Charitable Enforcement and Protection of Charitable Assets Act. State of Maryland (2014)

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1 Charitable Enforcement and Protection of Charitable Assets Act State of Maryland (2014)

2 Background of Act This new law arose out of a determination that clear lines of governmental enforcement authority was needed in order to protect charitable assets in the State of Maryland. Before passage of the Act, the Attorney General relied on common law when exercising jurisdiction over asset protection issues. It was determined that this precedent was not sufficient for purposes of adequately protecting charitable assets in the State. The law passed by the General Assembly and was signed into law in 2014.

3 Charitable Enforcement Fund The law established a new Charitable Enforcement Fund for purpose of supporting: charitable solicitation registration enforcement, and charitable asset protection (sections addressing these matters are in the new law) The money received in the fund will be controlled by the Secretary of State

4 How will money in the Fund be Used? To better enforce the Charitable Solicitations Act Upgrade the capabilities of the Secretary of State To enforce/regulate the Protection of Charitable Assets Act Hiring an Assistant Attorney General to oversee the Asset Protection statute. No Assistant Attorney General in place yet but that should happen sometime later this year Maryland Solicitations Act: Business Regulation Article, Title 6 (BR et seq) Protection of Charitable Assets Act: Business Regulation Article, Title 6.5 (BR et seq)

5 Goals for Protection of Charitable Asset Provisions Provide clear authority of Attorney General to: act in the public interest to protect charitable assets from being misapplied, diverted, or wasted prevent or remedy a breach of fiduciary or other legal duty in the governance, management, or administration of a charitable asset commence or intervene in an action to protect the public interest with respect to charitable assets

6 Some definitions Charitable Asset means property that is given, received, or held for a charitable purpose including all interest in real property or tangible or intangible personal property. BR (b) 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 whose achievement is beneficial to the community. BR (c)

7 Investigatory Powers Power to conduct investigations if there are findings or reasonable grounds to believe a person has: Misapplied, wasted or diverted a charitable asset, or Breached a fiduciary or other legal duty in the governance, management or administration of a charitable asset Subpoena power to investigate whether it should take action under this law. Per BR

8 Enforcement Powers Enter into a settlement agreement if it finds charitable assets were misapplied, wasted, etc. This can result in the following: Payment by the responsible party of the value by which the asset has been diminished. Transfer of the asset to another charitable organization consistent with the asset s charitable purpose. Sue in Circuit Court in the county in which the alleged violation occurred in order to: Restrain the responsible party from misapplying, etc. Secure: Payment of the value by which the asset has been diminished, or Transfer the asset to another charitable organization consistent with the asset s charitable purpose. See BR

9 Enforcement Limitations Any action or remedy is subject to immunity or limits on liability available under federal, State or common law. See BR An enforcement action must be brought within 3 years after the alleged violation occurred. BR

10 How the Act Will Be Implemented? Creation of workgroup to study information collected by the Secretary of State and the manner by which it collects information and how that information can most effectively be shared with the public and other government agencies. During 2014, the workgroup focused on what information the Secretary of State collects for registration for charities and their paid fundraisers. Revised the forms. The Secretary of State s main function will continue to be charitable registration and enforcement of the Maryland Solicitations Act. The role of the Attorney General will be to support the Secretary of State in enforcement of the Solicitations Act as well as to serve as the primary overseer of the protection of charitable assets. Secretary of State expects to maintain current staffing levels and add an Assistant Attorney General this year.