HB3722 96TH GENERAL ASSEMBLY

LRB096 11194 AMC 21587 b

96TH GENERAL ASSEMBLY
State of Illinois
2009 and 2010
HB3722

Introduced 2/25/2009, by Rep. William D. Burns

SYNOPSIS AS INTRODUCED:

See Index

Amends the Illinois Governmental Ethics Act. Requires members of the board of any pension fund or retirement system established under the Illinois Pension Code to file a statement of economic interests. Amends the State Officials and Employees Ethics Act. Includes appointed or elected commissioners, trustees, directors, or board members of a board of a State agency, including the boards found in the Illinois Pension Code, in the definition of "employee". Amends the Illinois Pension Code. Makes changes in provisions concerning the definition of "fiduciary", allocation and delegation of fiduciary duties, and prohibited transactions. Adds provisions concerning investment advisers, consultants, and investment services for investment boards, pension funds, and retirement systems other than downstate police and fire pension funds; investment transparency; prohibitions on monetary gain on investments; fraud, prohibitions on gifts; contingent fees; and procurements for pension funds, retirement systems, and investment boards, except downstate police and fire pension funds. Requires the University of Illinois to create the Illinois Fiduciary College for the purpose of education pension fund, retirement system, and investment board members and staffs on ethics.

CORRECTIONAL BUDGET AND IMPACT NOTE ACT MAY APPLY

FISCAL NOTE ACT MAY APPLY

PENSION IMPACT NOTE ACT MAY APPLY

A BILL FOR

AN ACT concerning public employee benefits.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 5. The Illinois Governmental Ethics Act is amended by changing Sections 4A-101, 4A-102, 4A-106, and 4A-107 as follows:

(5 ILCS 420/4A-101) (from Ch. 127, par. 604A-101)

Sec. 4A-101. Persons required to file. The following persons shall file verified written statements of economic interests, as provided in this Article:

(a) Members of the General Assembly and candidates for nomination or election to the General Assembly.

(b) Persons holding an elected office in the Executive Branch of this State, and candidates for nomination or election to these offices.

(c) Members of a Commission or Board created by the Illinois Constitution, and candidates for nomination or election to such Commission or Board.

(d) Persons whose appointment to office is subject to confirmation by the Senate.

(e) Holders of, and candidates for nomination or election to, the office of judge or associate judge of the Circuit Court and the office of judge of the Appellate or Supreme Court.

(f) Persons who are employed by any branch, agency, authority or board of the government of this State, including but not limited to, the Illinois State Toll Highway Authority, the Illinois Housing Development Authority, the Illinois Community College Board, and institutions under the jurisdiction of the Board of Trustees of the University of Illinois, Board of Trustees of Southern Illinois University, Board of Trustees of Chicago State University, Board of Trustees of Eastern Illinois University, Board of Trustees of Governor's State University, Board of Trustees of Illinois State University, Board of Trustees of Northeastern Illinois University, Board of Trustees of Northern Illinois University, Board of Trustees of Western Illinois University, or Board of Trustees of the Illinois Mathematics and Science Academy, and are compensated for services as employees and not as independent contractors and who:

(1) are, or function as, the head of a department, commission, board, division, bureau, authority or other administrative unit within the government of this State, or who exercise similar authority within the government of this State;

(2) have direct supervisory authority over, or direct responsibility for the formulation, negotiation, issuance or execution of contracts entered into by the State in the amount of $5,000 or more;

(3) have authority for the issuance or promulgation of rules and regulations within areas under the authority of the State;

(4) have authority for the approval of professional licenses;

(5) have responsibility with respect to the financial inspection of regulated nongovernmental entities;

(6) adjudicate, arbitrate, or decide any judicial or administrative proceeding, or review the adjudication, arbitration or decision of any judicial or administrative proceeding within the authority of the State;

(7) have supervisory responsibility for 20 or more employees of the State; or

(8) negotiate, assign, authorize, or grant naming rights or sponsorship rights regarding any property or asset of the State, whether real, personal, tangible, or intangible.

(g) Persons who are elected to office in a unit of local government, and candidates for nomination or election to that office, including regional superintendents of school districts.

(h) Persons appointed to the governing board of a unit of local government, or of a special district, and persons appointed to a zoning board, or zoning board of appeals, or to a regional, county, or municipal plan commission, or to a board of review of any county, and persons appointed to the Board of the Metropolitan Pier and Exposition Authority and any Trustee appointed under Section 22 of the Metropolitan Pier and Exposition Authority Act, and persons appointed to a board or commission of a unit of local government who have authority to authorize the expenditure of public funds. This subsection does not apply to members of boards or commissions who function in an advisory capacity.

(i) Persons who are employed by a unit of local government and are compensated for services as employees and not as independent contractors and who:

(1) are, or function as, the head of a department, division, bureau, authority or other administrative unit within the unit of local government, or who exercise similar authority within the unit of local government;

(2) have direct supervisory authority over, or direct responsibility for the formulation, negotiation, issuance or execution of contracts entered into by the unit of local government in the amount of $1,000 or greater;

(3) have authority to approve licenses and permits by the unit of local government; this item does not include employees who function in a ministerial capacity;

(4) adjudicate, arbitrate, or decide any judicial or administrative proceeding, or review the adjudication, arbitration or decision of any judicial or administrative proceeding within the authority of the unit of local government;

(5) have authority to issue or promulgate rules and regulations within areas under the authority of the unit of local government; or

(6) have supervisory responsibility for 20 or more employees of the unit of local government.

(j) Persons on the Board of Trustees of the Illinois Mathematics and Science Academy.

(k) Persons employed by a school district in positions that require that person to hold an administrative or a chief school business official endorsement.

(l) Special government agents. A "special government agent" is a person who is directed, retained, designated, appointed, or employed, with or without compensation, by or on behalf of a statewide executive branch constitutional officer to make an ex parte communication under Section 5-50 of the State Officials and Employees Ethics Act or Section 5-165 of the Illinois Administrative Procedure Act.

