Prudent Person Rule


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Prudent Person Rule

A standard that requires that a fiduciary entrusted with funds for investment may invest such funds only in Securities that any reasonable individual interested in receiving a good return of income while preserving his or her capital would purchase.

Historically known as the prudent or reasonable man rule, this standard does not mandate an individual to possess exceptional or uncanny investment skill. It requires only that a fiduciary exercise discretion and average intelligence in making investments that would be generally acceptable as sound.

References in periodicals archive ?
However, other strategies such as appropriately applying the prudent person rule could still be used, though taxpayers should note the increasing difficulty of challenging the proposed regulations when they are finalized.
In that testimony Hafer suggested that some of the funds set aside for long-term investments could be invested in stocks under the prudent person rule as long as they are not invested in tobacco stocks.