUNC-
TION WAS DELEGATED.
(D) 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.
(E) EACH CONTRACT, IF ANY, PURSUANT TO WHICH AUTHORITY IS SO DELEGATED
SHALL PROVIDE THAT IT MAY BE TERMINATED BY THE INSTITUTION AT ANY TIME,
WITHOUT PENALTY, UPON NOT MORE THAN SIXTY DAYS NOTICE.
(F) AN INSTITUTION MAY DELEGATE MANAGEMENT AND INVESTMENT FUNCTIONS TO
ITS COMMITTEES, OFFICERS, OR EMPLOYEES AS AUTHORIZED BY THE LAWS OF THIS
STATE OTHER THAN THIS ARTICLE, AS SET FORTH IN, INTER ALIA, SECTION 514
(DELEGATION OF INVESTMENT MANAGEMENT).
(G) NOTHING IN THIS ARTICLE SHALL IMPAIR THE OPERATION OF SECTION 717
(DUTY OF DIRECTORS AND OFFICERS).
S 555. RELEASE OR MODIFICATION OF RESTRICTIONS ON MANAGEMENT, INVEST-
MENT, OR PURPOSE.
(A) IF THE DONOR CONSENTS IN A RECORD, AN INSTITUTION MAY RELEASE OR
MODIFY, IN WHOLE OR IN PART, A RESTRICTION CONTAINED IN A GIFT INSTRU-
MENT 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.
(B) A 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 DONOR, IF AVAILABLE, AND THE ATTORNEY
GENERAL OF THE APPLICATION, AND THE ATTORNEY GENERAL AND SUCH DONOR MUST
S. 4778--C 7
BE GIVEN AN OPPORTUNITY TO BE HEARD. TO THE EXTENT PRACTICABLE, ANY
MODIFICATION MUST BE MADE IN ACCORDANCE WITH THE DONOR'S PROBABLE INTEN-
TION.
(C) IF A PARTICULAR PURPOSE OR A RESTRICTION CONTAINED IN A GIFT
INSTRUMENT ON THE USE OF AN INSTITUTIONAL FUND BECOMES UNLAWFUL, IMPRAC-
TICABLE, 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 PURPOSES
EXPRESSED IN THE GIFT INSTRUMENT. THE INSTITUTION SHALL NOTIFY THE
DONOR, IF AVAILABLE, AND THE ATTORNEY GENERAL OF THE APPLICATION, AND
THE ATTORNEY GENERAL AND SUCH DONOR MUST BE GIVEN AN OPPORTUNITY TO BE
HEARD.
(D)(1) IF AN INSTITUTION DETERMINES THAT A RESTRICTION CONTAINED IN A
GIFT INSTRUMENT ON THE MANAGEMENT, INVESTMENT, OR PURPOSE OF AN INSTITU-
TIONAL FUND IS UNLAWFUL, IMPRACTICABLE, IMPOSSIBLE TO ACHIEVE, OR WASTE-
FUL, THE INSTITUTION, NINETY DAYS AFTER NOTIFICATION TO THE ATTORNEY
GENERAL, MAY RELEASE OR MODIFY THE RESTRICTION, IN WHOLE OR PART, IF:
(A) THE INSTITUTIONAL FUND SUBJECT TO THE RESTRICTION HAS A TOTAL
VALUE OF LESS THAN ONE HUNDRED THOUSAND DOLLARS;
(B) MORE THAN TWENTY YEARS HAVE ELAPSED SINCE THE FUND WAS ESTAB-
LISHED; AND
(C) THE INSTITUTION USES THE PROPERTY IN A MANNER CONSISTENT WITH THE
PURPOSES EXPRESSED IN THE GIFT INSTRUMENT.
(2) NOTICE TO THE ATTORNEY GENERAL SHALL CONTAIN: (A) AN EXPLANATION
OF (I) THE INSTITUTION'S DETERMINATION THAT THE RESTRICTION MEETS THE
REQUIREMENTS SET FORTH IN SUBPARAGRAPH ONE OF THIS PARAGRAPH AND (II)
THE PROPOSED RELEASE OR MODIFICATION; (B) A COPY OF A RECORD OF THE
INSTITUTION APPROVING THE RELEASE OR MODIFICATION; AND (C) A STATEMENT
OF THE PROPOSED USE OF THE INSTITUTIONAL FUND AFTER SUCH RELEASE OR
MODIFICATION.