(m) Members of the board of commissioners of any flood prevention district.

(n) Members of the board of any pension fund or retirement system established under the Illinois Pension Code, if not required to file under any other provision of this Section.

This Section shall not be construed to prevent any unit of local government from enacting financial disclosure requirements that mandate more information than required by this Act.

(Source: P.A. 95-719, eff. 5-21-08.)

(5 ILCS 420/4A-102) (from Ch. 127, par. 604A-102)

Sec. 4A-102. The statement of economic interests required by this Article shall include the economic interests of the person making the statement as provided in this Section. The interest (if constructively controlled by the person making the statement) of a spouse or any other party, shall be considered to be the same as the interest of the person making the statement. Campaign receipts shall not be included in this statement.

(a) The following interests shall be listed by all persons required to file:

(1) The name, address and type of practice of any professional organization or individual professional practice in which the person making the statement was an officer, director, associate, partner or proprietor, or served in any advisory capacity, from which income in excess of $1200 was derived during the preceding calendar year;

(2) The nature of professional services (other than services rendered to the unit or units of government in relation to which the person is required to file) and the nature of the entity to which they were rendered if fees exceeding $5,000 were received during the preceding calendar year from the entity for professional services rendered by the person making the statement.

(3) The identity (including the address or legal description of real estate) of any capital asset from which a capital gain of $5,000 or more was realized in the preceding calendar year.

(4) The name of any unit of government which has employed the person making the statement during the preceding calendar year other than the unit or units of government in relation to which the person is required to file.

(5) The name of any entity from which a gift or gifts, or honorarium or honoraria, valued singly or in the aggregate in excess of $500, was received during the preceding calendar year.

(b) The following interests shall also be listed by persons listed in items (a) through (f), and item (l), and item (n) of Section 4A-101:

(1) The name and instrument of ownership in any entity doing business in the State of Illinois, in which an ownership interest held by the person at the date of filing is in excess of $5,000 fair market value or from which dividends of in excess of $1,200 were derived during the preceding calendar year. (In the case of real estate, location thereof shall be listed by street address, or if none, then by legal description). No time or demand deposit in a financial institution, nor any debt instrument need be listed;

(2) Except for professional service entities, the name of any entity and any position held therein from which income of in excess of $1,200 was derived during the preceding calendar year, if the entity does business in the State of Illinois. No time or demand deposit in a financial institution, nor any debt instrument need be listed.

(3) The identity of any compensated lobbyist with whom the person making the statement maintains a close economic association, including the name of the lobbyist and specifying the legislative matter or matters which are the object of the lobbying activity, and describing the general type of economic activity of the client or principal on whose behalf that person is lobbying.

(c) The following interests shall also be listed by persons listed in items (g), (h), and (i) of Section 4A-101:

(1) The name and instrument of ownership in any entity doing business with a unit of local government in relation to which the person is required to file if the ownership interest of the person filing is greater than $5,000 fair market value as of the date of filing or if dividends in excess of $1,200 were received from the entity during the preceding calendar year. (In the case of real estate, location thereof shall be listed by street address, or if none, then by legal description). No time or demand deposit in a financial institution, nor any debt instrument need be listed.

(2) Except for professional service entities, the name of any entity and any position held therein from which income in excess of $1,200 was derived during the preceding calendar year if the entity does business with a unit of local government in relation to which the person is required to file. No time or demand deposit in a financial institution, nor any debt instrument need be listed.

(3) The name of any entity and the nature of the governmental action requested by any entity which has applied to a unit of local government in relation to which the person must file for any license, franchise or permit for annexation, zoning or rezoning of real estate during the preceding calendar year if the ownership interest of the person filing is in excess of $5,000 fair market value at the time of filing or if income or dividends in excess of $1,200 were received by the person filing from the entity during the preceding calendar year.

(Source: P.A. 92-101, eff. 1-1-02; 93-617, eff. 12-9-03.)

(5 ILCS 420/4A-106) (from Ch. 127, par. 604A-106)

Sec. 4A-106. The statements of economic interests required of persons listed in items (a) through (f), item (j), and item (l), and item (n) of Section 4A-101 shall be filed with the Secretary of State. The statements of economic interests required of persons listed in items (g), (h), (i), and (k) of Section 4A-101 shall be filed with the county clerk of the county in which the principal office of the unit of local government with which the person is associated is located. If it is not apparent which county the principal office of a unit of local government is located, the chief administrative officer, or his or her designee, has the authority, for purposes of this Act, to determine the county in which the principal office is located. On or before February 1 annually, (1) the chief administrative officer of any State agency in the executive, legislative, or judicial branch employing persons required to file under item (f) or item (l) of Section 4A-101 and the chief administrative officer of a board described in item (n) of Section 4A-101 shall certify to the Secretary of State the names and mailing addresses of those persons, and (2) the chief administrative officer, or his or her designee, of each unit of local government with persons described in items (h), (i) and (k) of Section 4A-101 shall certify to the appropriate county clerk a list of names and addresses of persons described in items (h), (i) and (k) of Section 4A-101 that are required to file. In preparing the lists, each chief administrative officer, or his or her designee, shall set out the names in alphabetical order.

On or before April 1 annually, the Secretary of State shall notify (1) all persons whose names have been certified to him under items (f), and (l), and (n) of Section 4A-101, and (2) all persons described in items (a) through (e) and item (j) of Section 4A-101, other than candidates for office who have filed their statements with their nominating petitions, of the requirements for filing statements of economic interests. A person required to file with the Secretary of State by virtue of more than one item among items (a) through (f) and items (j), and (l), and (n) shall be notified of and is required to file only one statement of economic interests relating to all items under which the person is required to file with the Secretary of State.

