HB3429 EnrolledLRB099 04381 JLS 29575 b

1    AN ACT concerning business.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Illinois Securities Law of 1953 is amended
5by changing Sections 4, 8, 11, 11a, 12, 13, and 18.1 and by
6adding Sections 2.34, 2.35, 2.36, and 8d as follows:
 
7    (815 ILCS 5/2.34 new)
8    Sec. 2.34. Accredited investor. "Accredited investor" has
9the meaning given to that term in 17 CFR 230.501(a), as amended
10and in effect from time to time.
 
11    (815 ILCS 5/2.35 new)
12    Sec. 2.35. Qualified escrowee. "Qualified escrowee" means
13a person, firm, partnership, association, corporation, or
14other legal entity who: (a) falls under the definition of
15"title insurance company" under, and pursuant to the terms and
16requirements of, the Title Insurance Act; (b) is certified as
17an independent escrowee under, and pursuant to the terms and
18requirements of, the Title Insurance Act; or (c) is a bank,
19regulated trust company, savings bank, savings and loan
20association, or credit union which is authorized to do business
21in the State and which maintains at least one physical business
22location within the State.
 

 

 

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1    (815 ILCS 5/2.36 new)
2    Sec. 2.36. Registered Internet portal. "Registered
3Internet portal" means an Internet portal maintained by a
4corporation or other legal entity that is being used to offer
5or sell securities and that meets the requirements of Section
68d of this Act.
 
7    (815 ILCS 5/4)  (from Ch. 121 1/2, par. 137.4)
8    Sec. 4. Exempt transactions. The provisions of Sections 2a,
95, 6 and 7 of this Act shall not apply to any of the following
10transactions, except where otherwise specified in this Section
114:
12    A. Any offer or sale, whether through a dealer or
13otherwise, of securities by a person who is not an issuer,
14underwriter, dealer or controlling person in respect of such
15securities, and who, being the bona fide owner of such
16securities, disposes thereof for his or her own account;
17provided, that such offer or sale is not made directly or
18indirectly for the benefit of the issuer or of an underwriter
19or controlling person.
20    B. Any offer, sale, issuance or exchange of securities of
21the issuer to or with security holders of the issuer except to
22or with persons who are security holders solely by reason of
23holding transferable warrants, transferable options, or
24similar transferable rights of the issuer, if no commission or

 

 

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1other remuneration is paid or given directly or indirectly for
2or on account of the procuring or soliciting of such sale or
3exchange (other than a fee paid to underwriters based on their
4undertaking to purchase any securities not purchased by
5security holders in connection with such sale or exchange).
6    C. Any offer, sale or issuance of securities to any
7corporation, bank, savings bank, savings institution, savings
8and loan association, trust company, insurance company,
9building and loan association, or dealer; to a pension fund,
10pension trust, or employees' profit sharing trust, other
11financial institution or institutional investor, any
12government or political subdivision or instrumentality
13thereof, whether the purchaser is acting for itself or in some
14fiduciary capacity; to any partnership or other association
15engaged as a substantial part of its business or operations in
16purchasing or holding securities; to any trust in respect of
17which a bank or trust company is trustee or co-trustee; to any
18entity in which at least 90% of the equity is owned by persons
19described under subsection C, H, or S of this Section 4; to any
20employee benefit plan within the meaning of Title I of the
21Federal ERISA Act if (i) the investment decision is made by a
22plan fiduciary as defined in Section 3(21) of the Federal ERISA
23Act and such plan fiduciary is either a bank, savings and loan
24association, insurance company, registered investment adviser
25or an investment adviser registered under the Federal 1940
26Investment Advisers Act, or (ii) the plan has total assets in

 

 

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1excess of $5,000,000, or (iii) in the case of a self-directed
2plan, investment decisions are made solely by persons that are
3described under subsection C, D, H or S of this Section 4; to
4any plan established and maintained by, and for the benefit of
5the employees of, any state or political subdivision or agency
6or instrumentality thereof if such plan has total assets in
7excess of $5,000,000; or to any organization described in
8Section 501(c)(3) of the Internal Revenue Code of 1986, any
9Massachusetts or similar business trust, or any partnership, if
10such organization, trust, or partnership has total assets in
11excess of $5,000,000.
12    D. The Secretary of State is granted authority to create by
13rule or regulation a limited offering transactional exemption
14that furthers the objectives of compatibility with federal
15exemptions and uniformity among the states. The Secretary of
16State shall prescribe by rule or regulation the amount of the
17fee for filing any report required under this subsection, but
18the fee shall not be less than the minimum amount nor more than
19the maximum amount established under Section 11a of this Act
20and shall not be returnable in any event.
21    E. Any offer or sale of securities by an executor,
22administrator, guardian, receiver or trustee in insolvency or
23bankruptcy, or at any judicial sale, or at a public sale by
24auction held at an advertised time and place, or the offer or
25sale of securities in good faith and not for the purpose of
26avoiding the provisions of this Act by a pledgee of securities

 

 

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1pledged for a bona fide debt.
2    F. Any offer or sale by a registered dealer, either as
3principal or agent, of any securities (except face amount
4certificate contracts and investment fund shares) at a price
5reasonably related to the current market price of such
6securities, provided:
7        (1) (a) the securities are issued and outstanding;
8            (b) the issuer is required to file reports pursuant
9        to Section 13 or Section 15(d) of the Federal 1934 Act
10        and has been subject to such requirements during the 90
11        day period immediately preceding the date of the offer
12        or sale, or is an issuer of a security covered by
13        Section 12(g)(2)(B) or (G) of the Federal 1934 Act;
14            (c) the dealer has a reasonable basis for believing
15        that the issuer is current in filing the reports
16        required to be filed at regular intervals pursuant to
17        the provisions of Section 13 or Section 15(d), as the
18        case may be, of the Federal 1934 Act, or in the case of
19        insurance companies exempted from Section 12(g) of the
20        Federal 1934 Act by subparagraph 12(g)(2)(G) thereof,
21        the annual statement referred to in Section
22        12(g)(2)(G)(i) of the Federal 1934 Act; and
23            (d) the dealer has in its records, and makes
24        reasonably available upon request to any person
25        expressing an interest in a proposed transaction in the
26        securities, the issuer's most recent annual report

 

 

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1        filed pursuant to Section 13 or 15(d), as the case may
2        be, of the Federal 1934 Act or the annual statement in
3        the case of an insurance company exempted from Section
4        12(g) of the Federal 1934 Act by subparagraph
5        12(g)(2)(G) thereof, together with any other reports
6        required to be filed at regular intervals under the
7        Federal 1934 Act by the issuer after such annual report
8        or annual statement; provided that the making
9        available of such reports pursuant to this
10        subparagraph, unless otherwise represented, shall not
11        constitute a representation by the dealer that the
12        information is true and correct, but shall constitute a
13        representation by the dealer that the information is
14        reasonably current; or
15        (2) (a) prior to any offer or sale, an application for
16        the authorization thereof and a report as set forth
17        under sub-paragraph (d) of this paragraph (2) has been
18        filed by any registered dealer with and approved by the
19        Secretary of State pursuant to such rules and
20        regulations as the Secretary of State may prescribe;
21            (b) the Secretary of State shall have the power by
22        order to refuse to approve any application or report
23        filed pursuant to this paragraph (2) if
24                (i) the application or report does not comply
25            with the provisions of this paragraph (2), or
26                (ii) the offer or sale of such securities would

 

 

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1            work or tend to work a fraud or deceit, or
2                (iii) the issuer or the applicant has violated
3            any of the provisions of this Act;
4            (c) each application and report filed pursuant to
5        this paragraph (2) shall be accompanied by a filing fee
6        and an examination fee in the amount established
7        pursuant to Section 11a of this Act, which shall not be
8        returnable in any event;
9            (d) there shall be submitted to the Secretary of
10        State no later than 120 days following the end of the
11        issuer's fiscal year, each year during the period of
12        the authorization, one copy of a report which shall
13        contain a balance sheet and income statement prepared
14        as of the issuer's most recent fiscal year end
15        certified by an independent certified public
16        accountant, together with such current information
17        concerning the securities and the issuer thereof as the
18        Secretary of State may prescribe by rule or regulation
19        or order;
20            (e) prior to any offer or sale of securities under
21        the provisions of this paragraph (2), each registered
22        dealer participating in the offer or sale of such
23        securities shall provide upon request of prospective
24        purchasers of such securities a copy of the most recent
25        report required under the provisions of sub-paragraph
26        (d) of this paragraph (2);

 

 

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1            (f) approval of an application filed pursuant to
2        this paragraph (2) of subsection F shall expire 5 years
3        after the date of the granting of the approval, unless
4        said approval is sooner terminated by (1) suspension or
5        revocation by the Secretary of State in the same manner
6        as is provided for in subsections E, F and G of Section
7        11 of this Act, or (2) the applicant filing with the
8        Secretary of State an affidavit to the effect that (i)
9        the subject securities have become exempt under
10        Section 3 of this Act or (ii) the applicant no longer
11        is capable of acting as the applicant and stating the
12        reasons therefor or (iii) the applicant no longer
13        desires to act as the applicant. In the event of the
14        filing of an affidavit under either preceding
15        sub-division (ii) or (iii) the Secretary of State may
16        authorize a substitution of applicant upon the new
17        applicant executing the application as originally
18        filed. However, the aforementioned substituted
19        execution shall have no effect upon the previously
20        determined date of expiration of approval of the
21        application. Notwithstanding the provisions of this
22        subparagraph (f), approvals granted under this
23        paragraph (2) of subsection F prior to the effective
24        date of this Act shall be governed by the provisions of
25        this Act in effect on such date of approval; and
26            (g) no person shall be considered to have violated

 

 

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1        Section 5 of this Act by reason of any offer or sale
2        effected in reliance upon an approval granted under
3        this paragraph (2) after a termination thereof under
4        the foregoing subparagraph (f) if official notice of
5        such termination has not been circulated generally to
6        dealers by the Secretary of State and if such person
7        sustains the burden of proof that he or she did not
8        know, and in the exercise of reasonable care, could not
9        have known, of the termination; or
10        (3) the securities, or securities of the same class,
11    are the subject of an existing registration under Section 5
12    of this Act.
13    The exemption provided in this subsection F shall apply
14only if the offer or sale is made in good faith and not for the
15purpose of avoiding any of the provisions of this Act, and only
16if the offer or sale is not made for the direct or indirect
17benefit of the issuer of the securities, or the controlling
18person in respect of such issuer.
19    G. (1) Any offer, sale or issuance of a security, whether
20    to residents or to non-residents of this State, where:
21            (a) all sales of such security to residents of this
22        State (including the most recent such sale) within the
23        immediately preceding 12-month period have been made
24        to not more than 35 persons or have involved an
25        aggregate sales price of not more than $1,000,000;
26            (b) such security is not offered or sold by means

 

 

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1        of any general advertising or general solicitation in
2        this State; and
3            (c) no commission, discount, or other remuneration
4        exceeding 20% of the sale price of such security, if
5        sold to a resident of this State, is paid or given
6        directly or indirectly for or on account of such sales.
7        (2) In computing the number of resident purchasers or
8    the aggregate sales price under paragraph (1) (a) above,
9    there shall be excluded any purchaser or dollar amount of
10    sales price, as the case may be, with respect to any
11    security which at the time of its sale was exempt under
12    Section 3 or was registered under Section 5, 6 or 7 or was
13    sold in a transaction exempt under other subsections of
14    this Section 4.
15        (3) A prospectus or preliminary prospectus with
16    respect to a security for which a registration statement is
17    pending or effective under the Federal 1933 Act shall not
18    be deemed to constitute general advertising or general
19    solicitation in this State as such terms are used in
20    paragraph (1) (b) above, provided that such prospectus or
21    preliminary prospectus has not been sent or otherwise
22    delivered to more than 150 residents of this State.
23        (4) The Secretary of State shall by rule or regulation
24    require the filing of a report or reports of sales made in
25    reliance upon the exemption provided by this subsection G
26    and prescribe the form of such report and the time within

 

 

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1    which such report shall be filed. Such report shall set
2    forth the name and address of the issuer and of the
3    controlling person, if the sale was for the direct or
4    indirect benefit of such person, and any other information
5    deemed necessary by the Secretary of State to enforce
6    compliance with this subsection G. The Secretary of State
7    shall prescribe by rule or regulation the amount of the fee
8    for filing any such report, established pursuant to Section
9    11a of this Act, which shall not be returnable in any
10    event. The Secretary of State may impose, in such cases as
11    he or she may deem appropriate, a penalty for failure to
12    file any such report in a timely manner, but no such
13    penalty shall exceed an amount equal to five times the
14    filing fee. The contents of any such report or portion
15    thereof may be deemed confidential by the Secretary of
16    State by rule or order and if so deemed shall not be
17    disclosed to the public except by order of court or in
18    court proceedings. The failure to file any such report
19    shall not affect the availability of such exemption, but
20    such failure to file any such report shall constitute a
21    violation of subsection D of Section 12 of this Act,
22    subject to the penalties enumerated in Section 14 of this
23    Act. The civil remedies provided for in subsection A of
24    Section 13 of this Act and the civil remedies of rescission
25    and appointment of a receiver, conservator, ancillary
26    receiver or ancillary conservator provided for in

 

 

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1    subsection F of Section 13 of this Act shall not be
2    available against any person by reason of the failure to
3    file any such report or on account of the contents of any
4    such report.
5    H. Any offer, sale or issuance of a security to an
6accredited investor provided that such security is not offered
7or sold by means of any general advertising or general
8solicitation, except as otherwise permitted in this Act. (1)
9any natural person who has, or is reasonably believed by the
10person relying upon this subsection H to have, a net worth or
11joint net worth with that person's spouse, at the time of the
12offer, sale or issuance, in excess of $1,000,000 excluding the
13value of a principal residence, or (2) any natural person who
14had, or is reasonably believed by the person relying upon this
15subsection H to have had, an income or joint income with that
16person's spouse, in excess of $200,000 in each of the two most
17recent years and who reasonably expects, or is reasonably
18expected to have, an income in excess of $200,000 in the
19current year, or (3) any person that is not a natural person
20and in which at least 90% of the equity interest is owned by
21persons who meet either of the tests set forth in clauses (1)
22or (2) of this subsection H; provided that such security is not
23offered or sold by means of any general advertising or general
24solicitation in this State.
25    I. Any offer, sale or issuance of securities to or for the
26benefit of security holders of any person incident to a vote by

 

 

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1such security holders pursuant to such person's organizational
2document or any applicable statute of the jurisdiction of such
3person's organization, on a merger, consolidation,
4reclassification of securities, or sale or transfer of assets
5in consideration of or exchange for securities of the same or
6another person.
7    J. Any offer, sale or issuance of securities in exchange
8for one or more outstanding securities, claims or property
9interests, or partly in such exchange and partly for cash,
10where such offer, sale or issuance is incident to a
11reorganization, recapitalization, readjustment, composition or
12settlement of a claim, as approved by a court of competent
13jurisdiction of the United States, or any state.
14    K. Any offer, sale or issuance of securities for patronage,
15or as patronage refunds, or in connection with marketing
16agreements by cooperative associations organized exclusively
17for agricultural, producer, marketing, purchasing, or consumer
18purposes; and the sale of subscriptions for or shares of stock
19of cooperative associations organized exclusively for
20agricultural, producer, marketing, purchasing, or consumer
21purposes, if no commission or other remuneration is paid or
22given directly or indirectly for or on account of such
23subscription, sale or resale, and if any person does not own
24beneficially more than 5% of the aggregate amount of issued and
25outstanding capital stock of such cooperative association.
26    L. Offers for sale or solicitations of offers to buy (but