(3) IF THE ATTORNEY GENERAL DOES NOT NOTIFY THE INSTITUTION WITHIN
NINETY DAYS, THE INSTITUTION MAY PROCEED WITH THE RELEASE OR MODIFICA-
TION.
(4) NOTICE SHALL ALSO BE GIVEN TO THE DONOR, AS DEFINED IN PARAGRAPH
(A-1) OF SECTION 551 (DEFINITIONS), IF AVAILABLE, PROVIDED, HOWEVER,
THAT SUCH NOTICE SHALL NOT BE REQUIRED FOR FUNDS DESCRIBED IN CLAUSE (B)
OF SUBPARAGRAPH TWO OF PARAGRAPH (E) OF SECTION 553 (APPROPRIATION FOR
EXPENDITURE OR ACCUMULATION OF ENDOWMENT FUND; RULES OF CONSTRUCTION).
(E) FOR PURPOSES OF THIS SECTION, AN INSTITUTION MAY APPLY TO THE
FOLLOWING COURTS TO RELEASE OR MODIFY A RESTRICTION CONTAINED IN A GIFT
INSTRUMENT:
(1) TO THE SUPREME COURT OF THE JUDICIAL DISTRICT WHEREIN THE INSTITU-
TION HAS ITS OFFICE OR PRINCIPAL PLACE OF CARRYING OUT THE PURPOSES FOR
WHICH IT WAS FORMED; OR
(2) WHERE THE APPLICABLE GIFT INSTRUMENT IS A WILL, TO THE SURROGATE'S
COURT IN WHICH SUCH WILL IS PROBATED.
(F) THIS SECTION SHALL NOT LIMIT THE APPLICATION OF THE DOCTRINE OF CY
PRES.
S 556. REVIEWING COMPLIANCE.
COMPLIANCE WITH THIS ARTICLE SHALL BE DETERMINED IN LIGHT OF THE FACTS
AND CIRCUMSTANCES EXISTING AT THE TIME A DECISION IS MADE OR ACTION IS
TAKEN, AND NOT RETROSPECTIVELY.
S 557. APPLICATION TO EXISTING INSTITUTIONAL FUNDS.
THIS ARTICLE SHALL APPLY TO INSTITUTIONAL FUNDS EXISTING ON OR ESTAB-
LISHED AFTER THE EFFECTIVE DATE OF THIS ARTICLE. AS APPLIED TO INSTITU-
TIONAL FUNDS EXISTING ON THE EFFECTIVE DATE OF THIS ARTICLE, THIS ARTI-
S. 4778--C 8
CLE SHALL GOVERN ONLY DECISIONS MADE OR ACTIONS TAKEN ON OR AFTER THAT
DATE.
S 558. RELATION TO ELECTRONIC SIGNATURES IN GLOBAL AND NATIONAL COMMERCE
ACT.
THIS ARTICLE MODIFIES, LIMITS, AND SUPERSEDES THE ELECTRONIC SIGNA-
TURES IN GLOBAL AND NATIONAL COMMERCE ACT, 15 U.S.C. SECTION 7001 ET
SEQ., BUT DOES NOT MODIFY, LIMIT, OR SUPERSEDE SECTION 101 OF THAT ACT,
15 U.S.C. SECTION 7001(A), OR AUTHORIZE ELECTRONIC DELIVERY OF ANY OF
THE NOTICES DESCRIBED IN SECTION 103 OF THAT ACT, 15 U.S.C. SECTION
7003(B).
S 2. Subparagraphs 13, 14 and 17 of paragraph (a) of section 102,
section 512, paragraphs (c) and (d) of section 513, and section 522 of
the not-for-profit corporation law are REPEALED.