On or before April 1 annually, the county clerk of each county shall notify all persons whose names have been certified to him under items (g), (h), (i), and (k) of Section 4A-101, other than candidates for office who have filed their statements with their nominating petitions, of the requirements for filing statements of economic interests. A person required to file with a county clerk by virtue of more than one item among items (g), (h), (i), and (k) shall be notified of and is required to file only one statement of economic interests relating to all items under which the person is required to file with that county clerk.

Except as provided in Section 4A-106.1, the notices provided for in this Section shall be in writing and deposited in the U.S. Mail, properly addressed, first class postage prepaid, on or before the day required by this Section for the sending of the notice. A certificate executed by the Secretary of State or county clerk attesting that he has mailed the notice constitutes prima facie evidence thereof.

From the lists certified to him under this Section of persons described in items (g), (h), (i), and (k) of Section 4A-101, the clerk of each county shall compile an alphabetical listing of persons required to file statements of economic interests in his office under any of those items. As the statements are filed in his office, the county clerk shall cause the fact of that filing to be indicated on the alphabetical listing of persons who are required to file statements. Within 30 days after the due dates, the county clerk shall mail to the State Board of Elections a true copy of that listing showing those who have filed statements.

The county clerk of each county shall note upon the alphabetical listing the names of all persons required to file a statement of economic interests who failed to file a statement on or before May 1. It shall be the duty of the several county clerks to give notice as provided in Section 4A-105 to any person who has failed to file his or her statement with the clerk on or before May 1.

Any person who files or has filed a statement of economic interest under this Act is entitled to receive from the Secretary of State or county clerk, as the case may be, a receipt indicating that the person has filed such a statement, the date of such filing, and the identity of the governmental unit or units in relation to which the filing is required.

The Secretary of State may employ such employees and consultants as he considers necessary to carry out his duties hereunder, and may prescribe their duties, fix their compensation, and provide for reimbursement of their expenses.

All statements of economic interests filed under this Section shall be available for examination and copying by the public at all reasonable times. Not later than 12 months after the effective date of this amendatory Act of the 93rd General Assembly, beginning with statements filed in calendar year 2004, the Secretary of State shall make statements of economic interests filed with the Secretary available for inspection and copying via the Secretary's website.

(Source: P.A. 93-617, eff. 12-9-03; 94-603, eff. 8-16-05.)

(5 ILCS 420/4A-107) (from Ch. 127, par. 604A-107)

Sec. 4A-107. Any person required to file a statement of economic interests under this Article who willfully files a false or incomplete statement shall be guilty of a Class A misdemeanor.

Failure to file a statement within the time prescribed shall result in ineligibility for, or forfeiture of, office or position of employment, as the case may be; provided, however, that if the notice of failure to file a statement of economic interests provided in Section 4A-105 of this Act is not given by the Secretary of State or the county clerk, as the case may be, no forfeiture shall result if a statement is filed within 30 days of actual notice of the failure to file.

The Attorney General, with respect to offices or positions described in items (a) through (f) and items (j), and (l), and (n) of Section 4A-101 of this Act, or the State's Attorney of the county of the entity for which the filing of statements of economic interests is required, with respect to offices or positions described in items (g) through (i) and item (k) of Section 4A-101 of this Act, shall bring an action in quo warranto against any person who has failed to file by either May 31 or June 30 of any given year.

(Source: P.A. 93-617, eff. 12-9-03.)

Section 10. The State Officials and Employees Ethics Act is amended by changing Section 1-5 as follows:

(5 ILCS 430/1-5)

Sec. 1-5. Definitions. As used in this Act:

"Appointee" means a person appointed to a position in or with a State agency, regardless of whether the position is compensated.

"Campaign for elective office" means any activity in furtherance of an effort to influence the selection, nomination, election, or appointment of any individual to any federal, State, or local public office or office in a political organization, or the selection, nomination, or election of Presidential or Vice-Presidential electors, but does not include activities (i) relating to the support or opposition of any executive, legislative, or administrative action (as those terms are defined in Section 2 of the Lobbyist Registration Act), (ii) relating to collective bargaining, or (iii) that are otherwise in furtherance of the person's official State duties.

"Candidate" means a person who has filed nominating papers or petitions for nomination or election to an elected State office, or who has been appointed to fill a vacancy in nomination, and who remains eligible for placement on the ballot at either a general primary election or general election.

"Collective bargaining" has the same meaning as that term is defined in Section 3 of the Illinois Public Labor Relations Act.

"Commission" means an ethics commission created by this Act.

"Compensated time" means any time worked by or credited to a State employee that counts toward any minimum work time requirement imposed as a condition of employment with a State agency, but does not include any designated State holidays or any period when the employee is on a leave of absence.

"Compensatory time off" means authorized time off earned by or awarded to a State employee to compensate in whole or in part for time worked in excess of the minimum work time required of that employee as a condition of employment with a State agency.

"Contribution" has the same meaning as that term is defined in Section 9-1.4 of the Election Code.

"Employee" means (i) any person employed full-time, part-time, or pursuant to a contract and whose employment duties are subject to the direction and control of an employer with regard to the material details of how the work is to be performed or (ii) any appointed or elected commissioner, trustee, director, or board member of a board of a State agency, including the boards found in the Illinois Pension Code or (iii) any other appointee.

"Executive branch constitutional officer" means the Governor, Lieutenant Governor, Attorney General, Secretary of State, Comptroller, and Treasurer.

"Gift" means any gratuity, discount, entertainment, hospitality, loan, forbearance, or other tangible or intangible item having monetary value including, but not limited to, cash, food and drink, and honoraria for speaking engagements related to or attributable to government employment or the official position of an employee, member, or officer.

"Governmental entity" means a unit of local government (including a community college district) or a school district but not a State agency.

"Leave of absence" means any period during which a State employee does not receive (i) compensation for State employment, (ii) service credit towards State pension benefits, and (iii) health insurance benefits paid for by the State.

"Legislative branch constitutional officer" means a member of the General Assembly and the Auditor General.