 

 

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1not the acceptance thereof), of securities which are the
2subject of a pending registration statement filed under the
3Federal 1933 Act and which are the subject of a pending
4application for registration under this Act.
5    M. Any offer or sale of preorganization subscriptions for
6any securities prior to the incorporation, organization or
7formation of any issuer under the laws of the United States, or
8any state, or the issuance by such issuer, after its
9incorporation, organization or formation, of securities
10pursuant to such preorganization subscriptions, provided the
11number of subscribers does not exceed 25 and either (1) no
12commission or other remuneration is paid or given directly or
13indirectly for or on account of such sale or sales or issuance,
14or (2) if any commission or other remuneration is paid or given
15directly or indirectly for or on account of such sale or sales
16or issuance, the securities are not offered or sold by any
17means of general advertising or general solicitation in this
18State.
19    N. The execution of orders for purchase of securities by a
20registered salesperson and dealer, provided such persons act as
21agent for the purchaser, have made no solicitation of the order
22to purchase the securities, have no direct interest in the sale
23or distribution of the securities ordered, receive no
24commission, profit, or other compensation other than the
25commissions involved in the purchase and sale of the securities
26and deliver to the purchaser written confirmation of the order

 

 

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1which clearly identifies the commissions paid to the registered
2dealer.
3    O. Any offer, sale or issuance of securities, other than
4fractional undivided interests in an oil, gas or other mineral
5lease, right or royalty, for the direct or indirect benefit of
6the issuer thereof, or of a controlling person, whether through
7a dealer (acting either as principal or agent) or otherwise, if
8the securities sold, immediately following the sale or sales,
9together with securities already owned by the purchaser, would
10constitute 50% or more of the equity interest of any one
11issuer, provided that the number of purchasers is not more than
125 and provided further that no commission, discount or other
13remuneration exceeding 15% of the aggregate sale price of the
14securities is paid or given directly or indirectly for or on
15account of the sale or sales.
16    P. Any offer, sale or issuance of securities (except face
17amount certificate contracts and investment fund shares)
18issued by and representing an interest in an issuer which is a
19business corporation incorporated under the laws of this State,
20the purposes of which are to provide capital and supervision
21solely for the redevelopment of blighted urban areas located in
22a municipality in this State and whose assets are located
23entirely within that municipality, provided: (1) no
24commission, discount or other remuneration is paid or given
25directly or indirectly for or on account of the sale or sales
26of such securities; (2) the aggregate amount of any securities

 

 

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1of the issuer owned of record or beneficially by any one person
2will not exceed the lesser of $5,000 or 4% of the equity
3capitalization of the issuer; (3) the officers and directors of
4the corporation have been bona fide residents of the
5municipality not less than 3 years immediately preceding the
6effectiveness of the offering sheet for the securities under
7this subsection P; and (4) the issuer files with the Secretary
8of State an offering sheet descriptive of the securities
9setting forth:
10        (a) the name and address of the issuer;
11        (b) the title and total amount of securities to be
12    offered;
13        (c) the price at which the securities are to be
14    offered; and
15        (d) such additional information as the Secretary of
16    State may prescribe by rule and regulation.
17    The Secretary of State shall within a reasonable time
18examine the offering sheet so filed and, unless the Secretary
19of State shall make a determination that the offering sheet so
20filed does not conform to the requirements of this subsection
21P, shall declare the offering sheet to be effective, which
22offering sheet shall continue effective for a period of 12
23months from the date it becomes effective. The fee for
24examining the offering sheet shall be as established pursuant
25to Section 11a of this Act, and shall not be returnable in any
26event. The Secretary of State shall by rule or regulation

 

 

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1require the filing of a report or reports of sales made to
2residents of this State in reliance upon the exemption provided
3by this subsection P and prescribe the form of such report and
4the time within which such report shall be filed. The Secretary
5of State shall prescribe by rule or regulation the amount of
6the fee for filing any such report, but such fee shall not be
7less than the minimum amount nor more than the maximum amount
8established pursuant to Section 11a of this Act, and shall not
9be returnable in any event. The Secretary of State may impose,
10in such cases as he or she may deem appropriate, a penalty for
11failure to file any such report in a timely manner, but no such
12penalty shall exceed an amount equal to five times the filing
13fee. The contents of any such report shall be deemed
14confidential and shall not be disclosed to the public except by
15order of court or in court proceedings. The failure to file any
16such report shall not affect the availability of such
17exemption, but such failure to file any such report shall
18constitute a violation of subsection D of Section 12 of this
19Act, subject to the penalties enumerated in Section 14 of this
20Act. The civil remedies provided for in subsection A of Section
2113 of this Act and the civil remedies of rescission and
22appointment of a receiver, conservator, ancillary receiver or
23ancillary conservator provided for in subsection F of Section
2413 of this Act shall not be available against any person by
25reason of the failure to file any such report or on account of
26the contents of any such report.

 

 

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1    Q. Any isolated transaction, whether effected by a dealer
2or not.
3    R. Any offer, sale or issuance of a security to any person
4who purchases at least $150,000 of the securities being
5offered, where the purchaser's total purchase price does not,
6or it is reasonably believed by the person relying upon this
7subsection R that said purchase price does not, exceed 20
8percent of the purchaser's net worth at the time of sale, or if
9a natural person a joint net worth with that person's spouse,
10for one or any combination of the following: (i) cash, (ii)
11securities for which market quotations are readily available,
12(iii) an unconditional obligation to pay cash or securities for
13which quotations are readily available, which obligation is to
14be discharged within five years of the sale of the securities
15to the purchaser, or (iv) the cancellation of any indebtedness
16owed by the issuer to the purchaser; provided that such
17security is not offered or sold by means of any general
18advertising or general solicitation in this State.
19    S. Any offer, sale or issuance of a security to any person
20who is, or who is reasonably believed by the person relying
21upon this subsection S to be, a director, executive officer, or
22general partner of the issuer of the securities being offered
23or sold, or any director, executive officer, or general partner
24of a general partner of that issuer. For purposes of this
25subsection S, "executive officer" shall mean the president, any
26vice president in charge of a principal business unit, division

 

 

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1or function (such as sales, administration or finance), any
2other officer who performs a policy making function, or any
3other person who performs similar policy making functions for
4the issuer. Executive officers of subsidiaries may be deemed
5executive officers of the issuer if they perform such policy
6making functions for the issuer.
7    A document being filed pursuant to this Section 4 shall be
8deemed filed, and any fee paid pursuant to this Section 4 shall
9be deemed paid, upon the date of actual receipt thereof by the
10Secretary of State.
11    T. An offer or sale of a security by an issuer that is
12organized and, as of the time of the offer and the time of
13sale, in good standing under the laws of the State of Illinois,
14made solely to persons or entities that are, as of the time of
15the offer and time of sale, residents of the State of Illinois,
16provided:
17        (1) The offering meets all of the requirements of the
18    federal exemption for intrastate offerings provided in
19    Section 3(a)(11) of the Securities Act of 1933 (15 U.S.C.
20    77c(a)(11)) and Rule 147 adopted under the Securities Act
21    of 1933 (17 CFR 230.147).
22        (2) The aggregate purchase price of all securities sold
23    by an issuer in reliance on the exemption under this
24    subsection, within any 12-month period, does not exceed:
25    (i) $1,000,000; or (ii) $4,000,000 if the issuer has
26    undergone and made available (directly, or through a

 

 

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1    registered Internet portal), to each prospective purchaser
2    and the Secretary of State, copies of its most recent
3    financial statements which have been audited by an
4    independent auditor and certified by a senior officer of
5    the issuer as fairly, completely, and accurately
6    presenting the financial condition of the issuer, in all
7    material respects, as of the dates indicated therein.
8    Amounts received in connection with any offer or sale to
9    any accredited investor or any of the following shall not
10    count toward the calculation of the foregoing monetary
11    limitations:
12            (a) any entity (including, without limitation, any
13        trust) in which all of the equity interests are owned
14        by (or with respect to any trust, the primary
15        beneficiaries are) persons who are accredited
16        investors or who meet one or more of the criteria in
17        subparagraphs (b) through (d) of this paragraph (2);
18            (b) with respect to participating in an offering of
19        a particular issuer, a natural person serving as an
20        officer, director, partner, or trustee of, or
21        otherwise occupying similar status or performing
22        similar functions with respect to, such issuer;
23            (c) with respect to participating in an offering of
24        a particular issuer, a natural person or entity who
25        owns 10% or more of the then aggregate outstanding
26        voting capital securities of such issuer; or

 

 

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1            (d) such other person or entity as the Secretary of
2        State may hereafter exempt by rule.
3        The Secretary of State may hereafter cumulatively
4    increase the dollar limitations provided in this
5    paragraph.
6        (3) The aggregate amount sold by an issuer to any
7    purchaser (other than an accredited investor or a person or
8    entity which meets one or more of the criteria in
9    subparagraphs (a) through (d) of paragraph (2) of this
10    subsection T) in an offering of securities made in reliance
11    on the exemption provided in this subsection T, within any
12    consecutive 12-month period, does not exceed $5,000.
13        (4) The Secretary of State shall establish by rule the
14    duties of the issuer including disclosure and filing
15    requirements, treatment of escrow funds and agreements,
16    production of financial statements, and other requirements
17    as deemed necessary.
18        (5) The issuer has made available, to each prospective
19    purchaser and the Secretary of State, copies of its most
20    recent financial statements personally certified by one or
21    more senior officers of the issuer as fairly, completely,
22    and accurately presenting the financial condition of the
23    issuer, in all material respects, as of the dates indicated
24    therein.
25        (6) No commission or other remuneration is paid or
26    given directly or indirectly to any person or entity

 

 

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1    (including, without limitation, any registered Internet
2    portal) for soliciting any person in this State, except to
3    registered dealers and registered salespersons licensed in
4    this State.
5        (7) Not less than 15 days before the earlier of the
6    first sale of securities made in reliance on the exemption
7    provided in this subsection T, or the use of any general
8    solicitation with respect thereto (other than a general
9    announcement made by or on behalf of), an issuer shall file
10    forms, materials, and fees as required by the Secretary of
11    State by rule.
12        The Secretary of State shall prescribe by rule the
13    amount of the fee for filing the notice required in
14    subparagraph (a), established pursuant to Section 11a of
15    this Act. The Secretary of State may impose, in such cases
16    as he or she may deem appropriate, a penalty for failure to
17    file any such notice in a timely manner, but no such
18    penalty shall exceed an amount equal to 5 times the filing
19    fee. The contents of any such notice or portion thereof may
20    be deemed confidential by the Secretary of State by rule or
21    order and if so deemed shall not be disclosed to the public
22    except by order of court or in court proceedings. The
23    failure to file any such notice does not affect the
24    availability of such exemption, but such failure to file
25    any such report constitutes a violation of subsection D of
26    Section 12 of this Act and is subject to the penalties and

 

 

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1    remedies available in this Act and under the law.
2        (8) All payments for purchase of securities offered
3    pursuant to the exemption provided under this subsection T
4    are made directly to, and held by, the qualified escrowee
5    identified in the escrow agreement required pursuant to
6    subparagraph (c) of paragraph (4).
7        (9) The issuer includes each of the following in one or
8    more of the offering materials delivered to a prospective
9    purchaser, or to which a prospective purchaser has been
10    granted electronic access, in connection with the
11    offering:
12            (a) a description of the issuer, its type of
13        entity, the address, and telephone number of its
14        principal office;
15            (b) a reasonably detailed description of the
16        intended use of the offering proceeds, including any
17        amounts to be paid, as compensation or otherwise, to
18        any owner, executive officer, director, managing
19        member, or other person occupying a similar status or
20        performing similar functions on behalf of the issuer;
21            (c) the identity of all persons owning more than
22        10% of the voting capital securities of the issuer;
23            (d) the identity of the executive officers,
24        directors, managing members, and other persons
25        occupying a similar status or performing similar
26        functions in the name of and on behalf of the issuer,

 

 

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1        including their titles and a reasonably detailed
2        description of their prior experience;
3            (e) the identity of any person or entity who has
4        been or will be retained by the issuer to assist the
5        issuer in conducting the offering and sale of the
6        securities (including all registered Internet portals
7        but excluding persons acting solely as accountants or
8        attorneys and employees whose primary job
9        responsibilities involve the operating business of the
10        issuer rather than assisting the issuer in raising
11        capital) and a description of the consideration being
12        paid to each such person or entity for such assistance;
13            (f) any additional information material to the
14        offering, including a description of significant
15        factors that make the offering speculative or risky for
16        the purchaser;
17            (g) the information required pursuant to
18        subparagraphs (a) and (b) of paragraph (4) of this
19        subsection T;
20            (h) such other information as the Secretary of
21        State may hereafter require by rule.
22        (10) The issuer (directly or through a registered
23    Internet portal) requires each purchaser to certify, in
24    writing or electronically, that the purchaser:
25            (a) is a resident of the State of Illinois;
26            (b) understands that he or she is investing in a

 

 

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1        high-risk, highly speculative, business venture, that
2        he or she may lose all of his or her investment, and
3        that he or she can afford such a loss of his or her
4        investment;
5            (c) understands that the securities being offered
6        are highly illiquid, that there is no ready market for
7        the sale of such securities, that it may be difficult
8        or impossible for purchaser to sell or otherwise
9        dispose of such securities, and (where applicable)
10        that purchaser may be required to hold the securities
11        for an indefinite period of time; and
12            (d) understands that purchaser may be subject to
13        the payment of certain taxes with respect to the
14        securities being purchased whether or not purchaser
15        has sold, or otherwise disposed of, such securities or
16        whether purchaser has received any distributions or
17        other amounts from the issuer.
18        (11) The issuer (directly or through a registered
19    Internet portal) obtains from each purchaser of a security
20    offered under this subsection T evidence that the purchaser
21    is a resident of this State and, if applicable, is an
22    accredited investor. Without limiting the generality of
23    the foregoing, and not to the exclusion of other reasonable
24    methods which may be used by the issuer in connection with
25    the foregoing, an issuer may rely.
26        (12) The issuer (and to the extent a registered

 

 

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1    Internet portal is used, such registered Internet portal)
2    maintains records of all offers and sales of securities
3    made pursuant to the exemption granted by this subsection T
4    and provides ready access to such records to the Secretary
5    of State, upon notice from the Secretary of State.
6        (13) The issuer is not, either before or as a result of
7    the offering:
8            (a) an investment company, as defined in Section 3
9        of the Investment Company Act of 1940 (15 U.S.C.
10        80a-3), as amended and in effect (unless the issuer
11        qualifies for exclusion from such definition pursuant
12        to one or more of the exceptions provided in Section
13        3(c) of the Investment Company Act of 1940, any other
14        provision of the Investment Company Act of 1940, or any
15        administrative rule or regulation promulgated with
16        respect to the Investment Company Act of 1940 or in
17        connection therewith); or
18            (b) subject to the reporting requirements of
19        Section 13 or 15(d) of the Securities Exchange Act of
20        1934 (15 U.S.C. 78m or 15 U.S.C. 78o(d).
21        (14) Neither the issuer, nor any person affiliated with
22    the issuer (either before or as a result of the offering),
23    nor the offering itself, nor the registered Internet portal
24    (to the extent used) is subject to disqualification
25    established by the Secretary of State by rule or contained
26    in the Securities Act of 1933 (15 U.S.C. 77c(a)(11)) and

 

 

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1    Rule 147 adopted under the Securities Act of 1933 (17 CFR
2    230.147), unless both of the following are met:
3            (a) on a showing of good cause and without
4        prejudice to any other action by the Secretary of
5        State, the Secretary of State determines that it is not
6        necessary under the circumstances that an exemption is
7        denied; and
8            (b) the issuer establishes that it made a factual
9        inquiry into whether any disqualification existed
10        under this paragraph (14), but did not know, and in the
11        exercise of reasonable care could not have known, that
12        a disqualification existed under this paragraph (14);
13        the nature and scope of the requisite inquiry will vary
14        based on the circumstances of the issuer and the other
15        offering participants.
16(Source: P.A. 90-70, eff. 7-8-97; 91-809, eff. 1-1-01.)
 