S 3. The closing paragraph of paragraph (a) and paragraph (b) of
section 406 of the not-for-profit corporation law, as added by chapter
331 of the laws of 1971, are amended to read as follows:
Except as provided in paragraph (b), this paragraph applies notwith-
standing any other provision of the certificate of incorporation or any
direction in [an] A GIFT instrument [referred to in section 513 (Admin-
istration of assets received for specific purposes)].
(b) Paragraph (a) shall not apply to the extent that it conflicts with
any mandatory direction in [an] A GIFT instrument [by which assets
referred to in section 513 were transferred to the corporation] EXECUTED
prior to the effective date of this section unless such conflicting
direction is removed as impracticable under article eight of the
estates, powers and trusts law or in any other manner provided by law.
The absence of a specific provision in the [section 513 instrument] GIFT
INSTRUMENT for the current use of the principal of the fund, or the
presence in such an instrument of a provision, as to the principal of a
fund, limited to the principal's being held, invested and reinvested, is
not such a conflicting mandatory direction.
S 4. Section 406 of the not-for-profit corporation law is amended by
adding a new paragraph (e) to read as follows:
(E) FOR PURPOSES OF THIS SECTION, THE TERM GIFT INSTRUMENT SHALL HAVE
THE MEANING SET FORTH IN SECTION 551 (DEFINITIONS).
S 5. Paragraph (b) of section 513 of the not-for-profit corporation
law, as amended by chapter 690 of the laws of 1978, is amended to read
as follows:
(b) Except as may be otherwise permitted under article eight of the
estates, powers and trusts law or section [522 (Release of restrictions
on use or investment)] 555 (RELEASE OR MODIFICATION OF RESTRICTIONS ON
MANAGEMENT, INVESTMENT, OR PURPOSE), the governing board shall apply all
assets thus received to the purposes specified in the gift instrument AS
DEFINED IN SECTION 551 (DEFINITIONS) and to the payment of the reason-
able and proper expenses of administration of such assets. The governing
board shall cause accurate accounts to be kept of such assets separate
and apart from the accounts of other assets of the corporation. Unless
the terms of the particular gift instrument provide otherwise, the trea-
surer shall make an annual report to the members (if there be members)
or to the governing board (if there be no members) concerning the assets
held under this section and the use made of such assets and of the
income thereof.
S 6. Paragraph (a) of section 514 of the not-for-profit corporation
law, as added by chapter 690 of the laws of 1978, is amended to read as
follows:
S. 4778--C 9
(a) Except as otherwise provided by the applicable gift instrument AS
DEFINED IN SECTION 551 (DEFINITIONS), the governing board may [(1)]
delegate to its committees, officers or employees of the corporation or
the fund[, or agents, including investment counsel,] the authority to
act in place of the governing board in investment and reinvestment of
institutional funds[, (2) contract with independent investment advisors,
investment counsel or managers, banks, or trust companies, so to act,
and (3) authorize the payment of compensation for investment advisory or
management services, advisors, investment counsel or managers, banks or
trust companies, so to act] AS DEFINED IN SECTION 551 (DEFINITIONS).
Each contract, IF ANY, pursuant to which authority is so delegated shall
provide that it may be terminated by the governing board at any time,
without penalty, upon not more than sixty days' notice. SECTION 554
(DELEGATION OF MANAGEMENT AND INVESTMENT FUNCTIONS) SHALL GOVERN
EXTERNAL DELEGATION.
S 7. Paragraph (a) of section 717 of the not-for-profit corporation
law, as amended by chapter 690 of the laws of 1978, is amended to read
as follows:
(a) Directors and officers shall discharge the duties of their respec-
tive positions in good faith and with [that degree of diligence, care
and skill which ordinarily prudent men would exercise under similar
circumstances in like positions] THE CARE AN ORDINARILY PRUDENT PERSON
IN A LIKE POSITION WOULD EXERCISE UNDER SIMILAR CIRCUMSTANCES. [In the
administration of the powers to make and retain investments pursuant to
section 512 (Investment authority), to appropriate appreciation pursuant
to section 513 (Administration of assets received for specific
purposes), and to delegate] THE FACTORS SET FORTH IN SUBPARAGRAPH ONE OF
PARAGRAPH (E) OF SECTION 552 (STANDARD OF CONDUCT IN MANAGING AND
INVESTING AN INSTITUTIONAL FUND), IF RELEVANT, MUST BE CONSIDERED BY A
GOVERNING BOARD DELEGATING investment management of institutional funds
pursuant to section 514 (Delegation of investment management)[, a
governing board shall consider among other relevant considerations the
long and short term needs of the corporation in carrying out its
purposes, its present and anticipated financial requirements, expected
total return on its investments, price level trends, and general econom-
ic conditions] FOR PURPOSES OF THIS PARAGRAPH, THE TERM INSTITUTIONAL
FUND IS DEFINED IN SECTION 551 (DEFINITIONS).
