What is the Prudent Man Rule?

This legal definition is for disambiguation purposes only, and is not related to the Prudent Layperson Standard in health care. However, as a courtesy, we provide this term here as it contains a common search phrase that people seek:

“Prudent Man Rule is an investment standard. It directs trustees “to observe how men of prudence, discretion and intelligence manage their own affairs, not in regard to speculation, but in regard to the permanent disposition of their funds, considering the probable income, as well as the probable safety of the capital to be invested”. [Harvard College v. Armory 9 Pick (26 Mass) 446, 461 (1830).]

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 legal list. In other states, the trustee may invest in a security if it is one that would be bought by a prudent person of discretion and intelligence, who is seeking a reasonable income and preservation of capital.”

SOURCE: Legal Definitions of Prudent Man, Prudent Man Rule

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