State Government Administration Committee

Filed: 11/16/2010

 

 


 

 


 
09600SB3162ham001LRB096 19909 JDS 43919 a

1
AMENDMENT TO SENATE BILL 3162

2    AMENDMENT NO. ______. Amend Senate Bill 3162 by replacing
3everything after the enacting clause with the following:
 
4    "Section 5. The Illinois Pension Code is amended by
5changing Section 1-113.14 as follows:
 
6    (40 ILCS 5/1-113.14)
7    Sec. 1-113.14. Investment services for retirement systems,
8pension funds, and investment boards, except those funds
9established under Articles 3 and 4.
10    (a) For the the purposes of this Section, "investment
11services" means services provided by an investment adviser or a
12consultant.
13    (b) The selection and appointment of an investment adviser
14or consultant for investment services by the board of a
15retirement system, pension fund, or investment board subject to
16this Code, except those whose investments are restricted by

 

 

09600SB3162ham001- 2 -LRB096 19909 JDS 43919 a

1Section 1-113.2, shall be made and awarded in accordance with
2this Section. All contracts for investment services shall be
3awarded by the board using a competitive process that is
4substantially similar to the process required for the
5procurement of professional and artistic services under
6Article 35 of the Illinois Procurement Code. Each board of
7trustees shall adopt a policy in accordance with this
8subsection (b) within 60 days after the effective date of this
9amendatory Act of the 96th General Assembly. The policy shall
10be posted on its web site and filed with the Illinois
11Procurement Policy Board. Exceptions to this Section are
12allowed for (i) sole source procurements, (ii) emergency
13procurements, and (iii) at the discretion of the pension fund,
14retirement system, or board of investment, contracts that are
15nonrenewable and one year or less in duration, so long as the
16contract has a value of less than $20,000. All exceptions
17granted under this Section must be published on the system's,
18fund's, or board's web site, shall name the person authorizing
19the procurement, and shall include a brief explanation of the
20reason for the exception.
21    A person, other than a trustee or an employee of a
22retirement system, pension fund, or investment board, may not
23act as a consultant or investment adviser under this Section
24unless that person is registered as an investment adviser under
25the federal Investment Advisers Act of 1940 (15 U.S.C. 80b-1,
26et seq.) or a bank, as defined in the federal Investment

 

 

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1Advisers Act of 1940 (15 U.S.C. 80b-1, et seq.).
2    (c) Investment services provided by an investment adviser
3or a consultant appointed under this Section shall be rendered
4pursuant to a written contract between the investment adviser
5or consultant and the board.
6    The contract shall include all of the following:
7        (1) Acknowledgement in writing by the investment
8    adviser or consultant that he or she is a fiduciary with
9    respect to the pension fund or retirement system.
10        (2) The description of the board's investment policy
11    and notice that the policy is subject to change.
12        (3) (i) Full disclosure of direct and indirect fees,
13    commissions, penalties, and other compensation, including
14    reimbursement for expenses, that may be paid by or on
15    behalf of the consultant in connection with the provision
16    of services to the pension fund or retirement system and
17    (ii) a requirement that the consultant update the
18    disclosure promptly after a modification of those payments
19    or an additional payment.
20        (4) A requirement that the investment adviser or
21    consultant, in conjunction with the board's staff, submit
22    periodic written reports, on at least a quarterly basis,
23    for the board's review at its regularly scheduled meetings.
24    All returns on investment shall be reported as net returns
25    after payment of all fees, commissions, and any other
26    compensation.

 

 

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1        (5) Disclosure of the names and addresses of (i) the
2    consultant or investment adviser; (ii) any entity that is a
3    parent of, or owns a controlling interest in, the
4    consultant or investment adviser; (iii) any entity that is
5    a subsidiary of, or in which a controlling interest is
6    owned by, the consultant or investment adviser; (iv) any
7    persons who have an ownership or distributive income share
8    in the consultant or investment adviser that is in excess
9    of 7.5%; or (v) serves as an executive officer of the
10    consultant or investment adviser.
11        (6) A disclosure of the names and addresses of all
12    subcontractors, if applicable, and the expected amount of
13    money each will receive under the contract, including an
14    acknowledgment that the contractor must promptly make
15    notification, in writing, if at any time during the term of
16    the contract a contractor adds or changes any
17    subcontractors. For purposes of this subparagraph (6),
18    "subcontractor" does not include non-investment related
19    professionals or professionals offering services that are
20    not directly related to the investment of assets, such as
21    legal counsel, actuary, proxy-voting services, services
22    used to track compliance with legal standards, and
23    investment fund of funds where the board has no direct
24    contractual relationship with the investment advisers or
25    partnerships.
26        (7) A description of service to be performed.

 

 

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1        (8) A description of the need for the service.
2        (9) A description of the plan for post-performance
3    review.
4        (10) A description of the qualifications necessary.
5        (11) The duration of the contract.
6        (12) The method for charging and measuring cost.
7    (d) Notwithstanding any other provision of law, a
8retirement system, pension fund, or investment board subject to
9this Code, except those whose investments are restricted by
10Section 1-113.2 of this Code, shall not enter into a contract
11with a consultant that exceeds 5 years in duration. No contract
12to provide consulting services may be renewed or extended. At
13the end of the term of a contract, however, the consultant is
14eligible to compete for a new contract as provided in this
15Section. No retirement system, pension fund, or investment
16board shall attempt to avoid or contravene the restrictions of
17this subsection (d) by any means.
18    (e) Within 60 days after the effective date of this
19amendatory Act of the 96th General Assembly, each investment
20adviser or consultant currently providing services or subject
21to an existing contract for the provision of services must
22disclose to the board of trustees all direct and indirect fees,
23commissions, penalties, and other compensation paid by or on
24behalf of the investment adviser or consultant in connection
25with the provision of those services and shall update that
26disclosure promptly after a modification of those payments or

 

 

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1an additional payment. The person shall update the disclosure
2promptly after a modification of those payments or an
3additional payment. The disclosures required by this
4subsection (e) shall be in writing and shall include the date
5and amount of each payment and the name and address of each
6recipient of a payment.
7    (f) The retirement system, pension fund, or board of
8investment shall develop uniform documents that shall be used
9for the solicitation, review, and acceptance of all investment
10services. The form shall include the terms contained in
11subsection (c) of this Section. All such uniform documents
12shall be posted on the retirement system's, pension fund's, or
13investment board's web site.
14    (g) A description of every contract for investment services
15shall be posted in a conspicuous manner on the web site of the
16retirement system, pension fund, or investment board. The
17description must include the name of the person or entity
18awarded a contract, the total amount applicable to the
19contract, the total fees paid or to be paid, and a disclosure
20approved by the board describing the factors that contributed
21to the selection of an investment adviser or consultant.
22(Source: P.A. 96-6, eff. 4-3-09.)".