S 8. Paragraphs (c) and (e) of subdivision 1 of section 2-b of the
religious corporations law, paragraph (c) as amended by chapter 623 of
the laws of 1992, paragraph (e) as added by chapter 690 of the laws of
1978, are amended to read as follows:
(c) The following provisions of the not-for-profit corporation law
shall not apply to religious corporations: subparagraphs (7) and (8) of
paragraph (a) of section one hundred twelve, section one hundred thir-
teen, section one hundred fourteen, section two hundred one, section
three hundred three, section three hundred four, section three hundred
five, section three hundred six, article four except section four
hundred one, section five hundred fourteen, that portion of section five
hundred [twenty-two (b)] FIFTY-FIVE (B) AND SECTION FIVE HUNDRED FIFTY-
FIVE (C) which reads "[The attorney general shall be notified of the
application and shall be given an opportunity to be heard] THE INSTITU-
TION SHALL NOTIFY THE DONOR, IF AVAILABLE, AND THE ATTORNEY GENERAL OF
THE APPLICATION, AND THE ATTORNEY GENERAL AND SUCH DONOR MUST BE GIVEN
AN OPPORTUNITY TO BE HEARD", section six hundred five, section six
hundred seven, section six hundred nine, section eight hundred four,
article nine except section nine hundred ten, article ten except as
S. 4778--C 10
provided in section eleven hundred fifteen, section eleven hundred two,
and article fifteen except paragraph (c) of section fifteen hundred
seven.
(e) No action shall be taken by the trustees of an incorporated Roman
Catholic church, or of a Ruthenian Greek Catholic church, under section
five hundred [twenty-two] FIFTY-FIVE of the not-for-profit corporation
law [(Release of restrictions on use or investment)] (RELEASE OR MODIFI-
CATION OF RESTRICTIONS ON MANAGEMENT, INVESTMENT, OR PURPOSE) without
the consent of the archbishop or bishop of the diocese to which such
church belongs or in case of their absence or inability to act, without
the consent of the vicar general or administrator of such diocese.
S 9. Paragraph (e) of section 8-1.1 of the estates, powers and trusts
law, as amended by chapter 686 of the laws of 1967, is amended to read
as follows:
(e) Any accumulation of income from property subject to a disposition
in trust for a religious, charitable, educational or benevolent purpose,
or otherwise acquired by such trust, shall in all respects, including
its reasonableness, amount and duration, be within the jurisdiction of
the supreme court or the surrogate's court, as the case may be. In exer-
cising such jurisdiction, (1) any accumulation of income which might
otherwise be applied for the purposes of the trust may be prohibited or
limited, despite a valid direction therefor in the trust instrument or
authority therefor under 8-1.7 and (2) such an accumulation may be
authorized by order of the court despite the absence of a direction
therefor in the trust instrument. THIS PARAGRAPH SHALL NOT RESTRICT IN
ANY MANNER THE ABILITY TO RELEASE OR MODIFY RESTRICTIONS RELATING TO
INSTITUTIONAL FUNDS UNDER SECTION 555 OF THE NOT-FOR-PROFIT CORPORATION
LAW.