"Legislative leader" means the President and Minority Leader of the Senate and the Speaker and Minority Leader of the House of Representatives.

"Member" means a member of the General Assembly.

"Officer" means an executive branch constitutional officer or a legislative branch constitutional officer.

"Political" means any activity in support of or in connection with any campaign for elective office or any political organization, but does not include activities (i) relating to the support or opposition of any executive, legislative, or administrative action (as those terms are defined in Section 2 of the Lobbyist Registration Act), (ii) relating to collective bargaining, or (iii) that are otherwise in furtherance of the person's official State duties or governmental and public service functions.

"Political organization" means a party, committee, association, fund, or other organization (whether or not incorporated) that is required to file a statement of organization with the State Board of Elections or a county clerk under Section 9-3 of the Election Code, but only with regard to those activities that require filing with the State Board of Elections or a county clerk.

"Prohibited political activity" means:

(1) Preparing for, organizing, or participating in any political meeting, political rally, political demonstration, or other political event.

(2) Soliciting contributions, including but not limited to the purchase of, selling, distributing, or receiving payment for tickets for any political fundraiser, political meeting, or other political event.

(3) Soliciting, planning the solicitation of, or preparing any document or report regarding any thing of value intended as a campaign contribution.

(4) Planning, conducting, or participating in a public opinion poll in connection with a campaign for elective office or on behalf of a political organization for political purposes or for or against any referendum question.

(5) Surveying or gathering information from potential or actual voters in an election to determine probable vote outcome in connection with a campaign for elective office or on behalf of a political organization for political purposes or for or against any referendum question.

(6) Assisting at the polls on election day on behalf of any political organization or candidate for elective office or for or against any referendum question.

(7) Soliciting votes on behalf of a candidate for elective office or a political organization or for or against any referendum question or helping in an effort to get voters to the polls.

(8) Initiating for circulation, preparing, circulating, reviewing, or filing any petition on behalf of a candidate for elective office or for or against any referendum question.

(9) Making contributions on behalf of any candidate for elective office in that capacity or in connection with a campaign for elective office.

(10) Preparing or reviewing responses to candidate questionnaires in connection with a campaign for elective office or on behalf of a political organization for political purposes.

(11) Distributing, preparing for distribution, or mailing campaign literature, campaign signs, or other campaign material on behalf of any candidate for elective office or for or against any referendum question.

(12) Campaigning for any elective office or for or against any referendum question.

(13) Managing or working on a campaign for elective office or for or against any referendum question.

(14) Serving as a delegate, alternate, or proxy to a political party convention.

(15) Participating in any recount or challenge to the outcome of any election, except to the extent that under subsection (d) of Section 6 of Article IV of the Illinois Constitution each house of the General Assembly shall judge the elections, returns, and qualifications of its members.

"Prohibited source" means any person or entity who:

(1) is seeking official action (i) by the member or officer or (ii) in the case of an employee, by the employee or by the member, officer, State agency, or other employee directing the employee;

(2) does business or seeks to do business (i) with the member or officer or (ii) in the case of an employee, with the employee or with the member, officer, State agency, or other employee directing the employee;

(3) conducts activities regulated (i) by the member or officer or (ii) in the case of an employee, by the employee or by the member, officer, State agency, or other employee directing the employee;

(4) has interests that may be substantially affected by the performance or non-performance of the official duties of the member, officer, or employee; or

(5) is registered or required to be registered with the Secretary of State under the Lobbyist Registration Act, except that an entity not otherwise a prohibited source does not become a prohibited source merely because a registered lobbyist is one of its members or serves on its board of directors.

"State agency" includes all officers, boards, commissions and agencies created by the Constitution, whether in the executive or legislative branch; all officers, departments, boards, commissions, agencies, institutions, authorities, public institutions of higher learning as defined in Section 2 of the Higher Education Cooperation Act (except community colleges), and bodies politic and corporate of the State; and administrative units or corporate outgrowths of the State government which are created by or pursuant to statute, other than units of local government (including community college districts) and their officers, school districts, and boards of election commissioners; and all administrative units and corporate outgrowths of the above and as may be created by executive order of the Governor. "State agency" includes the General Assembly, the Senate, the House of Representatives, the President and Minority Leader of the Senate, the Speaker and Minority Leader of the House of Representatives, the Senate Operations Commission, and the legislative support services agencies. "State agency" includes the Office of the Auditor General. "State agency" does not include the judicial branch.

"State employee" means any employee of a State agency.

"Ultimate jurisdictional authority" means the following:

(1) For members, legislative partisan staff, and legislative secretaries, the appropriate legislative leader: President of the Senate, Minority Leader of the Senate, Speaker of the House of Representatives, or Minority Leader of the House of Representatives.

(2) For State employees who are professional staff or employees of the Senate and not covered under item (1), the Senate Operations Commission.

(3) For State employees who are professional staff or employees of the House of Representatives and not covered under item (1), the Speaker of the House of Representatives.

(4) For State employees who are employees of the legislative support services agencies, the Joint Committee on Legislative Support Services.

(5) For State employees of the Auditor General, the Auditor General.

(6) For State employees of public institutions of higher learning as defined in Section 2 of the Higher Education Cooperation Act (except community colleges), the board of trustees of the appropriate public institution of higher learning.

(7) For State employees of an executive branch constitutional officer other than those described in paragraph (6), the appropriate executive branch constitutional officer.

(8) For State employees not under the jurisdiction of paragraph (1), (2), (3), (4), (5), (6), or (7), the Governor.

(Source: P.A. 95-880, eff. 8-19-08.)

