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Glossary Term: PRUDENT MAN RULE

Definition(s) for PRUDENT MAN RULE:


1. ) pertains to a fundamental principle for professional money management which serves as a basis for the Prudent Investor Act. The principle is based on a statement by Judge Samuel Putnum in 1830: 'Those with the responsibility to invest money for others should act with prudence, discretion, intelligence and regard for the safety of capital as well as income.' A common law standard against which those investing the money of others fiduciaries are judged.

2. ) An investment standard. In some states, the law requires that a fiduciary, such as a trustee, may invest the fund's money only in a list of securities designated by the state, the so-called legal list. In other states, the trustee may invest in a security if it is one that would be bought by a prudent man of discretion and intelligence, who is seeking a reasonable income and preservation of capital.



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