S 10. Paragraph (j) of section 8-1.1 of the estates, powers and trusts
law is amended to read as follows:
(j) Whenever a voluntary association or committee has received, by
public subscription, a fund for a charitable or benevolent purpose from
more than one thousand contributors, a portion of which remains unex-
pended after the expiration of five years from the time of its receipt,
and it appears that a literal compliance with the terms of the
subscription is impracticable, the supreme court may make an order
directing that such unexpended balance be transferred for administration
and application to such domestic corporation as in the judgment of the
court will most effectively accomplish the general purpose for which
such fund was collected, free from any restriction, limitation or direc-
tion upon which the subscription was made; and on the transfer of such
fund to the corporation designated in the order, such voluntary associ-
ation, its officers and trustees, or such committee and its officers
shall be fully exonerated and discharged from all liability to account
for such fund. THIS PARAGRAPH SHALL NOT RESTRICT IN ANY MANNER THE
ABILITY TO RELEASE OR MODIFY RESTRICTIONS RELATING TO INSTITUTIONAL
FUNDS UNDER SECTION 555 OF THE NOT-FOR-PROFIT CORPORATION LAW.
S 11. Section 8-1.7 of the estates, powers and trusts law is amended
by adding a new paragraph (b) to read as follows:
(B) THIS SECTION SHALL NOT RESTRICT IN ANY MANNER THE APPROPRIATION
FOR EXPENDITURE OR ACCUMULATION OF ENDOWMENT FUNDS AS SET FORTH IN
SECTION 553 OF THE NOT-FOR-PROFIT CORPORATION LAW.
S 12. Subparagraph 1 of paragraph (e) of section 11-2.3 of the
estates, powers and trusts law, as added by chapter 609 of the laws of
1994, is amended to read as follows:
S. 4778--C 11
(1) the term "trustee" includes a personal representative, trustee,
guardian, donee of a power during minority, guardian under article
eighty-one of the mental hygiene law, committee of the property of an
incompetent person, and conservator of the property of a conservatee,
BUT DOES NOT INCLUDE AN INSTITUTIONAL FUND AS DEFINED IN SECTION 551 OF
THE NOT-FOR-PROFIT CORPORATION LAW;
S 13. Subdivision 1 of section 2115 of the surrogate's court procedure
act, as added by chapter 609 of the laws of 1994, is amended to read as
follows:
1. At any time during the administration of a trust and irrespective
of the pendency of a particular proceeding, the court with jurisdiction
of the trust may review the reasonableness of the costs of a delegation
by the trustee under section 11-2.3 of the estates, powers and trusts
law AND UNDER SECTION 554 OF THE NOT-FOR-PROFIT CORPORATION LAW.
S 14. Subdivision 2 of section 174-b of the executive law, as amended
by chapter 43 of the laws of 2002, is amended to read as follows:
2. Any solicitation used by or on behalf of any charitable organiza-
tion shall provide a clear description of the programs and activities
for which it has requested and has expended or will expend contributions
or shall include therein a statement that, upon request, a person may
obtain from the organization such a description. IF THE SOLICITATION IS
BY AN INSTITUTION SUBJECT TO ARTICLE FIVE-A OF THE NOT-FOR-PROFIT CORPO-
RATION LAW, AND IS FOR AN ENDOWMENT FUND, THE SOLICITATION MUST INCLUDE
A STATEMENT THAT, UNLESS OTHERWISE RESTRICTED BY THE GIFT INSTRUMENT
PURSUANT TO PARAGRAPH (B) OF SECTION FIVE HUNDRED FIFTY-THREE OF THE
NOT-FOR-PROFIT CORPORATION LAW, THE INSTITUTION MAY EXPEND SO MUCH OF AN
ENDOWMENT FUND AS IT DEEMS PRUDENT AFTER CONSIDERING THE FACTORS SET
FORTH IN PARAGRAPH (A) OF SECTION FIVE HUNDRED FIFTY-THREE OF THE
NOT-FOR-PROFIT CORPORATION LAW.
S 15. If any clause, sentence, paragraph, subdivision, section or part
of this act shall be adjudged by any court of competent jurisdiction to
be invalid, such judgement shall not affect, impair, or invalidate the
remainder thereof, but shall be confined in its operation to the clause,
sentence, paragraph, subdivision, section or part thereof directly
involved in the controversy in which such judgement shall have been
rendered. It is hereby declared to be the intent of the legislature that
this act would have been enacted even if such invalid provisions had not
been included herein.
S 16. This act shall take effect immediately.