17    (815 ILCS 5/8)  (from Ch. 121 1/2, par. 137.8)
18    Sec. 8. Registration of dealers, limited Canadian dealers,
19internet portals, salespersons, investment advisers, and
20investment adviser representatives.
 
21    A. Except as otherwise provided in this subsection A, every
22dealer, limited Canadian dealer, salesperson, investment
23adviser, and investment adviser representative shall be
24registered as such with the Secretary of State. No dealer or

 

 

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1salesperson need be registered as such when offering or selling
2securities in transactions exempted by subsection A, B, C, D,
3E, G, H, I, J, K, M, O, P, Q, R or S of Section 4 of this Act,
4provided that such dealer or salesperson is not regularly
5engaged in the business of offering or selling securities in
6reliance upon the exemption set forth in subsection G or M of
7Section 4 of this Act. No dealer, issuer or controlling person
8shall employ a salesperson unless such salesperson is
9registered as such with the Secretary of State or is employed
10for the purpose of offering or selling securities solely in
11transactions exempted by subsection A, B, C, D, E, G, H, I, J,
12K, L, M, O, P, Q, R or S of Section 4 of this Act; provided that
13such salesperson need not be registered when effecting
14transactions in this State limited to those transactions
15described in Section 15(h)(2) of the Federal 1934 Act or
16engaging in the offer or sale of securities in respect of which
17he or she has beneficial ownership and is a controlling person.
18The Secretary of State may, by rule, regulation or order and
19subject to such terms, conditions, and fees as may be
20prescribed in such rule, regulation or order, exempt from the
21registration requirements of this Section 8 any investment
22adviser, if the Secretary of State shall find that such
23registration is not necessary in the public interest by reason
24of the small number of clients or otherwise limited character
25of operation of such investment adviser.
 

 

 

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1    B. An application for registration as a dealer or limited
2Canadian dealer, executed, verified, or authenticated by or on
3behalf of the applicant, shall be filed with the Secretary of
4State, in such form as the Secretary of State may by rule,
5regulation or order prescribe, setting forth or accompanied by:
6        (1) The name and address of the applicant, the location
7    of its principal business office and all branch offices, if
8    any, and the date of its organization;
9        (2) A statement of any other Federal or state licenses
10    or registrations which have been granted the applicant and
11    whether any such licenses or registrations have ever been
12    refused, cancelled, suspended, revoked or withdrawn;
13        (3) The assets and all liabilities, including
14    contingent liabilities of the applicant, as of a date not
15    more than 60 days prior to the filing of the application;
16        (4) (a) A brief description of any civil or criminal
17    proceeding of which fraud is an essential element pending
18    against the applicant and whether the applicant has ever
19    been convicted of a felony, or of any misdemeanor of which
20    fraud is an essential element;
21        (b) A list setting forth the name, residence and
22    business address and a 10 year occupational statement of
23    each principal of the applicant and a statement describing
24    briefly any civil or criminal proceedings of which fraud is
25    an essential element pending against any such principal and
26    the facts concerning any conviction of any such principal

 

 

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1    of a felony, or of any misdemeanor of which fraud is an
2    essential element;
3        (5) If the applicant is a corporation: a list of its
4    officers and directors setting forth the residence and
5    business address of each; a 10-year occupational statement
6    of each such officer or director; and a statement
7    describing briefly any civil or criminal proceedings of
8    which fraud is an essential element pending against each
9    such officer or director and the facts concerning any
10    conviction of any officer or director of a felony, or of
11    any misdemeanor of which fraud is an essential element;
12        (6) If the applicant is a sole proprietorship, a
13    partnership, limited liability company, an unincorporated
14    association or any similar form of business organization:
15    the name, residence and business address of the proprietor
16    or of each partner, member, officer, director, trustee or
17    manager; the limitations, if any, of the liability of each
18    such individual; a 10-year occupational statement of each
19    such individual; a statement describing briefly any civil
20    or criminal proceedings of which fraud is an essential
21    element pending against each such individual and the facts
22    concerning any conviction of any such individual of a
23    felony, or of any misdemeanor of which fraud is an
24    essential element;
25        (7) Such additional information as the Secretary of
26    State may by rule or regulation prescribe as necessary to

 

 

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1    determine the applicant's financial responsibility,
2    business repute and qualification to act as a dealer.
3        (8) (a) No applicant shall be registered or
4    re-registered as a dealer or limited Canadian dealer under
5    this Section unless and until each principal of the dealer
6    has passed an examination conducted by the Secretary of
7    State or a self-regulatory organization of securities
8    dealers or similar person, which examination has been
9    designated by the Secretary of State by rule, regulation or
10    order to be satisfactory for purposes of determining
11    whether the applicant has sufficient knowledge of the
12    securities business and laws relating thereto to act as a
13    registered dealer. Any dealer who was registered on
14    September 30, 1963, and has continued to be so registered;
15    and any principal of any registered dealer, who was acting
16    in such capacity on and continuously since September 30,
17    1963; and any individual who has previously passed a
18    securities dealer examination administered by the
19    Secretary of State or any examination designated by the
20    Secretary of State to be satisfactory for purposes of
21    determining whether the applicant has sufficient knowledge
22    of the securities business and laws relating thereto to act
23    as a registered dealer by rule, regulation or order, shall
24    not be required to pass an examination in order to continue
25    to act in such capacity. The Secretary of State may by
26    order waive the examination requirement for any principal

 

 

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1    of an applicant for registration under this subsection B
2    who has had such experience or education relating to the
3    securities business as may be determined by the Secretary
4    of State to be the equivalent of such examination. Any
5    request for such a waiver shall be filed with the Secretary
6    of State in such form as may be prescribed by rule or
7    regulation.
8        (b) Unless an applicant is a member of the body
9    corporate known as the Securities Investor Protection
10    Corporation established pursuant to the Act of Congress of
11    the United States known as the Securities Investor
12    Protection Act of 1970, as amended, a member of an
13    association of dealers registered as a national securities
14    association pursuant to Section 15A of the Federal 1934
15    Act, or a member of a self-regulatory organization or stock
16    exchange in Canada which the Secretary of State has
17    designated by rule or order, an applicant shall not be
18    registered or re-registered unless and until there is filed
19    with the Secretary of State evidence that such applicant
20    has in effect insurance or other equivalent protection for
21    each client's cash or securities held by such applicant,
22    and an undertaking that such applicant will continually
23    maintain such insurance or other protection during the
24    period of registration or re-registration. Such insurance
25    or other protection shall be in a form and amount
26    reasonably prescribed by the Secretary of State by rule or

 

 

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1    regulation.
2        (9) The application for the registration of a dealer or
3    limited Canadian dealer shall be accompanied by a filing
4    fee and a fee for each branch office in this State, in each
5    case in the amount established pursuant to Section 11a of
6    this Act, which fees shall not be returnable in any event.
7        (10) The Secretary of State shall notify the dealer or
8    limited Canadian dealer by written notice (which may be by
9    electronic or facsimile transmission) of the effectiveness
10    of the registration as a dealer in this State.
11        (11) Any change which renders no longer accurate any
12    information contained in any application for registration
13    or re-registration of a dealer or limited Canadian dealer
14    shall be reported to the Secretary of State within 10
15    business days after the occurrence of such change; but in
16    respect to assets and liabilities only materially adverse
17    changes need be reported.
 
18    C. Any registered dealer, limited Canadian dealer, issuer,
19or controlling person desiring to register a salesperson shall
20file an application with the Secretary of State, in such form
21as the Secretary of State may by rule or regulation prescribe,
22which the salesperson is required by this Section to provide to
23the dealer, issuer, or controlling person, executed, verified,
24or authenticated by the salesperson setting forth or
25accompanied by:

 

 

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1        (1) the name, residence and business address of the
2    salesperson;
3        (2) whether any federal or State license or
4    registration as dealer, limited Canadian dealer, or
5    salesperson has ever been refused the salesperson or
6    cancelled, suspended, revoked, withdrawn, barred, limited,
7    or otherwise adversely affected in a similar manner or
8    whether the salesperson has ever been censured or expelled;
9        (3) the nature of employment with, and names and
10    addresses of, employers of the salesperson for the 10 years
11    immediately preceding the date of application;
12        (4) a brief description of any civil or criminal
13    proceedings of which fraud is an essential element pending
14    against the salesperson, and whether the salesperson has
15    ever been convicted of a felony, or of any misdemeanor of
16    which fraud is an essential element;
17        (5) such additional information as the Secretary of
18    State may by rule, regulation or order prescribe as
19    necessary to determine the salesperson's business repute
20    and qualification to act as a salesperson; and
21        (6) no individual shall be registered or re-registered
22    as a salesperson under this Section unless and until such
23    individual has passed an examination conducted by the
24    Secretary of State or a self-regulatory organization of
25    securities dealers or similar person, which examination
26    has been designated by the Secretary of State by rule,

 

 

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1    regulation or order to be satisfactory for purposes of
2    determining whether the applicant has sufficient knowledge
3    of the securities business and laws relating thereto to act
4    as a registered salesperson.
5        Any salesperson who was registered prior to September
6    30, 1963, and has continued to be so registered, and any
7    individual who has passed a securities salesperson
8    examination administered by the Secretary of State or an
9    examination designated by the Secretary of State by rule,
10    regulation or order to be satisfactory for purposes of
11    determining whether the applicant has sufficient knowledge
12    of the securities business and laws relating thereto to act
13    as a registered salesperson, shall not be required to pass
14    an examination in order to continue to act as a
15    salesperson. The Secretary of State may by order waive the
16    examination requirement for any applicant for registration
17    under this subsection C who has had such experience or
18    education relating to the securities business as may be
19    determined by the Secretary of State to be the equivalent
20    of such examination. Any request for such a waiver shall be
21    filed with the Secretary of State in such form as may be
22    prescribed by rule, regulation or order.
23        (7) The application for registration of a salesperson
24    shall be accompanied by a filing fee and a Securities Audit
25    and Enforcement Fund fee, each in the amount established
26    pursuant to Section 11a of this Act, which shall not be

 

 

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1    returnable in any event.
2        (8) Any change which renders no longer accurate any
3    information contained in any application for registration
4    or re-registration as a salesperson shall be reported to
5    the Secretary of State within 10 business days after the
6    occurrence of such change. If the activities are terminated
7    which rendered an individual a salesperson for the dealer,
8    issuer or controlling person, the dealer, issuer or
9    controlling person, as the case may be, shall notify the
10    Secretary of State, in writing, within 30 days of the
11    salesperson's cessation of activities, using the
12    appropriate termination notice form.
13        (9) A registered salesperson may transfer his or her
14    registration under this Section 8 for the unexpired term
15    thereof from one registered dealer or limited Canadian
16    dealer to another by the giving of notice of the transfer
17    by the new registered dealer or limited Canadian dealer to
18    the Secretary of State in such form and subject to such
19    conditions as the Secretary of State shall by rule or
20    regulation prescribe. The new registered dealer or limited
21    Canadian dealer shall promptly file an application for
22    registration of such salesperson as provided in this
23    subsection C, accompanied by the filing fee prescribed by
24    paragraph (7) of this subsection C.
 
25    C-5. Except with respect to federal covered investment

 

 

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1advisers whose only clients are investment companies as defined
2in the Federal 1940 Act, other investment advisers, federal
3covered investment advisers, or any similar person which the
4Secretary of State may prescribe by rule or order, a federal
5covered investment adviser shall file with the Secretary of
6State, prior to acting as a federal covered investment adviser
7in this State, such documents as have been filed with the
8Securities and Exchange Commission as the Secretary of State by
9rule or order may prescribe. The notification of a federal
10covered investment adviser shall be accompanied by a
11notification filing fee established pursuant to Section 11a of
12this Act, which shall not be returnable in any event. Every
13person acting as a federal covered investment adviser in this
14State shall file a notification filing and pay an annual
15notification filing fee established pursuant to Section 11a of
16this Act, which is not returnable in any event. The failure to
17file any such notification shall constitute a violation of
18subsection D of Section 12 of this Act, subject to the
19penalties enumerated in Section 14 of this Act. Until October
2010, 1999 or other date as may be legally permissible, a federal
21covered investment adviser who fails to file the notification
22or refuses to pay the fees as required by this subsection shall
23register as an investment adviser with the Secretary of State
24under Section 8 of this Act. The civil remedies provided for in
25subsection A of Section 13 of this Act and the civil remedies
26of rescission and appointment of receiver, conservator,

 

 

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1ancillary receiver, or ancillary conservator provided for in
2subsection F of Section 13 of this Act shall not be available
3against any person by reason of the failure to file any such
4notification or to pay the notification fee or on account of
5the contents of any such notification.
 