Section 15. The Illinois Pension Code is amended by changing Sections 1-101.2, 1-109.1, and 1-110 and by adding Sections 1-113.14, 1-113.15, 1-113.16, 1-130, 1-135, 1-140, 1-145, and 1-150 as follows:

(40 ILCS 5/1-101.2)

Sec. 1-101.2. Fiduciary. A person is a "fiduciary" with respect to a pension fund or retirement system established under this Code to the extent that the person:

(1) exercises any discretionary authority or discretionary control respecting management of the pension fund or retirement system, or exercises any authority or control respecting management or disposition of its assets;

(2) renders investment advice or renders advice on the selection of other fiduciaries for a fee or other compensation, direct or indirect, with respect to any moneys or other property of the pension fund or retirement system, or has any authority or responsibility to do so; or

(3) has any discretionary authority or discretionary responsibility in the administration of the pension fund or retirement system.

(Source: P.A. 90-507, eff. 8-22-97.)

(40 ILCS 5/1-109.1) (from Ch. 108 1/2, par. 1-109.1)

Sec. 1-109.1. Allocation and Delegation of Fiduciary Duties.

(1) Subject to the provisions of Section 22A-113 of this Code and subsections (2) and (3) of this Section, the board of trustees of a retirement system or pension fund established under this Code may:

(a) Appoint one or more investment managers as fiduciaries to manage (including the power to acquire and dispose of) any assets of the retirement system or pension fund; and

(b) Allocate duties among themselves and designate others as fiduciaries to carry out specific fiduciary activities other than the management of the assets of the retirement system or pension fund.

(2) The board of trustees of a pension fund established under Article 5, 6, 8, 9, 10, 11, 12 or 17 of this Code may not transfer its investment authority, nor transfer the assets of the fund to any other person or entity for the purpose of consolidating or merging its assets and management with any other pension fund or public investment authority, unless the board resolution authorizing such transfer is submitted for approval to the contributors and pensioners of the fund at elections held not less than 30 days after the adoption of such resolution by the board, and such resolution is approved by a majority of the votes cast on the question in both the contributors election and the pensioners election. The election procedures and qualifications governing the election of trustees shall govern the submission of resolutions for approval under this paragraph, insofar as they may be made applicable.

(3) Pursuant to subsections (h) and (i) of Section 6 of Article VII of the Illinois Constitution, the investment authority of boards of trustees of retirement systems and pension funds established under this Code is declared to be a subject of exclusive State jurisdiction, and the concurrent exercise by a home rule unit of any power affecting such investment authority is hereby specifically denied and preempted.

(4) For the purposes of this Code, "emerging investment manager" means a qualified investment adviser that manages an investment portfolio of at least $10,000,000 but less than $2,000,000,000 and is a "minority owned business", or "female owned business" or "business owned by a person with a disability" as those terms are defined in the Business Enterprise for Minorities, Females, and Persons with Disabilities Act.

For the purposes of this Code, "minority broker-dealer" means a qualified broker-dealer who meets the definition of "minority owned business", "female owned business", or "business owned by a person with a disability", as those terms are defined in the Business Enterprise for Minorities, Females, and Persons with Disabilities Act.

It is hereby declared to be the public policy of the State of Illinois to encourage the trustees of public employee retirement systems, pension funds, and investment boards (hereinafter referred to as "system") to use emerging investment managers in managing their system's assets to the greatest extent feasible within the bounds of financial and fiduciary prudence, and to take affirmative steps to remove any barriers to the full participation of emerging investment managers in investment opportunities afforded by those retirement systems.

Each system subject to this Code shall adopt policies that identify the system's plan and implementation procedures for increasing the utilization of emerging investment managers and minority broker-dealers.

Each retirement system subject to this Code shall prepare a report to be submitted to the Governor and the General Assembly by September 1 of each year. The report shall identify the emerging investment managers and minority broker-dealers used by the system, the percentage of the system's assets under the investment control of emerging investment managers, the percentage of total commissions paid by the system's investment managers to minority broker-dealers, the policies adopted by the system to increase the utilization of emerging investment managers and minority broker-dealers, and the actions it has undertaken to increase the use of emerging investment managers and minority broker-dealers, including encouraging other investment managers to use emerging investment managers as subcontractors when the opportunity arises and to use minority broker-dealers.

If in any case an emerging investment manager meets the criteria established by a board for a specific search and meets the criteria established by a consultant for that search, then that emerging investment manager shall receive an invitation by the board of trustees, or an investment committee of the board of trustees, to present their firm for final consideration of a contract. In the case where multiple emerging investment managers meet the criteria of this Section, the staff may choose the most qualified firm or firms to present to the board. In any case where a firm meets the criteria of this Section, but does not present in front of the board, the staff must expressly notify that firm of all future searches with the same criteria as the initial search for which the firm was qualified.

The use of an emerging investment manager does not constitute a transfer of investment authority for the purposes of subsection (2) of this Section.

(Source: P.A. 94-471, eff. 8-4-05.)

(40 ILCS 5/1-110) (from Ch. 108 1/2, par. 1-110)

Sec. 1-110. Prohibited Transactions.

(a) A fiduciary with respect to a retirement system or pension fund shall not cause the retirement system or pension fund to engage in a transaction if he or she knows or should know that such transaction constitutes a direct or indirect:

(1) Sale or exchange, or leasing of any property from the retirement system or pension fund to a party in interest for less than adequate consideration, or from a party in interest to a retirement system or pension fund for more than adequate consideration.

(2) Lending of money or other extension of credit from the retirement system or pension fund to a party in interest without the receipt of adequate security and a reasonable rate of interest, or from a party in interest to a retirement system or pension fund with the provision of excessive security or an unreasonably high rate of interest.

(3) Furnishing of goods, services or facilities from the retirement system or pension fund to a party in interest for less than adequate consideration, or from a party in interest to a retirement system or pension fund for more than adequate consideration.

(4) Transfer to, or use by or for the benefit of, a party in interest of any assets of a retirement system or pension fund for less than adequate consideration.

