The PPA itself amended the Securities Act of 1993, the Securities Exchange Act of 1934, the Investment Advisors Act of 1940, and the Investment Company Act of 1940.
Gift funds affected
Under provisions of the bill, the following types of gifts receive special exemption from federal securities law registration:
1. general endowment funds
2. pooled income funds
3. charitable gift annuities
4. charitable remainder trusts and other trusts where the remainder interests are irrevocably dedicated to a charitable organization
5. charitable lead trusts
6. and special treatment for limited exemptions of certain revocable gifts for 3 years following the date of the bill’s enactment.
Written disclosure required
The bill requires that charitable organizations provide donors (of the above gifts) written disclosure information describing the material terms of the operation of such gift funds.
While no formal guidance was provided by the SEC or by Congress concerning the form that this disclosure would take, the consensus is that the disclosure burden is somewhat less than required by a full securities registration. However, the information must be complete enough to provide donors with the information necessary to make an informed decision concerning their gifts.
Legal counsel for many charitable organizations have used previously required pooled income fund disclosure documents as a general bench mark. Depending on the complexity of the gift plan involved, such written disclosure might be longer or shorter than the typical pooled income fund disclosure document. Often gift planners and planned giving officers provide the required disclosure in a letter outlining the specifics concerning the operation of a gift fund, and supplying additional published materials for more details.
As the 1-year anniversary of the March 7 effective date of the disclosure provisions of the Philanthropy Protection Act of 1995 passes, you may wish to take a moment to review your existing procedures to assure that they are in compliance with the disclosure requirements of the act.