6    D. An application for registration as an investment
7adviser, executed, verified, or authenticated by or on behalf
8of the applicant, shall be filed with the Secretary of State,
9in such form as the Secretary of State may by rule or
10regulation prescribe, setting forth or accompanied by:
11        (1) The name and form of organization under which the
12    investment adviser engages or intends to engage in
13    business; the state or country and date of its
14    organization; the location of the adviser's principal
15    business office and branch offices, if any; the names and
16    addresses of the adviser's principal, partners, officers,
17    directors, and persons performing similar functions or, if
18    the investment adviser is an individual, of the individual;
19    and the number of the adviser's employees who perform
20    investment advisory functions;
21        (2) The education, the business affiliations for the
22    past 10 years, and the present business affiliations of the
23    investment adviser and of the adviser's principal,
24    partners, officers, directors, and persons performing
25    similar functions and of any person controlling the

 

 

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1    investment adviser;
2        (3) The nature of the business of the investment
3    adviser, including the manner of giving advice and
4    rendering analyses or reports;
5        (4) The nature and scope of the authority of the
6    investment adviser with respect to clients' funds and
7    accounts;
8        (5) The basis or bases upon which the investment
9    adviser is compensated;
10        (6) Whether the investment adviser or any principal,
11    partner, officer, director, person performing similar
12    functions or person controlling the investment adviser (i)
13    within 10 years of the filing of the application has been
14    convicted of a felony, or of any misdemeanor of which fraud
15    is an essential element, or (ii) is permanently or
16    temporarily enjoined by order or judgment from acting as an
17    investment adviser, underwriter, dealer, principal or
18    salesperson, or from engaging in or continuing any conduct
19    or practice in connection with any such activity or in
20    connection with the purchase or sale of any security, and
21    in each case the facts relating to the conviction, order or
22    judgment;
23        (7) (a) A statement as to whether the investment
24    adviser is engaged or is to engage primarily in the
25    business of rendering investment supervisory services; and
26        (b) A statement that the investment adviser will

 

 

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1    furnish his, her, or its clients with such information as
2    the Secretary of State deems necessary in the form
3    prescribed by the Secretary of State by rule or regulation;
4        (8) Such additional information as the Secretary of
5    State may, by rule, regulation or order prescribe as
6    necessary to determine the applicant's financial
7    responsibility, business repute and qualification to act
8    as an investment adviser.
9        (9) No applicant shall be registered or re-registered
10    as an investment adviser under this Section unless and
11    until each principal of the applicant who is actively
12    engaged in the conduct and management of the applicant's
13    advisory business in this State has passed an examination
14    or completed an educational program conducted by the
15    Secretary of State or an association of investment advisers
16    or similar person, which examination or educational
17    program has been designated by the Secretary of State by
18    rule, regulation or order to be satisfactory for purposes
19    of determining whether the applicant has sufficient
20    knowledge of the securities business and laws relating
21    thereto to conduct the business of a registered investment
22    adviser.
23        Any person who was a registered investment adviser
24    prior to September 30, 1963, and has continued to be so
25    registered, and any individual who has passed an investment
26    adviser examination administered by the Secretary of

 

 

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1    State, or passed an examination or completed an educational
2    program designated by the Secretary of State by rule,
3    regulation or order to be satisfactory for purposes of
4    determining whether the applicant has sufficient knowledge
5    of the securities business and laws relating thereto to
6    conduct the business of a registered investment adviser,
7    shall not be required to pass an examination or complete an
8    educational program in order to continue to act as an
9    investment adviser. The Secretary of State may by order
10    waive the examination or educational program requirement
11    for any applicant for registration under this subsection D
12    if the principal of the applicant who is actively engaged
13    in the conduct and management of the applicant's advisory
14    business in this State has had such experience or education
15    relating to the securities business as may be determined by
16    the Secretary of State to be the equivalent of the
17    examination or educational program. Any request for a
18    waiver shall be filed with the Secretary of State in such
19    form as may be prescribed by rule or regulation.
20        (10) No applicant shall be registered or re-registered
21    as an investment adviser under this Section 8 unless the
22    application for registration or re-registration is
23    accompanied by an application for registration or
24    re-registration for each person acting as an investment
25    adviser representative on behalf of the adviser and a
26    Securities Audit and Enforcement Fund fee that shall not be

 

 

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1    returnable in any event is paid with respect to each
2    investment adviser representative.
3        (11) The application for registration of an investment
4    adviser shall be accompanied by a filing fee and a fee for
5    each branch office in this State, in each case in the
6    amount established pursuant to Section 11a of this Act,
7    which fees shall not be returnable in any event.
8        (12) The Secretary of State shall notify the investment
9    adviser by written notice (which may be by electronic or
10    facsimile transmission) of the effectiveness of the
11    registration as an investment adviser in this State.
12        (13) Any change which renders no longer accurate any
13    information contained in any application for registration
14    or re-registration of an investment adviser shall be
15    reported to the Secretary of State within 10 business days
16    after the occurrence of the change. In respect to assets
17    and liabilities of an investment adviser that retains
18    custody of clients' cash or securities or accepts
19    pre-payment of fees in excess of $500 per client and 6 or
20    more months in advance only materially adverse changes need
21    be reported by written notice (which may be by electronic
22    or facsimile transmission) no later than the close of
23    business on the second business day following the discovery
24    thereof.
25        (14) Each application for registration as an
26    investment adviser shall become effective automatically on

 

 

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1    the 45th day following the filing of the application,
2    required documents or information, and payment of the
3    required fee unless (i) the Secretary of State has
4    registered the investment adviser prior to that date or
5    (ii) an action with respect to the applicant is pending
6    under Section 11 of this Act.
 
7    D-5. A registered investment adviser or federal covered
8investment adviser desiring to register an investment adviser
9representative shall file an application with the Secretary of
10State, in the form as the Secretary of State may by rule or
11order prescribe, which the investment adviser representative
12is required by this Section to provide to the investment
13adviser, executed, verified, or authenticated by the
14investment adviser representative and setting forth or
15accompanied by:
16        (1) The name, residence, and business address of the
17    investment adviser representative;
18        (2) A statement whether any federal or state license or
19    registration as a dealer, salesperson, investment adviser,
20    or investment adviser representative has ever been
21    refused, canceled, suspended, revoked or withdrawn;
22        (3) The nature of employment with, and names and
23    addresses of, employers of the investment adviser
24    representative for the 10 years immediately preceding the
25    date of application;

 

 

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1        (4) A brief description of any civil or criminal
2    proceedings, of which fraud is an essential element,
3    pending against the investment adviser representative and
4    whether the investment adviser representative has ever
5    been convicted of a felony or of any misdemeanor of which
6    fraud is an essential element;
7        (5) Such additional information as the Secretary of
8    State may by rule or order prescribe as necessary to
9    determine the investment adviser representative's business
10    repute or qualification to act as an investment adviser
11    representative;
12        (6) Documentation that the individual has passed an
13    examination conducted by the Secretary of State, an
14    organization of investment advisers, or similar person,
15    which examination has been designated by the Secretary of
16    State by rule or order to be satisfactory for purposes of
17    determining whether the applicant has sufficient knowledge
18    of the investment advisory or securities business and laws
19    relating to that business to act as a registered investment
20    adviser representative; and
21        (7) A Securities Audit and Enforcement Fund fee
22    established under Section 11a of this Act, which shall not
23    be returnable in any event.
24    The Secretary of State may by order waive the examination
25requirement for an applicant for registration under this
26subsection D-5 who has had the experience or education relating

 

 

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1to the investment advisory or securities business as may be
2determined by the Secretary of State to be the equivalent of
3the examination. A request for a waiver shall be filed with the
4Secretary of State in the form as may be prescribed by rule or
5order.
6    A change that renders no longer accurate any information
7contained in any application for registration or
8re-registration as an investment adviser representative must
9be reported to the Secretary of State within 10 business days
10after the occurrence of the change. If the activities that
11rendered an individual an investment adviser representative
12for the investment adviser are terminated, the investment
13adviser shall notify the Secretary of State in writing (which
14may be by electronic or facsimile transmission), within 30 days
15of the investment adviser representative's termination, using
16the appropriate termination notice form as the Secretary of
17State may prescribe by rule or order.
18    A registered investment adviser representative may
19transfer his or her registration under this Section 8 for the
20unexpired term of the registration from one registered
21investment adviser to another by the giving of notice of the
22transfer by the new investment adviser to the Secretary of
23State in the form and subject to the conditions as the
24Secretary of State shall prescribe. The new registered
25investment adviser shall promptly file an application for
26registration of the investment adviser representative as

 

 

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1provided in this subsection, accompanied by the Securities
2Audit and Enforcement Fund fee prescribed by paragraph (7) of
3this subsection D-5.
 
4    E. (1) Subject to the provisions of subsection F of Section
511 of this Act, the registration of a dealer, limited Canadian
6dealer, salesperson, investment adviser, or investment adviser
7representative may be denied, suspended or revoked if the
8Secretary of State finds that the dealer, limited Canadian
9dealer, internet portal, salesperson, investment adviser, or
10investment adviser representative or any principal officer,
11director, partner, member, trustee, manager or any person who
12performs a similar function of the dealer, limited Canadian
13dealer, internet portal, or investment adviser:
14        (a) has been convicted of any felony during the 10 year
15    period preceding the date of filing of any application for
16    registration or at any time thereafter, or of any
17    misdemeanor of which fraud is an essential element;
18        (b) has engaged in any unethical practice in connection
19    with any security, or in any fraudulent business practice;
20        (c) has failed to account for any money or property, or
21    has failed to deliver any security, to any person entitled
22    thereto when due or within a reasonable time thereafter;
23        (d) in the case of a dealer, limited Canadian dealer,
24    or investment adviser, is insolvent;
25        (e) in the case of a dealer, limited Canadian dealer,

 

 

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1    salesperson, or registered principal of a dealer or limited
2    Canadian dealer (i) has failed reasonably to supervise the
3    securities activities of any of its salespersons or other
4    employees and the failure has permitted or facilitated a
5    violation of Section 12 of this Act or (ii) is offering or
6    selling or has offered or sold securities in this State
7    through a salesperson other than a registered salesperson,
8    or, in the case of a salesperson, is selling or has sold
9    securities in this State for a dealer, limited Canadian
10    dealer, issuer or controlling person with knowledge that
11    the dealer, limited Canadian dealer, issuer or controlling
12    person has not complied with the provisions of this Act or
13    (iii) has failed reasonably to supervise the
14    implementation of compliance measures following notice by
15    the Secretary of State of noncompliance with the Act or
16    with the regulations promulgated thereunder or both or (iv)
17    has failed to maintain and enforce written procedures to
18    supervise the types of business in which it engages and to
19    supervise the activities of its salespersons that are
20    reasonably designed to achieve compliance with applicable
21    securities laws and regulations;
22        (f) in the case of an investment adviser, has failed
23    reasonably to supervise the advisory activities of any of
24    its investment adviser representatives or employees and
25    the failure has permitted or facilitated a violation of
26    Section 12 of this Act;

 

 

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1        (g) has violated any of the provisions of this Act;
2        (h) has made any material misrepresentation to the
3    Secretary of State in connection with any information
4    deemed necessary by the Secretary of State to determine a
5    dealer's, limited Canadian dealer's, or investment
6    adviser's financial responsibility or a dealer's, limited
7    Canadian dealer's, investment adviser's, salesperson's, or
8    investment adviser representative's business repute or
9    qualifications, or has refused to furnish any such
10    information requested by the Secretary of State;
11        (i) has had a license or registration under any Federal
12    or State law regulating securities, commodity futures
13    contracts, or stock futures contracts refused, cancelled,
14    suspended, withdrawn, revoked, or otherwise adversely
15    affected in a similar manner;
16        (j) has had membership in or association with any
17    self-regulatory organization registered under the Federal
18    1934 Act or the Federal 1974 Act suspended, revoked,
19    refused, expelled, cancelled, barred, limited in any
20    capacity, or otherwise adversely affected in a similar
21    manner arising from any fraudulent or deceptive act or a
22    practice in violation of any rule, regulation or standard
23    duly promulgated by the self-regulatory organization;
24        (k) has had any order entered against it after notice
25    and opportunity for hearing by a securities agency of any
26    state, any foreign government or agency thereof, the

 

 

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1    Securities and Exchange Commission, or the Federal
2    Commodities Futures Trading Commission arising from any
3    fraudulent or deceptive act or a practice in violation of
4    any statute, rule or regulation administered or
5    promulgated by the agency or commission;
6        (l) in the case of a dealer or limited Canadian dealer,
7    fails to maintain a minimum net capital in an amount which
8    the Secretary of State may by rule or regulation require;
9        (m) has conducted a continuing course of dealing of
10    such nature as to demonstrate an inability to properly
11    conduct the business of the dealer, limited Canadian
12    dealer, salesperson, investment adviser, or investment
13    adviser representative;
14        (n) has had, after notice and opportunity for hearing,
15    any injunction or order entered against it or license or
16    registration refused, cancelled, suspended, revoked,
17    withdrawn, limited, or otherwise adversely affected in a
18    similar manner by any state or federal body, agency or
19    commission regulating banking, insurance, finance or small
20    loan companies, real estate or mortgage brokers or
21    companies, if the action resulted from any act found by the
22    body, agency or commission to be a fraudulent or deceptive
23    act or practice in violation of any statute, rule or
24    regulation administered or promulgated by the body, agency
25    or commission;
26        (o) has failed to file a return, or to pay the tax,

 

 

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1    penalty or interest shown in a filed return, or to pay any
2    final assessment of tax, penalty or interest, as required
3    by any tax Act administered by the Illinois Department of
4    Revenue, until such time as the requirements of that tax
5    Act are satisfied;
6        (p) in the case of a natural person who is a dealer,
7    limited Canadian dealer, salesperson, investment adviser,
8    or investment adviser representative, has defaulted on an
9    educational loan guaranteed by the Illinois Student
10    Assistance Commission, until the natural person has
11    established a satisfactory repayment record as determined
12    by the Illinois Student Assistance Commission;
13        (q) has failed to maintain the books and records
14    required under this Act or rules or regulations promulgated
15    under this Act or under any requirements established by the
16    Securities and Exchange Commission or a self-regulatory
17    organization;
18        (r) has refused to allow or otherwise impeded designees
19    of the Secretary of State from conducting an audit,
20    examination, inspection, or investigation provided for
21    under Section 8 or 11 of this Act;
22        (s) has failed to maintain any minimum net capital or
23    bond requirement set forth in this Act or any rule or
24    regulation promulgated under this Act;
25        (t) has refused the Secretary of State or his or her
26    designee access to any office or location within an office

 

 

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1    to conduct an investigation, audit, examination, or
2    inspection;
3        (u) has advised or caused a public pension fund or
4    retirement system established under the Illinois Pension
5    Code to make an investment or engage in a transaction not
6    authorized by that Code;
7        (v) if a corporation, limited liability company, or
8    limited liability partnership has been suspended,
9    canceled, revoked, or has failed to register as a foreign
10    corporation, limited liability company, or limited
11    liability partnership with the Secretary of State;
12        (w) is permanently or temporarily enjoined by any court
13    of competent jurisdiction, including any state, federal,
14    or foreign government, from engaging in or continuing any
15    conduct or practice involving any aspect of the securities
16    or commodities business or in any other business where the
17    conduct or practice enjoined involved investments,
18    franchises, insurance, banking, or finance;
19    (2) If the Secretary of State finds that any registrant or
20applicant for registration is no longer in existence or has
21ceased to do business as a dealer, limited Canadian dealer,
22internet portal, salesperson, investment adviser, or
23investment adviser representative, or is subject to an
24adjudication as a person under legal disability or to the
25control of a guardian, or cannot be located after reasonable
26search, or has failed after written notice to pay to the

 

 

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1Secretary of State any additional fee prescribed by this
2Section or specified by rule or regulation, or if a natural
3person, has defaulted on an educational loan guaranteed by the
4Illinois Student Assistance Commission, the Secretary of State
5may by order cancel the registration or application.
6    (3) Withdrawal of an application for registration or
7withdrawal from registration as a dealer, limited Canadian
8dealer, salesperson, investment adviser, or investment adviser
9representative becomes effective 30 days after receipt of an
10application to withdraw or within such shorter period of time
11as the Secretary of State may determine, unless any proceeding
12is pending under Section 11 of this Act when the application is
13filed or a proceeding is instituted within 30 days after the
14application is filed. If a proceeding is pending or instituted,
15withdrawal becomes effective at such time and upon such
16conditions as the Secretary of State by order determines. If no
17proceeding is pending or instituted and withdrawal
18automatically becomes effective, the Secretary of State may
19nevertheless institute a revocation or suspension proceeding
20within 2 years after withdrawal became effective and enter a
21revocation or suspension order as of the last date on which
22registration was effective.
 