(b) A fiduciary with respect to a retirement system or pension fund established under this Code shall not:

(1) Deal with the assets of the retirement system or pension fund in his own interest or for his own account;

(2) In his individual or any other capacity act in any transaction involving the retirement system or pension fund on behalf of a party whose interests are adverse to the interests of the retirement system or pension fund or the interests of its participants or beneficiaries; or

(3) Receive any consideration for his own personal account from any party dealing with the retirement system or pension fund in connection with a transaction involving the assets of the retirement system or pension fund.

(c) Nothing in this Section shall be construed to prohibit any trustee from:

(1) Receiving any benefit to which he may be entitled as a participant or beneficiary in the retirement system or pension fund.

(2) Receiving any reimbursement of expenses properly and actually incurred in the performance of his duties with the retirement system or pension fund.

(3) Serving as a trustee in addition to being an officer, employee, agent or other representative of a party in interest.

(d) A fiduciary of a pension fund established under Article 3 or 4 shall not knowingly cause or advise the pension fund to engage in an investment transaction when the fiduciary (i) has any direct interest in the income, gains, or profits of the investment advisor through which the investment transaction is made or (ii) has a business relationship with that investment advisor that would result in a pecuniary benefit to the fiduciary as a result of the investment transaction.

Violation of this subsection (d) is a Class 4 felony.

(e) A board member, employee, or consultant with respect to a retirement system or pension fund shall not knowingly cause or advise the retirement system or pension fund to engage in an investment transaction when the board member, employee, consultant, or their spouse (i) has any direct interest in the income, gains, or profits of the investment advisor through which the investment transaction is made or (ii) has a relationship with that investment advisor that would result in a pecuniary benefit to the board member, employee, or consultant or spouse of such board member, employee, or consultant as a result of the investment transaction. For purposes of this subsection (e), a consultant includes an employee or agent of a consulting firm who has greater than 7.5% ownership of the consulting company.

Violation of this subsection (e) is a Class 3 felony.

(Source: P.A. 95-950, eff. 8-29-08.)

(40 ILCS 5/1-113.14 new)

Sec. 1-113.14. Investment advisers, consultants, and investment services for investment boards, pension funds, and retirement systems other than pension funds created under Articles 3 and 4.

(a) The selection and appointment of a consultant and the contracting for investment consulting services by a consultant constitute procurements that must be made and awarded in a manner consistent with Section 1-150 of this Code. All offers from responsive offerors shall be accompanied by disclosure of the names and addresses of the following:

(1) The offeror.

(2) Any entity that is a parent of, or owns a controlling interest in, the offeror.

(3) Any entity that is a subsidiary of, or in which a controlling interest is owned by, the offeror.

(4) The offeror's key persons. "Key persons" means any persons who (i) have an ownership or distributive income share in the offeror that is in excess of 5%, or an amount greater than 60% of the annual salary of the Governor, or (ii) serve as executive officers of the offeror.

A person, other than a trustee or an employee of a pension fund or retirement system, may not act as a consultant under this Section unless that person is at least one of the following: (i) registered as an investment adviser under the federal Investment Advisers Act of 1940 (15 U.S.C. 80b-1, et seq.); (ii) registered as an investment adviser under the Illinois Securities Law of 1953; (iii) a bank, as defined in the Investment Advisers Act of 1940; or (iv) an insurance company authorized to transact business in this State.

(b) All investment advice and services provided by an investment adviser or a consultant appointed under this Section shall be (i) rendered pursuant to a written contract between the investment adviser or consultant and the board and (ii) in accordance with the board's investment policy.

The contract shall include all of the following:

(1) acknowledgement in writing by the investment adviser or consultant that he or she is a fiduciary with respect to the pension fund or retirement system;

(2) the board's investment policy;

(3) full disclosure of direct and indirect fees, commissions, penalties, and any other compensation that may be received by the investment adviser or consultant, including reimbursement for expenses; and

(4) a requirement that the investment adviser or consultant submit periodic written reports, on at least a quarterly basis, for the board's review at its regularly scheduled meetings. All returns on investment shall be reported as net returns after payment of all fees, commissions, and any other compensation.

(c) Each contract described in subsection (b) shall also include (i) full disclosure of direct and indirect fees, commissions, penalties, and other compensation, including reimbursement for expenses, that may be paid by or on behalf of the consultant in connection with the provision of services to the pension fund or retirement system and (ii) a requirement that the consultant update the disclosure promptly after a modification of those payments or an additional payment.

Within 30 days after the effective date of this amendatory Act of the 96th General Assembly, each consultant currently providing services or subject to an existing contract for the provision of services must disclose to the board of trustees all direct and indirect fees, commissions, penalties, and other compensation paid by or on behalf of the consultant in connection with the provision of those services and shall update that disclosure promptly after a modification of those payments or an additional payment. A person required to make a disclosure under subsection (d) is also required to disclose direct and indirect fees, commissions, penalties, or other compensation that shall or may be paid by or on behalf of the person in connection with the rendering of those services. The person shall update the disclosure promptly after a modification of those payments or an additional payment. The disclosures required by this subsection (b) shall be in writing and shall include the date and amount of each payment and the name and address of each recipient of a payment.

(d) Investment services provided by a person other than an investment adviser appointed under this Section, including, but not limited to, services provided by the kinds of persons listed in items (1) through (4) of subsection (a), shall be rendered only after full written disclosure of direct and indirect fees, commissions, penalties, and any other compensation that shall or may be received by the person rendering those services.

(e) Notwithstanding any other provision of law, a board of trustees of a pension fund or retirement system of this Code shall adopt a policy that sets forth goals of utilization of businesses owned by minorities, females, and persons with Disabilities. When developing these goals, the system shall look at the Business Enterprise for Minorities, Females, and Persons with Disabilities Act, the preceding 5 fiscal years utilization numbers, and the existence of qualified firms with a willingness to do business with the system. The board of trustees shall post upon its website the percentage of its contracts awarded under this Section currently and during the preceding 5 fiscal years that were awarded to minority owned businesses, female owned businesses, and businesses owned by a person with a disability.

(f) Notwithstanding the foregoing, the retirement system or pension fund established under this Code shall not have a goal that is less than 12% of the total dollar amount of all contracts let to "minority owned businesses", "female owned businesses", and "businesses owned by a person with a disability", as those terms are defined in the Business Enterprise for Minorities, Females, and Persons with Disabilities Act.

(40 ILCS 5/1-113.15 new)

Sec. 1-113.15. Illinois Fiduciary College. The University of Illinois shall create and maintain a fiduciary college. This college shall offer continuing education at any of the University of Illinois campuses or other locations established by the University for the sole purpose of educating pension fund, retirement system, and investment board members and staffs on ethics, fiduciary duty, investment issues, and any other curriculum that the University establishes as being important to the administration of a pension system. It will be mandatory that all board members of any fund created under this Code, except those created under Articles 3 and 4, attend training of at least 8 hours per year at the Illinois Fiduciary College. All expenses shall be charged by the University to the retirement system as a percentage cost based on the total asset level possessed by the fund. The classes may be open to others at the University's discretion and shall be charged at an hourly rate equal to what the University would otherwise charge students for similar class work.

Pension funds established under Article 3 and 4 of this Code may opt to participate in these classes, and in doing so, board members shall fulfill any requirements for training otherwise required by this Code. In establishing the costs paid by these funds, the University shall charge the boards a rate based on their size, but may waive this charge at the University's discretion.

(40 ILCS 5/1-113.16 new)

Sec. 1-113.16. Investment transparency.

(a) The purpose of this Section is to provide for transparency in the investment of public funds by requiring the reporting of full and complete information regarding the investment moneys by pension funds, retirement systems, and investment boards.

(b) The pension fund, retirement system, or investment board shall make available in a clear and conspicuous manner on its official website, and update at least monthly, all of the following information concerning the investment of public funds:

(1)The total amount of funds held by the pension fund, retirement system, or investment board.

(2) The asset allocation for the investments made by the pension fund, retirement system, or investment board.

(3) Current and historic return information.

(4) A detailed listing of the investment managers for all asset classes and the performance of each.

(5) Performance of investments compared against established benchmarks.

(c) Nothing in this Section requires the pension fund, retirement system, or investment board to make information available on the Internet that is exempt from inspection and copying under the Freedom of Information Act, or information which has not been audited and approved by its board.

(40 ILCS 5/1-130 new)

Sec. 1-130. No monetary gain on investments. No member or employee of the board of trustees of any retirement system or pension fund created under this Code or the Illinois State Board of Investment nor any spouse of such member or employee shall have any direct interest in the income, gains, or profits of any investments made in behalf of a retirement system or pension fund created under this Code, nor receive any pay or emolument for services in connection with any investment. No member or employee of the board of trustees of any retirement system or pension fund created under this Code or the Illinois State Board of Investment shall become an endorser or surety, or in any manner an obligor for money loaned or borrowed from any retirement system or pension fund created under this Code or the Illinois State Board of Investment. For the purposes of this Section, an annuity otherwise provided in accordance with this Code is not considered monetary gain on investments.

Violation of this Section is a Class 3 felony.

(40 ILCS 5/1-135 new)

Sec. 1-135. Fraud. Any person who knowingly makes any false statement or falsifies or permits to be falsified any record of a retirement system or pension fund created under this Code or the Illinois State Board of Investment in an attempt to defraud the retirement system or pension fund created under this Code or the Illinois State Board of Investment is guilty of a Class 3 felony.

(40 ILCS 5/1-140 new)

Sec. 1-140. Prohibition on gifts.

(a) For the purposes of this Section:

"Board" means the board of trustees of a pension fund or retirement system created under this Code or the Illinois State Board of Investment.

"Gift" means a gift as defined in Section 1-5 of the State Officials and Employees Ethics Act; however, a gift shall not include those items excluded as a gift by the State Officials and Employees Ethics Act.

"Prohibited source" means a person or entity who: (i) is seeking official action (A) by the board, (B) by a board member, or (C) in the case of a board employee, by the employee, the board, a board member, or another employee directing the employee; (ii) does business or seeks to do business (A) with the board, (B) with a board member, or (C) in the case of a board employee, with the employee, the board, a board member, or another employee directing the employee; (iii) has interests that may be substantially affected by the performance or non-performance of the official duties of the board member or employee; or (iv) is registered or required to be registered with the Secretary of State under the Lobbyist Registration Act, except that an entity not otherwise a prohibited source does not become a prohibited source merely because a registered lobbyist is one of its members or serves on its board of directors.

(b) No board member or employee shall solicit or accept any gift from a prohibited source or from an officer, agent, or employee of a prohibited source. No prohibited source or officer, agent, or employee of a prohibited source shall offer to a board member or employee any gift.

(c) Violation of this Section is a Class A misdemeanor.

(40 ILCS 5/1-145 new)

Sec. 1-145. Contingent fees. No person shall retain a solicitor or placement agent to attempt to influence the outcome of an investment decision of or the procurement of investment advice or services by a board of a pension fund or retirement system created under this Code, or the Board or Oversight Board of the Illinois Public Employees Retirement System for compensation contingent in whole or in part upon the decision or procurement, unless (i) such solicitor is a person enumerated in one of clauses (1) through (5) of Section 1-101.4 and is in compliance with Rule 206(4)-3 of the Investment Advisers Act of 1940 or (ii) such placement agent is registered as a broker or dealer pursuant to the federal Securities and Exchange Act of 1934, as amended, or the Illinois Securities Law of 1953.

Any person who violates this Section is guilty of a business offense and shall be fined not more than $10,000.

(40 ILCS 5/1-150 new)

Sec. 1-150. Procurement for pension funds, retirement systems, and investment boards, except those created under Articles 3 and 4.