23    F. The Secretary of State shall make available upon request
24the date that each dealer, investment adviser, salesperson, or
25investment adviser representative was granted registration,

 

 

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1together with the name and address of the dealer, limited
2Canadian dealer, or issuer on whose behalf the salesperson is
3registered, and all orders of the Secretary of State denying or
4abandoning an application, or suspending or revoking
5registration, or censuring the persons. The Secretary of State
6may designate by rule, regulation or order the statements,
7information or reports submitted to or filed with him or her
8pursuant to this Section 8 which the Secretary of State
9determines are of a sensitive nature and therefore should be
10exempt from public disclosure. Any such statement, information
11or report shall be deemed confidential and shall not be
12disclosed to the public except upon the consent of the person
13filing or submitting the statement, information or report or by
14order of court or in court proceedings.
 
15    G. The registration or re-registration of a dealer or
16limited Canadian dealer and of all salespersons registered upon
17application of the dealer or limited Canadian dealer shall
18expire on the next succeeding anniversary date of the
19registration or re-registration of the dealer; and the
20registration or re-registration of an investment adviser and of
21all investment adviser representatives registered upon
22application of the investment adviser shall expire on the next
23succeeding anniversary date of the registration of the
24investment adviser; provided, that the Secretary of State may
25by rule or regulation prescribe an alternate date which any

 

 

HB3429 Enrolled- 54 -LRB099 04381 JLS 29575 b

1dealer registered under the Federal 1934 Act or a member of any
2self-regulatory association approved pursuant thereto, a
3member of a self-regulatory organization or stock exchange in
4Canada, or any investment adviser may elect as the expiration
5date of its dealer or limited Canadian dealer and salesperson
6registrations, or the expiration date of its investment adviser
7registration, as the case may be. A registration of a
8salesperson registered upon application of an issuer or
9controlling person shall expire on the next succeeding
10anniversary date of the registration, or upon termination or
11expiration of the registration of the securities, if any,
12designated in the application for his or her registration or
13the alternative date as the Secretary may prescribe by rule or
14regulation. Subject to paragraph (9) of subsection C of this
15Section 8, a salesperson's registration also shall terminate
16upon cessation of his or her employment, or termination of his
17or her appointment or authorization, in each case by the person
18who applied for the salesperson's registration, provided that
19the Secretary of State may by rule or regulation prescribe an
20alternate date for the expiration of the registration.
 
21    H. Applications for re-registration of dealers, limited
22Canadian dealers, internet portals, salespersons, investment
23advisers, and investment adviser representatives shall be
24filed with the Secretary of State prior to the expiration of
25the then current registration and shall contain such

 

 

HB3429 Enrolled- 55 -LRB099 04381 JLS 29575 b

1information as may be required by the Secretary of State upon
2initial application with such omission therefrom or addition
3thereto as the Secretary of State may authorize or prescribe.
4Each application for re-registration of a dealer, limited
5Canadian dealer, internet portal, or investment adviser shall
6be accompanied by a filing fee, each application for
7re-registration as a salesperson shall be accompanied by a
8filing fee and a Securities Audit and Enforcement Fund fee
9established pursuant to Section 11a of this Act, and each
10application for re-registration as an investment adviser
11representative shall be accompanied by a Securities Audit and
12Enforcement Fund fee established under Section 11a of this Act,
13which shall not be returnable in any event. Notwithstanding the
14foregoing, applications for re-registration of dealers,
15limited Canadian dealers, internet portals, and investment
16advisers may be filed within 30 days following the expiration
17of the registration provided that the applicant pays the annual
18registration fee together with an additional amount equal to
19the annual registration fee and files any other information or
20documents that the Secretary of State may prescribe by rule or
21regulation or order. Any application filed within 30 days
22following the expiration of the registration shall be
23automatically effective as of the time of the earlier
24expiration provided that the proper fee has been paid to the
25Secretary of State.
26    Each registered dealer, limited Canadian dealer, internet

 

 

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1portal, or investment adviser shall continue to be registered
2if the registrant changes his, her, or its form of organization
3provided that the dealer or investment adviser files an
4amendment to his, her, or its application not later than 30
5days following the occurrence of the change and pays the
6Secretary of State a fee in the amount established under
7Section 11a of this Act.
 
8    I. (1) Every registered dealer, limited Canadian dealer,
9internet portal, and investment adviser shall make and keep for
10such periods, such accounts, correspondence, memoranda,
11papers, books and records as the Secretary of State may by rule
12or regulation prescribe. All records so required shall be
13preserved for 3 years unless the Secretary of State by rule,
14regulation or order prescribes otherwise for particular types
15of records.
16    (2) Every registered dealer, limited Canadian dealer,
17internet portal, and investment adviser shall file such
18financial reports as the Secretary of State may by rule or
19regulation prescribe.
20    (3) All the books and records referred to in paragraph (1)
21of this subsection I are subject at any time or from time to
22time to such reasonable periodic, special or other audits,
23examinations, or inspections by representatives of the
24Secretary of State, within or without this State, as the
25Secretary of State deems necessary or appropriate in the public

 

 

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1interest or for the protection of investors.
2    (4) At the time of an audit, examination, or inspection,
3the Secretary of State, by his or her designees, may conduct an
4interview of any person employed or appointed by or affiliated
5with a registered dealer, limited Canadian dealer, internet
6portal, or investment advisor, provided that the dealer,
7limited Canadian dealer, internet portal, or investment
8advisor shall be given reasonable notice of the time and place
9for the interview. At the option of the dealer, limited
10Canadian dealer, internet portal, or investment advisor, a
11representative of the dealer or investment advisor with
12supervisory responsibility over the individual being
13interviewed may be present at the interview.
 
14    J. The Secretary of State may require by rule or regulation
15the payment of an additional fee for the filing of information
16or documents required to be filed by this Section which have
17not been filed in a timely manner. The Secretary of State may
18also require by rule or regulation the payment of an
19examination fee for administering any examination which it may
20conduct pursuant to subsection B, C, D, or D-5 of this Section
218.
 
22    K. The Secretary of State may declare any application for
23registration or limited registration under this Section 8
24abandoned by order if the applicant fails to pay any fee or

 

 

HB3429 Enrolled- 58 -LRB099 04381 JLS 29575 b

1file any information or document required under this Section 8
2or by rule or regulation for more than 30 days after the
3required payment or filing date. The applicant may petition the
4Secretary of State for a hearing within 15 days after the
5applicant's receipt of the order of abandonment, provided that
6the petition sets forth the grounds upon which the applicant
7seeks a hearing.
 
8    L. Any document being filed pursuant to this Section 8
9shall be deemed filed, and any fee being paid pursuant to this
10Section 8 shall be deemed paid, upon the date of actual receipt
11thereof by the Secretary of State or his or her designee.
 
12    M. The Secretary of State shall provide to the Illinois
13Student Assistance Commission annually or at mutually agreed
14periodic intervals the names and social security numbers of
15natural persons registered under subsections B, C, D, and D-5
16of this Section. The Illinois Student Assistance Commission
17shall determine if any student loan defaulter is registered as
18a dealer, limited Canadian dealer, internet portal
19salesperson, or investment adviser under this Act and report
20its determination to the Secretary of State or his or her
21designee.
22(Source: P.A. 92-308, eff. 1-1-02; 93-580, eff. 8-21-03.)
 
23    (815 ILCS 5/8d new)

 

 

HB3429 Enrolled- 59 -LRB099 04381 JLS 29575 b

1    Sec. 8d. Offerings made through registered Internet
2portals.
3    (a) An issuer shall make an offering or sale of securities
4pursuant to subsection T of Section 4 of this Act through the
5use of one or more registered Internet portals.
6    (b) The Internet portal:
7        (1) shall be a registered broker-dealer under the
8    Securities Exchange Act of 1934 (15 U.S.C. 78o);
9        (2) shall be a funding portal registered under the
10    Securities Act of 1933 (15 U.S.C. 77d-1) and the Securities
11    and Exchange Commission has adopted rules under authority
12    of Section 3(h) of the Securities Exchange Act of 1934 (15
13    U.S.C. 78c) and Section 304 of the Jumpstart Our Business
14    Startups Act (P.L. 112-106) governing funding portals;
15        (3) shall be a dealer registered under this Act as of
16    the date of any offer or sale of securities made through
17    the Internet portal; or
18        (4) shall, to the extent it meets the qualifications
19    for exemption from registration pursuant to subsection (d)
20    of this Section:
21            (A) file, not later than 30 days before the date of
22        the first offer or sale of securities made within this
23        State, an application for registration (or renewal of
24        registration, as applicable) as a registered Internet
25        portal with the Secretary of State, in writing or in
26        electronic form as prescribed by the Secretary of

 

 

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1        State, which the Secretary of State shall make
2        available as an electronic document on the Secretary of
3        State's Internet website, containing such information
4        and required deliveries as specified therein; and
5            (B) pay the application filing fee established
6        under Section 11a of this Act; the Secretary of State
7        shall, within a reasonable time, examine the filed
8        application and other materials filed and, approve or
9        deny the application.
10    (c) If any change occurs in the information submitted by,
11or on behalf of, an Internet portal to the Secretary of State,
12the Internet portal shall notify the Secretary of State within
1310 days after such change occurs and shall provide the
14Secretary of State with such additional information (if any)
15requested by the Secretary of State in connection therewith.
16    (d) Notwithstanding anything contained in this Act to the
17contrary, neither an Internet portal nor its owning or
18operating entity is required to register as a dealer or an
19investment advisor under this Act if each of the following
20applies with respect to the Internet portal and its owning or
21operating entity:
22        (1) It does not solicit purchases, sales, or offers to
23    buy the securities offered or displayed on the Internet
24    portal.
25        (2) It does not collect or hold funds in connection
26    with any purchase, sale, or offer to buy any securities

 

 

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1    offered or displayed on the Internet portal.
2        (3) It does not compensate employees, agents, or other
3    persons for the solicitation or based on the sale of
4    securities displayed or referenced on the Internet portal.
5        (4) It is not compensated based on the amount of
6    securities sold.
7        (5) The fee it charges an issuer for an offering of
8    securities on the Internet portal is a fixed amount for
9    each offering, a variable amount based on the length of
10    time that the securities are offered on the Internet
11    portal, a variable amount based on the total proposed
12    offering amount, or any combination of such fixed and
13    variable amounts.
14        (6) It does not offer investment advice or
15    recommendations; however, an Internet portal is not deemed
16    to be offering investment advice or recommendations simply
17    by virtue of:
18            (A) selecting transactions in which the Internet
19        portal shall serve as an intermediary;
20            (B) establishing reasonable selection criteria for
21        an issuer to meet in order to establish an offer or
22        sale of securities through the Internet portal;
23            (C) establishing reasonable selection criteria for
24        a potential purchaser to meet in order to participate
25        in an offer or sale of securities made through the
26        Internet portal; or

 

 

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1            (D) terminating an issuer transaction at any time
2        before the first sale of the securities of such issuer
3        if the Internet portal determines such action is
4        appropriate, after reasonable due diligence, to
5        protect potential purchasers, and the Internet portal
6        is able to direct the qualified escrowee to return all
7        funds then provided by potential purchasers, if any.
8        (7) It does not engage in such other activities as the
9    Secretary of State, by rule, determines are prohibited.
10    (e) Upon completion of an offering made pursuant to
11subsection T of Section 4, each registered Internet portal
12involved with the transactions (and the issuer, to the extent
13applicable) shall store any and all electronic materials
14related to the completed offering (including copies of all
15offering documents, all offering materials, and all purchaser
16information) on a secure, non-public, server or in such other
17manner as the Secretary of State may hereafter deem acceptable
18by rule.
 
19    (815 ILCS 5/11)  (from Ch. 121 1/2, par. 137.11)
20    Sec. 11. Duties and powers of the Secretary of State.
21    A. (1) The administration of this Act is vested in the
22Secretary of State, who may from time to time make, amend and
23rescind such rules and regulations as may be necessary to carry
24out this Act, including rules and regulations governing
25procedures of registration, statements, applications and

 

 

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1reports for various classes of securities, persons and matters
2within his or her jurisdiction and defining any terms, whether
3or not used in this Act, insofar as the definitions are not
4inconsistent with this Act. The rules and regulations adopted
5by the Secretary of State under this Act shall be effective in
6the manner provided for in the Illinois Administrative
7Procedure Act.
8    (2) Among other things, the Secretary of State shall have
9authority, for the purposes of this Act, to prescribe the form
10or forms in which required information shall be set forth,
11accounting practices, the items or details to be shown in
12balance sheets and earning statements, and the methods to be
13followed in the preparation of accounts, in the appraisal or
14valuation of assets and liabilities, in the determination of
15depreciation and depletion, in the differentiation of
16recurring and non-recurring income, in the differentiation of
17investment and operating income, and in the preparation of
18consolidated balance sheets or income accounts of any person,
19directly or indirectly, controlling or controlled by the
20issuer, or any person under direct or indirect common control
21with the issuer.
22    (3) No provision of this Act imposing any liability shall
23apply to any act done or omitted in good faith in conformity
24with any rule or regulation of the Secretary of State under
25this Act, notwithstanding that the rule or regulation may,
26after the act or omission, be amended or rescinded or be

 

 

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1determined by judicial or other authority to be invalid for any
2reason.
3    (4) The Securities Department of the Office of the
4Secretary of State shall be deemed a criminal justice agency
5for purposes of all federal and state laws and regulations and,
6in that capacity, shall be entitled to access to any
7information available to criminal justice agencies and has the
8power to appoint special agents to conduct all investigations,
9searches, seizures, arrests, and other duties imposed under the
10provisions of any law administered by the Department. The
11special agents have and may exercise all the powers of peace
12officers solely for the purpose of enforcing provisions of this
13Act.
14    The Director must authorize to each special agent employed
15under this Section a distinct badge that, on its face, (i)
16clearly states that the badge is authorized by the Department
17and (ii) contains a unique and identifying number.
18    Special agents shall comply with all training requirements
19established for law enforcement officers by provisions of the
20Illinois Police Training Act.
21    (5) The Secretary of State, by rule, may conditionally or
22unconditionally exempt any person, security, or transaction,
23or any class or classes of persons, securities, or transactions
24from any provision of Section 5, 6, 7, 8, 8a, or 9 of this Act
25or of any rule promulgated under these Sections, to the extent
26that such exemption is necessary or appropriate in the public

 

 

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1interest, and is consistent with the protection of investors.
2    B. The Secretary of State may, anything in this Act to the
3contrary notwithstanding, require financial statements and
4reports of the issuer, dealer, internet portal, salesperson,
5investment adviser, or investment adviser representative as
6often as circumstances may warrant. In addition, the Secretary
7of State may secure information or books and records from or
8through others and may make or cause to be made investigations
9respecting the business, affairs, and property of the issuer of
10securities, any person involved in the sale or offer for sale,
11purchase or offer to purchase of any mineral investment
12contract, mineral deferred delivery contract, or security and
13of dealers, internet portals, salespersons, investment
14advisers, and investment adviser representatives that are
15registered or are the subject of an application for
16registration under this Act. The costs of an investigation
17shall be borne by the registrant or the applicant, provided
18that the registrant or applicant shall not be obligated to pay
19the costs without his, her or its consent in advance.
20    C. Whenever it shall appear to the Secretary of State,
21either upon complaint or otherwise, that this Act, or any rule
22or regulation prescribed under authority thereof, has been or
23is about to be violated, he or she may, in his or her
24discretion, do one or more of the following:
25        (1) require or permit the person to file with the
26    Secretary of State a statement in writing under oath, or

 

 

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1    otherwise, as to all the facts and circumstances concerning
2    the subject matter which the Secretary of State believes to
3    be in the public interest to investigate, audit, examine,
4    or inspect;
5        (2) conduct an investigation, audit, examination, or
6    inspection as necessary or advisable for the protection of
7    the interests of the public; and
8        (3) appoint investigators to conduct all
9    investigations, searches, seizures, arrests, and other
10    duties imposed under the provisions of any law administered
11    by the Department. The Director must authorize to each
12    investigator employed under this Section a distinct badge
13    that, on its face, (i) clearly states that the badge is
14    authorized by the Department and (ii) contains a unique and
15    identifying number.
16    D. (1) For the purpose of all investigations, audits,
17examinations, or inspections which in the opinion of the
18Secretary of State are necessary and proper for the enforcement
19of this Act, the Secretary of State or a person designated by
20him or her is empowered to administer oaths and affirmations,
21subpoena witnesses, take evidence, and require, by subpoena or
22other lawful means provided by this Act or the rules adopted by
23the Secretary of State, the production of any books and
24records, papers, or other documents which the Secretary of
25State or a person designated by him or her deems relevant or
26material to the inquiry.

 

 

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1    (2) The Secretary of State or a person designated by him or
2her is further empowered to administer oaths and affirmations,
3subpoena witnesses, take evidence, and require the production
4of any books and records, papers, or other documents in this
5State at the request of a securities agency of another state,
6if the activities constituting the alleged violation for which
7the information is sought would be in violation of Section 12
8of this Act if the activities had occurred in this State.
9    (3) The Circuit Court of any County of this State, upon
10application of the Secretary of State or a person designated by
11him or her may order the attendance of witnesses, the
12production of books and records, papers, accounts and documents
13and the giving of testimony before the Secretary of State or a
14person designated by him or her; and any failure to obey the
15order may be punished by the Circuit Court as a contempt
16thereof.
17    (4) The fees of subpoenaed witnesses under this Act for
18attendance and travel shall be the same as fees of witnesses
19before the Circuit Courts of this State, to be paid when the
20witness is excused from further attendance, provided, the
21witness is subpoenaed at the instance of the Secretary of
22State; and payment of the fees shall be made and audited in the
23same manner as other expenses of the Secretary of State.
24    (5) Whenever a subpoena is issued at the request of a
25complainant or respondent as the case may be, the Secretary of
26State may require that the cost of service and the fee of the

 

 

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1witness shall be borne by the party at whose instance the
2witness is summoned.
3    (6) The Secretary of State shall have power at his or her
4discretion, to require a deposit to cover the cost of the
5service and witness fees and the payment of the legal witness
6fee and mileage to the witness served with subpoena.
7    (7) A subpoena issued under this Act shall be served in the
8same manner as a subpoena issued out of a circuit court.
9    (8) The Secretary of State may in any investigation,
10audits, examinations, or inspections cause the taking of
11depositions of persons residing within or without this State in
12the manner provided in civil actions under the laws of this
13State.
14    E. Anything in this Act to the contrary notwithstanding:
15        (1) If the Secretary of State shall find that the offer
16    or sale or proposed offer or sale or method of offer or
17    sale of any securities by any person, whether exempt or
18    not, in this State, is fraudulent, or would work or tend to
19    work a fraud or deceit, or is being offered or sold in
20    violation of Section 12, or there has been a failure or
21    refusal to submit any notification filing or fee required
22    under this Act, the Secretary of State may by written order
23    prohibit or suspend the offer or sale of securities by that
24    person or deny or revoke the registration of the securities
25    or the exemption from registration for the securities.
26        (2) If the Secretary of State shall find that any

 

 

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1    person has violated subsection C, D, E, F, G, H, I, J, or K
2    of Section 12 of this Act, the Secretary of State may by
3    written order temporarily or permanently prohibit or
4    suspend the person from offering or selling any securities,
5    any mineral investment contract, or any mineral deferred
6    delivery contract in this State, provided that any person
7    who is the subject of an order of permanent prohibition may
8    petition the Secretary of State for a hearing to present
9    evidence of rehabilitation or change in circumstances
10    justifying the amendment or termination of the order of
11    permanent prohibition.
12        (3) If the Secretary of State shall find that any
13    person is engaging or has engaged in the business of
14    selling or offering for sale securities as a dealer,
15    internet portal, or salesperson or is acting or has acted
16    as an investment adviser, investment adviser
17    representative, or federal covered investment adviser,
18    without prior thereto and at the time thereof having
19    complied with the registration or notice filing
20    requirements of this Act, the Secretary of State may by
21    written order prohibit or suspend the person from engaging
22    in the business of selling or offering for sale securities,
23    or acting as an investment adviser, investment adviser
24    representative, or federal covered investment adviser, in
25    this State.
26        (4) In addition to any other sanction or remedy

 

 

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1    contained in this subsection E, the Secretary of State,
2    after finding that any provision of this Act has been
3    violated, may impose a fine as provided by rule, regulation
4    or order not to exceed $10,000 for each violation of this
5    Act, may issue an order of public censure against the
6    violator, and may charge as costs of investigation all
7    reasonable expenses, including attorney's fees and witness
8    fees.
9    F. (1) The Secretary of State shall not deny, suspend or
10revoke the registration of securities, suspend or revoke the
11registration of a dealer, internet portal, salesperson,
12investment adviser, or investment adviser representative,
13prohibit or suspend the offer or sale of any securities,
14prohibit or suspend any person from offering or selling any
15securities in this State, prohibit or suspend a dealer or
16salesperson from engaging in the business of selling or
17offering for sale securities, prohibit or suspend a person from
18acting as an investment adviser or federal covered investment
19adviser, or investment adviser representative, impose any fine
20for violation of this Act, issue an order of public censure, or
21enter into an agreed settlement except after an opportunity for
22hearing upon not less than 10 days notice given by personal
23service or registered mail or certified mail, return receipt
24requested, to the person or persons concerned. Such notice
25shall state the date and time and place of the hearing and
26shall contain a brief statement of the proposed action of the

 

 

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1Secretary of State and the grounds for the proposed action. A
2failure to appear at the hearing or otherwise respond to the
3allegations set forth in the notice of hearing shall constitute
4an admission of any facts alleged therein and shall constitute
5sufficient basis to enter an order.
6    (2) Anything herein contained to the contrary
7notwithstanding, the Secretary of State may temporarily
8prohibit or suspend, for a maximum period of 90 days, by an
9order effective immediately, the offer or sale or registration
10of securities, the registration of a dealer, internet portal,
11salesperson, investment adviser, or investment adviser
12representative, or the offer or sale of securities by any
13person, or the business of rendering investment advice, without
14the notice and prior hearing in this subsection prescribed, if
15the Secretary of State shall in his or her opinion, based on
16credible evidence, deem it necessary to prevent an imminent
17violation of this Act or to prevent losses to investors which
18the Secretary of State reasonably believes will occur as a
19result of a prior violation of this Act. Immediately after
20taking action without such notice and hearing, the Secretary of
21State shall deliver a copy of the temporary order to the
22respondent named therein by personal service or registered mail
23or certified mail, return receipt requested. The temporary
24order shall set forth the grounds for the action and shall
25advise that the respondent may request a hearing, that the
26request for a hearing will not stop the effectiveness of the

 

 

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1temporary order and that respondent's failure to request a
2hearing within 30 days after the date of the entry of the
3temporary order shall constitute an admission of any facts
4alleged therein and shall constitute sufficient basis to make
5the temporary order final. Any provision of this paragraph (2)
6to the contrary notwithstanding, the Secretary of State may not
7pursuant to the provisions of this paragraph (2) suspend the
8registration of a dealer, limited Canadian dealer,
9salesperson, investment adviser, or investment adviser
10representative based upon sub-paragraph (n) of paragraph (l) of
11subsection E of Section 8 of this Act or revoke the
12registration of securities or revoke the registration of any
13dealer, salesperson, investment adviser representative, or
14investment adviser.
15    (3) The Secretary of State may issue a temporary order
16suspending or delaying the effectiveness of any registration of
17securities under subsection A or B of Section 5, 6 or 7 of this
18Act subsequent to and upon the basis of the issuance of any
19stop, suspension or similar order by the Securities and
20Exchange Commission with respect to the securities which are
21the subject of the registration under subsection A or B of
22Section 5, 6 or 7 of this Act, and the order shall become
23effective as of the date and time of effectiveness of the
24Securities and Exchange Commission order and shall be vacated
25automatically at such time as the order of the Securities and
26Exchange Commission is no longer in effect.

 

 

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1    (4) When the Secretary of State finds that an application
2for registration as a dealer, internet portal, salesperson,
3investment adviser, or investment adviser representative
4should be denied, the Secretary of State may enter an order
5denying the registration. Immediately after taking such
6action, the Secretary of State shall deliver a copy of the
7order to the respondent named therein by personal service or
8registered mail or certified mail, return receipt requested.
9The order shall state the grounds for the action and that the
10matter will be set for hearing upon written request filed with
11the Secretary of State within 30 days after the receipt of the
12request by the respondent. The respondent's failure to request
13a hearing within 30 days after receipt of the order shall
14constitute an admission of any facts alleged therein and shall
15make the order final. If a hearing is held, the Secretary of
16State shall affirm, vacate, or modify the order.
17    (5) The findings and decision of the Secretary of State
18upon the conclusion of each final hearing held pursuant to this
19subsection shall be set forth in a written order signed on
20behalf of the Secretary of State by his or her designee and
21shall be filed as a public record. All hearings shall be held
22before a person designated by the Secretary of State, and
23appropriate records thereof shall be kept.
24    (6) Notwithstanding the foregoing, the Secretary of State,
25after notice and opportunity for hearing, may at his or her
26discretion enter into an agreed settlement, stipulation or

 

 

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1consent order with a respondent in accordance with the
2provisions of the Illinois Administrative Procedure Act. The
3provisions of the agreed settlement, stipulation or consent
4order shall have the full force and effect of an order issued
5by the Secretary of State.
6    (7) Anything in this Act to the contrary notwithstanding,
7whenever the Secretary of State finds that a person is
8currently expelled from, refused membership in or association
9with, or limited in any material capacity by a self-regulatory
10organization registered under the Federal 1934 Act or the
11Federal 1974 Act because of a fraudulent or deceptive act or a
12practice in violation of a rule, regulation, or standard duly
13promulgated by the self-regulatory organization, the Secretary
14of State may, at his or her discretion, enter a Summary Order
15of Prohibition, which shall prohibit the offer or sale of any
16securities, mineral investment contract, or mineral deferred
17delivery contract by the person in this State. The order shall
18take effect immediately upon its entry. Immediately after
19taking the action the Secretary of State shall deliver a copy
20of the order to the named Respondent by personal service or
21registered mail or certified mail, return receipt requested. A
22person who is the subject of an Order of Prohibition may
23petition the Secretary of State for a hearing to present
24evidence of rehabilitation or change in circumstances
25justifying the amendment or termination of the Order of
26Prohibition.

 

 

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1    G. No administrative action shall be brought by the
2Secretary of State for relief under this Act or upon or because
3of any of the matters for which relief is granted by this Act
4after the earlier to occur of (i) 3 years from the date upon
5which the Secretary of State had notice of facts which in the
6exercise of reasonable diligence would lead to actual knowledge
7of the alleged violation of the Act, or (ii) 5 years from the
8date on which the alleged violation occurred.
9    H. The action of the Secretary of State in denying,
10suspending, or revoking the registration of a dealer, internet
11portal, limited Canadian dealer, salesperson, investment
12adviser, or investment adviser representative, in prohibiting
13any person from engaging in the business of offering or selling
14securities as a dealer, limited Canadian dealer, or
15salesperson, in prohibiting or suspending the offer or sale of
16securities by any person, in prohibiting a person from acting
17as an investment adviser, federal covered investment adviser,
18or investment adviser representative, in denying, suspending,
19or revoking the registration of securities, in prohibiting or
20suspending the offer or sale or proposed offer or sale of
21securities, in imposing any fine for violation of this Act, or
22in issuing any order shall be subject to judicial review in the
23Circuit Courts of Cook or Sangamon Counties in this State. The
24Administrative Review Law shall apply to and govern every
25action for the judicial review of final actions or decisions of
26the Secretary of State under this Act.