(a) For the purposes of this Section:

"Affiliated entity" means (i) any subsidiary of the bidding or contracting entity, (ii) any member of the same unitary business group, and (iii) any political committee for which the bidding or contracting entity is the sponsoring entity.

"Affiliated person" means (i) any person with any ownership interest or distributive share of the bidding or contracting entity in excess of 5%, (ii) any executive employee of the bidding or contracting entity, and (iii) the spouse and minor children of any such person.

"Consultant" means any person or entity that is employed to make recommendations to the pension fund, retirement system, or board of investment in choosing an investment manager or managers, but does not include an investment fund of funds where the system has no direct contractual relationship with the investment manager.

(b) All investment consulting services for a pension fund, retirement system, or board of investment established under this Code, other than a pension fund established under Article 3 or 4, shall be procured in accordance with the provisions of this Section. Each pension fund, retirement system, or board of investment has the authority to select, according to the provisions of this Section, its own investment consulting services.

(c) The pension fund, retirement system, or board of investment may develop appropriate and reasonable prequalification standards and categories of investment consulting services. If adopted, the prequalifications and categorizations shall be submitted to the Procurement Policy Board and published for public comment prior to their submission to the Joint Committee on Administrative Rules for approval.

The pension fund, retirement system, or board of investment shall also assemble and maintain a comprehensive list of prequalified and categorized businesses and persons. Prequalification shall not be used to bar or prevent any qualified business or person for bidding or responding to invitations for bid or proposal.

(d) The retirement system, pension fund, or board of investment shall develop, cause to be printed, and distribute uniform documents for the solicitation, review, and acceptance of all investment consulting services. All retirement systems, pension funds, or boards of investment shall use the appropriate uniform procedures and forms specified in this subsection (c) for all investment consulting services. These forms shall include in detail, in writing, at least all of the following:

(1) A description of the goal to be achieved.

(2) The services to be performed.

(3) The need for the service.

(4) The qualifications that are necessary.

(5) A plan for post performance review.

(e) The pension fund, retirement system, or board of investment shall develop, cause to be printed, and distribute uniform documents for the contracting of investment consulting services. All pension funds, retirement systems, and boards of investment shall use the appropriate uniform contracts and forms in contracting for all professional and artistic services. These contracts and forms shall include in detail, in writing, at least all of the following:

(1) The details listed in subsection (c) of this Section relating to uniformity in procurement.

(2) The duration of the contract, with a schedule of delivery, when applicable.

(3) The method for charging and measuring cost (hourly, per day, etc.).

(4) The rate of remuneration.

(5) The maximum price.

(f) All contracts for investment consulting services, except as provided in this Section, shall be awarded using the competitive request for proposal process outlined in this Section. For each contract offered, the retirement system, pension fund, or board of investment shall use appropriate solicitation forms approved by its respective board of trustees. Approved solicitation forms shall be published on the website of the pension fund, retirement system, or board of investment. Notice of the offer or request for proposal shall appear at least 14 days before the response to the offer is due. All interested respondents shall return their responses to the pension fund, retirement system or board of investment. After evaluation, ranking, and selection, the pension fund, retirement system, or board of investment shall publish the names of the responsible procurement decision-maker, the successful respondent, a contract reference, and value of the let contract on its website. The pension fund, retirement system, and board of investment may each refine, but not contradict, this Section by promulgating rules for submission to the Joint Committee on Administrative Rules.

(g) Exceptions to this Section are allowed for sole source procurements, emergency procurements, and at the discretion of the pension fund, retirement system or board of investment, for professional and artistic contracts that are nonrenewable, one year or less in duration, and have a value of less than $20,000. All exceptions granted under this Section must still be published on the system's, fund's or board's website, shall name the authorizing person, and shall include a brief explanation of the reason for the exception.

(h) Any contract granted under this Section shall state whether the services of a subcontractor will be used. The contract shall include the names and addresses of all subcontractors and the expected amount of money each will receive under the contract. If at any time during the term of a contract, a contractor adds or changes any subcontractors, he or she shall promptly notify, in writing, the pension fund, retirement system or board of investment of the names and addresses and the expected amount of money each new or replaced subcontractor will receive.

(i) A person, other than a trustee or an employee of a pension fund, retirement system, or investment board, may not act as a consultant under this Section unless that person is at least one of the following: (i) registered as an investment adviser under the federal Investment Advisers Act of 1940 (15 U.S.C. 80b-1, et seq.); (ii) registered as an investment adviser under the Illinois Securities Law of 1953; (iii) a bank, as defined in the Investment Advisers Act of 1940; or (iv) an insurance company authorized to transact business in this State.

(j) All investment advice and services provided by a consultant appointed under this Section shall be (i) rendered pursuant to a written contract between the consultant and the pension fund, retirement system, or investment board, awarded as provided in subsection (f), and (ii) in accordance with the pension fund's, retirement system's, or investment board's investment policy. The contract shall include all of the following:

(1) Acknowledgement in writing by the consultant that the consultant is a fiduciary with respect to the pension fund, retirement system, or investment board.

(2) The pension fund's, retirement system's, or investment board's investment policy.

(3) Full disclosure of direct and indirect fees, commissions, penalties, and any other compensation that may be received by the consultant, including reimbursement for expenses.

(4) A requirement that the consultant submit periodic written reports, on at least a quarterly basis, for the pension fund's, retirement system's, or investment board's review at its regularly scheduled meetings.

(f) Each contract described in subsection (e) shall also include (i) full disclosure of direct and indirect fees, commissions, penalties, and other compensation, including reimbursement for expenses, that have been or may be paid by or on behalf of the consultant in connection with the provision of services to the pension fund or retirement system, and (ii) a requirement that the consultant update the disclosure promptly after a modification of those payments or an additional payment. The disclosures required by this subsection (f) shall be in writing and shall include the date and amount of each payment and the name and address of each recipient of a payment.

Section 97. Severability. The provisions of this Act are severable under Section 1.31 of the Statute on Statutes.