 

 

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1    I. Notwithstanding any other provisions of this Act to the
2contrary, whenever it shall appear to the Secretary of State
3that any person is engaged or about to engage in any acts or
4practices which constitute or will constitute a violation of
5this Act or of any rule or regulation prescribed under
6authority of this Act, the Secretary of State may at his or her
7discretion, through the Attorney General take any of the
8following actions:
9        (1) File a complaint and apply for a temporary
10    restraining order without notice, and upon a proper showing
11    the court may enter a temporary restraining order without
12    bond, to enforce this Act.
13        (2) File a complaint and apply for a preliminary or
14    permanent injunction, and, after notice and a hearing and
15    upon a proper showing, the court may grant a preliminary or
16    permanent injunction and may order the defendant to make an
17    offer of rescission with respect to any sales or purchases
18    of securities, mineral investment contracts, or mineral
19    deferred delivery contracts determined by the court to be
20    unlawful under this Act.
21        (3) Seek the seizure of assets when probable cause
22    exists that the assets were obtained by a defendant through
23    conduct in violation of Section 12, paragraph F, G, I, J,
24    K, or L of this Act, and thereby subject to a judicial
25    forfeiture hearing as required under this Act.
26            (a) In the event that such probable cause exists

 

 

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1        that the subject of an investigation who is alleged to
2        have committed one of the relevant violations of this
3        Act has in his possession assets obtained as a result
4        of the conduct giving rise to the violation, the
5        Secretary of State may seek a seizure warrant in any
6        circuit court in Illinois.
7            (b) In seeking a seizure warrant, the Secretary of
8        State, or his or her designee, shall submit to the
9        court a sworn affidavit detailing the probable cause
10        evidence for the seizure, the location of the assets to
11        be seized, the relevant violation under Section 12 of
12        this Act, and a statement detailing any known owners or
13        interest holders in the assets.
14            (c) Seizure of the assets shall be made by any
15        peace officer upon process of the seizure warrant
16        issued by the court. Following the seizure of assets
17        under this Act and pursuant to a seizure warrant,
18        notice of seizure, including a description of the
19        seized assets, shall immediately be returned to the
20        issuing court. Seized assets shall be maintained
21        pending a judicial forfeiture hearing in accordance
22        with the instructions of the court.
23            (d) In the event that management of seized assets
24        becomes necessary to prevent the devaluation,
25        dissipation, or otherwise to preserve the property,
26        the court shall have jurisdiction to appoint a

 

 

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1        receiver, conservator, ancillary receiver, or
2        ancillary conservator for that purpose, as provided in
3        item (2) of this subsection.
4        (4) Seek the forfeiture of assets obtained through
5    conduct in violation of Section 12, paragraph F, G, H, I,
6    J, K, or L when authorized by law. A forfeiture must be
7    ordered by a circuit court or an action brought by the
8    Secretary of State as provided for in this Act, under a
9    verified complaint for forfeiture.
10            (a) In the event assets have been seized pursuant
11        to this Act, forfeiture proceedings shall be
12        instituted by the Attorney General within 45 days of
13        seizure.
14            (b) Service of the complaint filed under the
15        provisions of this Act shall be made in the manner as
16        provided in civil actions in this State.
17            (c) Only an owner of or interest holder in the
18        property may file an answer asserting a claim against
19        the property. For purposes of this Section, the owner
20        or interest holder shall be referred to as claimant.
21            (d) The answer must be signed by the owner or
22        interest holder under penalty of perjury and must set
23        forth:
24                (i) the caption of the proceedings as set forth
25            on the notice of pending forfeiture and the name of
26            the claimant;

 

 

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1                (ii) the address at which the claimant will
2            accept mail;
3                (iii) the nature and extent of the claimant's
4            interest in the property;
5                (iv) the date, identity of the transferor, and
6            circumstances of the claimant's acquisition of the
7            interest in the property;
8                (v) the name and address of all other persons
9            known to have an interest in the property;
10                (vi) the specific provisions of this Act
11            relied on in asserting that the property is not
12            subject to forfeiture;
13                (vii) all essential facts supporting each
14            assertion; and
15                (viii) the precise relief sought.
16            (e) The answer must be filed with the court within
17        45 days after service of the complaint.
18            (f) A property interest is exempt from forfeiture
19        under this Act if its owner or interest holder
20        establishes by a preponderance of evidence that the
21        owner or interest holder:
22                (i) is not legally accountable for the conduct
23            giving rise to the forfeiture, did not acquiesce in
24            it, and did not know and could not reasonably have
25            known of the conduct or that the conduct was likely
26            to occur;

 

 

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1                (ii) with respect to conveyances, did not hold
2            the property jointly or in common with a person
3            whose conduct gave rise to the forfeiture;
4                (iii) does not hold the property for the
5            benefit of or as a nominee for any person whose
6            conduct gave rise to its forfeiture and the owner
7            or interest holder acquires it as a bona fide
8            purchaser for value without knowingly taking part
9            in the conduct giving rise to the forfeiture; or
10                (iv) acquired the interest after the
11            commencement of the conduct giving rise to its
12            forfeiture and the owner or interest holder
13            acquired the interest as a mortgagee, secured
14            creditor, lienholder, or bona fide purchaser for
15            value without knowledge of the conduct that gave
16            rise to the forfeiture.
17            (g) The hearing must be held within 60 days after
18        the answer is filed unless continued for good cause.
19            (h) During the probable cause portion of the
20        judicial in rem proceeding wherein the Secretary of
21        State presents its case-in-chief, the court must
22        receive and consider, among other things, any relevant
23        hearsay evidence and information. The laws of evidence
24        relating to civil actions shall apply to all other
25        portions of the judicial in rem proceeding.
26            (i) The Secretary of State shall show the existence

 

 

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1        of probable cause for forfeiture of the property. If
2        the Secretary of State shows probable cause, the
3        claimant has the burden of showing by a preponderance
4        of the evidence that the claimant's interest in the
5        property is not subject to forfeiture.
6            (j) If the Secretary of State does not show the
7        existence of probable cause or a claimant has an
8        interest that is exempt under subdivision I (4)(d) of
9        this Section, the court shall order the interest in the
10        property returned or conveyed to the claimant and shall
11        order all other property forfeited to the Secretary of
12        State pursuant to all provisions of this Act. If the
13        Secretary of State does show the existence of probable
14        cause and the claimant does not establish by a
15        preponderance of the evidence that the claimant has an
16        interest that is exempt under subsection D herein, the
17        court shall order all the property forfeited to the
18        Secretary of State pursuant to the provisions of the
19        Section.
20            (k) A defendant convicted in any criminal
21        proceeding is precluded from later denying the
22        essential allegations of the criminal offense of which
23        the defendant was convicted in any proceeding for
24        violations of the Act giving rise to forfeiture of
25        property herein regardless of the pendency of an appeal
26        from that conviction. However, evidence of the

 

 

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1        pendency of an appeal is admissible.
2            (l) An acquittal or dismissal in a criminal
3        proceeding for violations of the Act giving rise to the
4        forfeiture of property herein shall not preclude civil
5        proceedings under this provision; however, for good
6        cause shown, on a motion by the Secretary of State, the
7        court may stay civil forfeiture proceedings during the
8        criminal trial for a related criminal indictment or
9        information alleging violation of the provisions of
10        Section 12 of the Illinois Securities Law of 1953.
11        Property subject to forfeiture under this Section
12        shall not be subject to return or release by a court
13        exercising jurisdiction over a criminal case involving
14        the seizure of the property unless the return or
15        release is consented to by the Secretary of State.
16            (m) All property declared forfeited under this Act
17        vests in the State on the commission of the conduct
18        giving rise to forfeiture together with the proceeds of
19        the property after that time. Any such property or
20        proceeds subsequently transferred to any person remain
21        subject to forfeiture and thereafter shall be ordered
22        forfeited unless the transferee claims and establishes
23        in a hearing under the provisions of this Act that the
24        transferee's interest is exempt under the Act. Any
25        assets forfeited to the State shall be disposed of in
26        following manner:

 

 

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1                (i) all forfeited property and assets shall be
2            liquidated by the Secretary of State in accordance
3            with all laws and rules governing the disposition
4            of such property;
5                (ii) the Secretary of State shall provide the
6            court at the time the property and assets are
7            declared forfeited a verified statement of
8            investors subject to the conduct giving rise to the
9            forfeiture;
10                (iii) after payment of any costs of sale,
11            receivership, storage, or expenses for
12            preservation of the property seized, other costs
13            to the State, and payment to claimants for any
14            amount deemed exempt from forfeiture, the proceeds
15            from liquidation shall be distributed pro rata to
16            investors subject to the conduct giving rise to the
17            forfeiture; and
18                (iv) any proceeds remaining after all verified
19            investors have been made whole shall be
20            distributed 25% to the Securities Investors
21            Education Fund, 25% to the Securities Audit and
22            Enforcement Fund, 25% to the Attorney General or
23            any State's Attorney bringing criminal charges for
24            the conduct giving rise to the forfeiture, and 25%
25            to other law enforcement agencies participating in
26            the investigation of the criminal charges for the

 

 

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1            conduct giving rise to the forfeiture. In the event
2            that no other law enforcement agencies are
3            involved in the investigation of the conduct
4            giving rise to the forfeiture, then the portion to
5            other law enforcement agencies shall be
6            distributed to the Securities Investors Education
7            Fund.
8            (n) The Secretary of State shall notify by
9        certified mail, return receipt requested, all known
10        investors in the matter giving rise to the forfeiture
11        of the forfeiture proceeding and sale of assets
12        forfeited arising from the violations of this Act, and
13        shall further publish notice in a paper of general
14        circulation in the district in which the violations
15        were prosecuted. The notice to investors shall
16        identify the name, address, and other identifying
17        information about any defendant prosecuted for
18        violations of this Act that resulted in forfeiture and
19        sale of property, the offense for which the defendant
20        was convicted, and that the court has ordered
21        forfeiture and sale of property for claims of investors
22        who incurred losses or damages as a result of the
23        violations. Investors may then file a claim in a form
24        prescribed by the Secretary of State in order to share
25        in disbursement of the proceeds from sale of the
26        forfeited property. Investor claims must be filed with

 

 

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1        the Secretary of State within 30 days after receipt of
2        the certified mail return receipt, or within 30 days
3        after the last date of publication of the general
4        notice in a paper of general circulation in the
5        district in which the violations were prosecuted,
6        whichever occurs last.
7            (o) A civil action under this subsection must be
8        commenced within 5 years after the last conduct giving
9        rise to the forfeiture became known or should have
10        become known or 5 years after the forfeitable property
11        is discovered, whichever is later, excluding time
12        during which either the property or claimant is out of
13        this State or in confinement or during which criminal
14        proceedings relating to the same conduct are in
15        progress.
16            (p) If property is seized for evidence and for
17        forfeiture, the time periods for instituting judicial
18        forfeiture proceedings shall not begin until the
19        property is no longer necessary for evidence.
20            (q) Notwithstanding other provisions of this Act,
21        the Secretary of State and a claimant of forfeitable
22        property may enter into an agreed-upon settlement
23        concerning the forfeitable property in such an amount
24        and upon such terms as are set out in writing in a
25        settlement agreement.
26            (r) Nothing in this Act shall apply to property

 

 

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1        that constitutes reasonable bona fide attorney's fees
2        paid to an attorney for services rendered or to be
3        rendered in the forfeiture proceeding or criminal
4        proceeding relating directly thereto when the property
5        was paid before its seizure and before the issuance of
6        any seizure warrant or court order prohibiting
7        transfer of the property and when the attorney, at the
8        time he or she received the property, did not know that
9        it was property subject to forfeiture under this Act.
10    The court shall further have jurisdiction and authority, in
11addition to the penalties and other remedies in this Act
12provided, to enter an order for the appointment of the court or
13a person as a receiver, conservator, ancillary receiver or
14ancillary conservator for the defendant or the defendant's
15assets located in this State, or to require restitution,
16damages or disgorgement of profits on behalf of the person or
17persons injured by the act or practice constituting the subject
18matter of the action, and may assess costs against the
19defendant for the use of the State; provided, however, that the
20civil remedies of rescission and appointment of a receiver,
21conservator, ancillary receiver or ancillary conservator shall
22not be available against any person by reason of the failure to
23file with the Secretary of State, or on account of the contents
24of, any report of sale provided for in subsection G or P of
25Section 4, paragraph (2) of subsection D of Sections 5 and 6,
26or paragraph (2) of subsection F of Section 7 of this Act.

 

 

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1Appeals may be taken as in other civil cases.
2    J. In no case shall the Secretary of State, or any of his
3or her employees or agents, in the administration of this Act,
4incur any official or personal liability by instituting an
5injunction or other proceeding or by denying, suspending or
6revoking the registration of a dealer or salesperson, or by
7denying, suspending or revoking the registration of securities
8or prohibiting the offer or sale of securities, or by
9suspending or prohibiting any person from acting as a dealer,
10limited Canadian dealer, salesperson, investment adviser, or
11investment adviser representative or from offering or selling
12securities.
13    K. No provision of this Act shall be construed to require
14or to authorize the Secretary of State to require any
15investment adviser or federal covered investment adviser
16engaged in rendering investment supervisory services to
17disclose the identity, investments, or affairs of any client of
18the investment adviser or federal covered investment adviser,
19except insofar as the disclosure may be necessary or
20appropriate in a particular proceeding or investigation having
21as its object the enforcement of this Act.
22    L. Whenever, after an examination, investigation or
23hearing, the Secretary of State deems it of public interest or
24advantage, he or she may certify a record to the State's
25Attorney of the county in which the act complained of, examined
26or investigated occurred. The State's Attorney of that county

 

 

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1within 90 days after receipt of the record shall file a written
2statement at the Office of the Secretary of State, which
3statement shall set forth the action taken upon the record, or
4if no action has been taken upon the record that fact, together
5with the reasons therefor, shall be stated.
6    M. The Secretary of State may initiate, take, pursue, or
7prosecute any action authorized or permitted under Section 6d
8of the Federal 1974 Act.
9    N. (1) Notwithstanding any provision of this Act to the
10contrary, to encourage uniform interpretation, administration,
11and enforcement of the provisions of this Act, the Secretary of
12State may cooperate with the securities agencies or
13administrators of one or more states, Canadian provinces or
14territories, or another country, the Securities and Exchange
15Commission, the Commodity Futures Trading Commission, the
16Securities Investor Protection Corporation, any
17self-regulatory organization, and any governmental law
18enforcement or regulatory agency.
19    (2) The cooperation authorized by paragraph (1) of this
20subsection includes, but is not limited to, the following:
21        (a) establishing or participating in a central
22    depository or depositories for registration under this Act
23    and for documents or records required under this Act;
24        (b) making a joint audit, inspection, examination, or
25    investigation;
26        (c) holding a joint administrative hearing;

 

 

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1        (d) filing and prosecuting a joint civil or criminal
2    proceeding;
3        (e) sharing and exchanging personnel;
4        (f) sharing and exchanging information and documents;
5    or
6        (g) issuing any joint statement or policy.
7(Source: P.A. 92-308, eff. 1-1-02; 93-580, eff. 8-21-03.)
 
8    (815 ILCS 5/11a)  (from Ch. 121 1/2, par. 137.11a)
9    Sec. 11a. Fees.
10    (1) The Secretary of State shall by rule or regulation
11impose and shall collect reasonable fees necessary for the
12administration of this Act including, but not limited to, fees
13for the following purposes:
14        (a) filing an application pursuant to paragraph (2) of
15    subsection F of Section 4 of this Act;
16        (b) examining an application and report pursuant to
17    paragraph (2) of subsection F of Section 4 of this Act;
18        (c) filing a report pursuant to subsection G of Section
19    4 of this Act, determined in accordance with paragraph (4)
20    of subsection G of Section 4 of this Act;
21        (d) examining an offering sheet pursuant to subsection
22    P of Section 4 of this Act;
23        (e) filing a report pursuant to subsection P of Section
24    4, determined in accordance with subsection P of Section 4
25    of this Act;

 

 

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1        (f) examining an application to register securities
2    under subsection B of Section 5 of this Act;
3        (g) examining an amended or supplemental prospectus
4    filed pursuant to the undertaking required by
5    sub-paragraph (i) of paragraph (2) of subsection B of
6    Section 5 of this Act;
7        (h) registering or renewing registration of securities
8    under Section 5, determined in accordance with subsection C
9    of Section 5 of this Act;
10        (i) registering securities in excess of the amount
11    initially registered, determined in accordance with
12    paragraph (2) of subsection C of Section 5 of this Act;
13        (j) failure to file timely an application for renewal
14    under subsection E of Section 5 of this Act;
15        (k) failure to file timely any document or information
16    required under Section 5 of this Act;
17        (l) examining an application to register face amount
18    certificate contracts under subsection B of Section 6 of
19    this Act;
20        (m) examining an amended or supplemental prospectus
21    filed pursuant to the undertaking required by
22    sub-paragraph (f) of paragraph (2) of subsection B of
23    Section 6 of this Act;
24        (n) registering or renewing registration of face
25    amount certificate contracts under Section 6 of this Act;
26        (o) amending a registration of face amount certificate

 

 

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1    contracts pursuant to subsection E of Section 6 of this Act
2    to add any additional series, type or class of contract;
3        (p) failure to file timely an application for renewal
4    under subsection F of Section 6 of this Act;
5        (q) adding to or withdrawing from deposits with respect
6    to face amount certificate contracts pursuant to
7    subsection H of Section 6, a transaction charge payable at
8    the times and in the manner specified in subsection H of
9    Section 6 (which transaction charge shall be in addition to
10    the annual fee called for by subsection H of Section 6 of
11    this Act);
12        (r) failure to file timely any document or information
13    required under Section 6 of this Act;
14        (s) examining an application to register investment
15    fund shares under subsection B of Section 7 of this Act;
16        (t) examining an amended or supplemental prospectus
17    filed pursuant to the undertaking required by
18    sub-paragraph (f) of paragraph (2) of subsection B of
19    Section 7 of this Act;
20        (u) registering or renewing registration of investment
21    fund shares under Section 7 of this Act;
22        (v) amending a registration of investment fund shares
23    pursuant to subsection D of Section 7 of this Act to
24    register an additional class or classes of investment fund
25    shares;
26        (w) failure to file timely an application for renewal

 

 

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1    under paragraph (l) of subsection G of Section 7 of this
2    Act;
3        (x) examining an application for renewal of
4    registration of investment fund shares under paragraph (2)
5    of subsection G of Section 7 of this Act;
6        (y) failure to file timely any document or information
7    required under Section 7 of this Act;
8        (z) filing an application for registration or
9    re-registration of a dealer or limited Canadian dealer
10    under Section 8 of this Act for each office in this State;
11        (aa) in connection with an application for the
12    registration or re-registration of a salesperson under
13    Section 8 of or this Act, for the following purposes:
14            (i) filing an application;
15            (ii) a Securities Audit and Enforcement Fund fee;
16        and
17            (iii) a notification filing of federal covered
18        investment advisers;
19        (bb) in connection with an application for the
20    registration or re-registration of an investment adviser
21    under Section 8 of this Act;
22        (cc) failure to file timely any document or information
23    required under Section 8 of this Act;
24        (dd) filing a consent to service of process under
25    Section 10 of this Act;
26        (ee) issuing a certificate pursuant to subsection B of

 

 

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1    Section 15 of this Act;
2        (ff) issuing a certified copy pursuant to subsection C
3    of Section 15 of this Act;
4        (gg) issuing a non-binding statement pursuant to
5    Section 15a of this Act;
6        (hh) filings by Notification under Section 2a;
7        (ii) notification filing of federal Regulation D,
8    Section 506 offering under the Federal 1933 Act;
9        (jj) notification filing of securities and closed-end
10    investment company securities;
11        (kk) notification filing of face amount certificate
12    contracts;
13        (ll) notification filing of open-end investment
14    company securities;
15        (mm) filing a report pursuant to subsection D of
16    Section 4 of this Act;
17        (nn) in connection with the filing of an application
18    for registration or re-registration of an investment
19    adviser representative under subsection D of Section 8 of
20    this Act; .
21        (oo) filing a notice pursuant to paragraph (6) of
22    subsection T of Section 4 of this Act; and
23        (pp) applying for registration, or renewing
24    registration, as a registered Internet portal pursuant to
25    Section 8d of this Act.
26    (2) The Secretary of State may, by rule or regulation,

 

 

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1raise or lower any fee imposed by, and which he or she is
2authorized by law to collect under, this Act.
3(Source: P.A. 90-70, eff. 7-8-97; 91-357, eff. 7-29-99; revised
412-11-14.)
 
5    (815 ILCS 5/12)  (from Ch. 121 1/2, par. 137.12)
6    Sec. 12. Violation. It shall be a violation of the
7provisions of this Act for any person:
8    A. To offer or sell any security except in accordance with
9the provisions of this Act.
10    B. To deliver to a purchaser any security required to be
11registered under Section 5, Section 6 or Section 7 hereof
12unless accompanied or preceded by a prospectus that meets the
13requirements of the pertinent subsection of Section 5 or of
14Section 6 or of Section 7.
15    C. To act as a dealer, internet portal, salesperson,
16investment adviser, or investment adviser representative,
17unless registered as such, where such registration is required,
18under the provisions of this Act.
19    D. To fail to file with the Secretary of State any
20application, report or document required to be filed under the
21provisions of this Act or any rule or regulation made by the
22Secretary of State pursuant to this Act or to fail to comply
23with the terms of any order of the Secretary of State issued
24pursuant to Section 11 hereof.
25    E. To make, or cause to be made, (1) in any application,

 

 

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1report or document filed under this Act or any rule or
2regulation made by the Secretary of State pursuant to this Act,
3any statement which was false or misleading with respect to any
4material fact or (2) any statement to the effect that a
5security (other than a security issued by the State of
6Illinois) has been in any way endorsed or approved by the
7Secretary of State or the State of Illinois.
8    F. To engage in any transaction, practice or course of
9business in connection with the sale or purchase of securities
10which works or tends to work a fraud or deceit upon the
11purchaser or seller thereof.
12    G. To obtain money or property through the sale of
13securities by means of any untrue statement of a material fact
14or any omission to state a material fact necessary in order to
15make the statements made, in the light of the circumstances
16under which they were made, not misleading.
17    H. To sign or circulate any statement, prospectus, or other
18paper or document required by any provision of this Act or
19pertaining to any security knowing or having reasonable grounds
20to know any material representation therein contained to be
21false or untrue.
22    I. To employ any device, scheme or artifice to defraud in
23connection with the sale or purchase of any security, directly
24or indirectly.
25    J. When acting as an investment adviser, investment adviser
26representative, or federal covered investment adviser, by any

 

 

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1means or instrumentality, directly or indirectly:
2        (1) To employ any device, scheme or artifice to defraud
3    any client or prospective client;
4        (2) To engage in any transaction, practice, or course
5    of business which operates as a fraud or deceit upon any
6    client or prospective client; or
7        (3) To engage in any act, practice, or course of
8    business which is fraudulent, deceptive or manipulative.
9    The Secretary of State shall for the purposes of this
10    paragraph (3), by rules and regulations, define and
11    prescribe means reasonably designed to prevent such acts,
12    practices, and courses of business as are fraudulent,
13    deceptive, or manipulative.
14    K. When offering or selling any mineral investment contract
15or mineral deferred delivery contract:
16        (1) To employ any device, scheme, or artifice to
17    defraud any customer, prospective customer, or offeree;
18        (2) To engage in any transaction, practice, or course
19    of business that operates as a fraud or deceit upon any
20    customer, prospective customer, or offeree; or
21        (3) To engage in any act, practice, or course of
22    business that is fraudulent, deceptive, or manipulative.
23    The Secretary of State shall for the purposes of this
24    paragraph (3), by rules and regulations, define and
25    prescribe means reasonably designed to prevent acts,
26    practices, and courses of business as are fraudulent,

 

 

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1    deceptive, or manipulative.
2    L. To knowingly influence, coerce, manipulate, or mislead
3any person engaged in the preparation or audit of financial
4statements or appraisals to be used in the offer or sale of
5securities for the purpose of rendering such financial
6statements or appraisals materially misleading.
7(Source: P.A. 93-580, eff. 8-21-03.)
 
8    (815 ILCS 5/13)  (from Ch. 121 1/2, par. 137.13)
9    Sec. 13. Private and other civil remedies; securities.
10    A. Every sale of a security made in violation of the
11provisions of this Act shall be voidable at the election of the
12purchaser exercised as provided in subsection B of this
13Section; and the issuer, controlling person, underwriter,
14dealer or other person by or on behalf of whom said sale was
15made, and each underwriter, dealer, internet portal, or
16salesperson who shall have participated or aided in any way in
17making the sale, and in case the issuer, controlling person,
18underwriter, or dealer, or internet portal is a corporation or
19unincorporated association or organization, each of its
20officers and directors (or persons performing similar
21functions) who shall have participated or aided in making the
22sale, shall be jointly and severally liable to the purchaser as
23follows:
24        (1) for the full amount paid, together with interest
25    from the date of payment for the securities sold at the

 

 

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1    rate of the interest or dividend stipulated in the
2    securities sold (or if no rate is stipulated, then at the
3    rate of 10% per annum) less any income or other amounts
4    received by the purchaser on the securities, upon offer to
5    tender to the seller or tender into court of the securities
6    sold or, where the securities were not received, of any
7    contract made in respect of the sale; or
8        (2) if the purchaser no longer owns the securities, for
9    the amounts set forth in clause (1) of this subsection A
10    less any amounts received by the purchaser for or on
11    account of the disposition of the securities.
12    If the purchaser shall prevail in any action brought to
13enforce any of the remedies provided in this subsection, the
14court shall assess costs together with the reasonable fees and
15expenses of the purchaser's attorney against the defendant. Any
16provision of this subsection A to the contrary notwithstanding,
17the civil remedies provided in this subsection A shall not be
18available against any person by reason of the failure to file
19with the Secretary of State, or on account of the content of,
20any report of sale provided for in subsection G or P of Section
214, paragraph (2) of subsection D of Sections 5 and 6, or
22paragraph (2) of subsection F of Section 7 of this Act.
23    B. Notice of any election provided for in subsection A of
24this Section shall be given by the purchaser within 6 months
25after the purchaser shall have knowledge that the sale of the
26securities to him or her is voidable, to each person from whom

 

 

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1recovery will be sought, by registered mail or certified mail,
2return receipt requested, addressed to the person to be
3notified at his or her last known address with proper postage
4affixed, or by personal service.
5    C. No purchaser shall have any right or remedy under this
6Section who shall fail, within 15 days from the date of receipt
7thereof, to accept an offer to repurchase the securities
8purchased by him or her for a price equal to the full amount
9paid therefor plus interest thereon and less any income thereon
10as set forth in subsection A of this Section. Every offer of
11repurchase provided for in this subsection shall be in writing,
12shall be delivered to the purchaser or sent by registered mail
13or certified mail, return receipt requested, addressed to the
14purchaser at his or her last known address, and shall offer to
15repurchase the securities sold for a price equal to the full
16amount paid therefor plus interest thereon and less any income
17thereon as set forth in subsection A of this Section. Such
18offer shall continue in force for 15 days from the date on
19which it was received by the purchaser, shall advise the
20purchaser of his or her rights and the period of time limited
21for acceptance thereof, and shall contain such further
22information, if any, as the Secretary of State may prescribe.
23Any agreement not to accept or refusing or waiving any such
24offer made during or prior to said 15 days shall be void.
25    D. No action shall be brought for relief under this Section
26or upon or because of any of the matters for which relief is

 

 

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1granted by this Section after 3 years from the date of sale;
2provided, that if the party bringing the action neither knew
3nor in the exercise of reasonable diligence should have known
4of any alleged violation of subsection E, F, G, H, I or J of
5Section 12 of this Act which is the basis for the action, the 3
6year period provided herein shall begin to run upon the earlier
7of:
8        (1) the date upon which the party bringing the action
9    has actual knowledge of the alleged violation of this Act;
10    or
11        (2) the date upon which the party bringing the action
12    has notice of facts which in the exercise of reasonable
13    diligence would lead to actual knowledge of the alleged
14    violation of this Act.
15    E. The term purchaser as used in this Section shall include
16the personal representative or representatives of the
17purchaser.
18    F. Anything in this Act to the contrary notwithstanding and
19in addition to all other remedies, the Secretary of State
20through the Office of the Attorney General may bring an action
21in any circuit court of the State of Illinois in the name and
22on behalf of the State of Illinois against any person or
23persons participating in or about to participate in a violation
24of this Act to enjoin those persons who are continuing or doing
25any act in violation of this Act or to enforce compliance with
26this Act. Upon a proper showing the court may grant a permanent

 

 

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1or preliminary injunction or temporary restraining order
2without bond, and may order the defendant to make an offer of
3rescission of any sales or purchases of securities determined
4by the court to be unlawful under this Act. The court shall
5further have jurisdiction and authority, in addition to the
6other penalties and remedies in this Act provided, to act or
7appoint another person as a receiver, conservator, ancillary
8receiver or ancillary conservator for the defendant or the
9defendant's assets located in this State and may assess costs
10against the defendant for the use of the State.
11    G. (1) Whenever any person has engaged or is about to
12engage in any act or practice constituting a violation of this
13Act, any party in interest may bring an action in the circuit
14court of the county in which the party in interest resides, or
15where the person has his, her or its principal office or
16registered office or where any part of the transaction has or
17will take place, to enjoin that person from continuing or doing
18any act in violation of or to enforce compliance with this Act.
19Upon a proper showing, the court shall grant a permanent or
20preliminary injunction or temporary restraining order or
21rescission of any sales or purchases of securities determined
22to be unlawful under this Act, and may assess costs of the
23proceedings against the defendant.
24    (2) A copy of the complaint shall be served upon the
25Secretary of State within one business day of filing in the
26form and manner prescribed by the Secretary of State by rule or

 

 

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1regulation; provided, that the failure to comply with this
2provision shall not invalidate the action which is the subject
3of the complaint.
4    H. Any provision of this Section 13 to the contrary
5notwithstanding, neither the civil remedies provided in
6subsection A of this Section 13 nor the remedies of rescission
7and appointment of a receiver, conservator, ancillary receiver
8or ancillary conservator provided in subsection I of Section 11
9of this Act and in subsections F and G of this Section 13 of
10this Act nor the remedies of restitution, damages or
11disgorgement of profits provided in subsection I of Section 11
12of this Act shall be available against any person by reason of
13the failure to file with the Secretary of State, or on account
14of the contents of, any notice filing under Section 2a of this
15Act or subsection C-5 of Section 8 of this Act or any report of
16sale provided for in subsection G or P of Section 4, paragraph
17(2) of subsection D of Sections 5 and 6, or paragraph (2) of
18subsection F of Section 7 of this Act.
19(Source: P.A. 98-174, eff. 8-5-13.)
 
20    (815 ILCS 5/18.1)
21    Sec. 18.1. Additional fees. In addition to any other fee
22that the Secretary of State may impose and collect pursuant to
23the authority contained in Sections 4, 8, and 11a of this Act,
24beginning on July 1, 2003 the Secretary of State shall also
25collect the following additional fees:
 

 

 

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1Securities offered or sold under the Uniform
2Limited Offering Exemption Pursuant to
3Section 4.D of the Act............................$100
4Securities offered or sold under the Uniform
5Limited Offering Exemption pursuant to subsection
6T of Section 4 of this Act. $100
7Registration and renewal of a dealer..............$300
8Registration and renewal of a registered Internet
9portal. $300
10Registration and renewal of an investment adviser.$200
11Federal covered investment adviser notification
12filing and annual notification filing.............$200
13Registration and renewal of a salesperson.........$75
14Registration and renewal of an investment adviser
15representative and a federal covered
16investment adviser representative.................$75
17    Investment fund shares notification filing and annual
18notification filing: $800 plus $80 for each series, class, or
19portfolio.
20    All fees collected by the Secretary of State pursuant to
21this amendatory Act of the 93rd General Assembly shall be
22deposited into the General Revenue Fund in the State treasury.
23(Source: P.A. 93-32, eff. 7-1-03.)