Full Text of SB3162 96th General Assembly
SB3162ham002 96TH GENERAL ASSEMBLY | Rep. Lou Lang Filed: 11/29/2010
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| 1 | | AMENDMENT TO SENATE BILL 3162
| 2 | | AMENDMENT NO. ______. Amend Senate Bill 3162, AS AMENDED, | 3 | | by replacing everything after the enacting clause with the | 4 | | following:
| 5 | | "Section 5. The Illinois Pension Code is amended by | 6 | | changing Sections 1-113.14 and 22A-111 and by adding Section | 7 | | 1-113.15 as follows: | 8 | | (40 ILCS 5/1-113.14) | 9 | | Sec. 1-113.14. Investment services for retirement systems, | 10 | | pension funds, and investment boards, except those funds | 11 | | established under Articles 3 and 4. | 12 | | (a) For the purposes of this Section, "investment services" | 13 | | means services provided by an investment adviser or a | 14 | | consultant other than qualified fund-of-fund management | 15 | | services as defined in Section 1-113.15 . | 16 | | (b) The selection and appointment of an investment adviser |
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| 1 | | or consultant for investment services by the board of a | 2 | | retirement system, pension fund, or investment board subject to | 3 | | this Code, except those whose investments are restricted by | 4 | | Section 1-113.2, shall be made and awarded in accordance with | 5 | | this Section. All contracts for investment services shall be | 6 | | awarded by the board using a competitive process that is | 7 | | substantially similar to the process required for the | 8 | | procurement of professional and artistic services under | 9 | | Article 35 of the Illinois Procurement Code. Each board of | 10 | | trustees shall adopt a policy in accordance with this | 11 | | subsection (b) within 60 days after the effective date of this | 12 | | amendatory Act of the 96th General Assembly. The policy shall | 13 | | be posted on its web site and filed with the Illinois | 14 | | Procurement Policy Board. Exceptions to this Section are | 15 | | allowed for (i) sole source procurements, (ii) emergency | 16 | | procurements, and (iii) at the discretion of the pension fund, | 17 | | retirement system, or board of investment, contracts that are | 18 | | nonrenewable and one year or less in duration, so long as the | 19 | | contract has a value of less than $20,000.
All exceptions | 20 | | granted under this Section must be published on the system's, | 21 | | fund's, or board's web site, shall name the person authorizing | 22 | | the procurement, and shall include a brief explanation of the | 23 | | reason for the exception. | 24 | | A person, other than a trustee or an employee of a | 25 | | retirement system, pension fund, or investment board, may not | 26 | | act as a consultant or investment adviser under this Section |
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| 1 | | unless that person is registered as an investment adviser under | 2 | | the federal Investment Advisers Act of 1940 (15 U.S.C. 80b-1, | 3 | | et seq.) or a bank, as defined in the federal Investment | 4 | | Advisers Act of 1940 (15 U.S.C. 80b-1, et seq.). | 5 | | (c) Investment services provided by an investment adviser | 6 | | or a consultant appointed under this Section shall be rendered | 7 | | pursuant to a written contract between the investment adviser | 8 | | or consultant and the board. | 9 | | The contract shall include all of the following: | 10 | | (1) Acknowledgement in writing by the investment | 11 | | adviser or consultant that he or she is a fiduciary with | 12 | | respect to the pension fund or retirement system. | 13 | | (2) The description of the board's investment policy | 14 | | and notice that the policy is subject to change. | 15 | | (3) (i) Full disclosure of direct and indirect fees, | 16 | | commissions, penalties, and other compensation, including | 17 | | reimbursement for expenses, that may be paid by or on | 18 | | behalf of the consultant in connection with the provision | 19 | | of services to the pension fund or retirement system and | 20 | | (ii) a requirement that the consultant update the | 21 | | disclosure promptly after a modification of those payments | 22 | | or an additional payment. | 23 | | (4) A requirement that the investment adviser or | 24 | | consultant, in conjunction with the board's staff, submit | 25 | | periodic written reports, on at least a quarterly basis, | 26 | | for the board's review at its regularly scheduled meetings. |
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| 1 | | All returns on investment shall be reported as net returns | 2 | | after payment of all fees, commissions, and any other | 3 | | compensation. | 4 | | (5) Disclosure of the names and addresses of (i) the | 5 | | consultant or investment adviser; (ii) any entity that is a | 6 | | parent of, or owns a controlling interest in, the | 7 | | consultant or investment adviser; (iii) any entity that is | 8 | | a subsidiary of, or in which a controlling interest is | 9 | | owned by, the consultant or investment adviser; (iv) any | 10 | | persons who have an ownership or distributive income share | 11 | | in the consultant or investment adviser that is in excess | 12 | | of 7.5%; or (v) serves as an executive officer of the | 13 | | consultant or investment adviser. | 14 | | (6) A disclosure of the names and addresses of all | 15 | | subcontractors, if applicable, and the expected amount of | 16 | | money each will receive under the contract, including an | 17 | | acknowledgment that the contractor must promptly make | 18 | | notification, in writing, if at any time during the term of | 19 | | the contract a contractor adds or changes any | 20 | | subcontractors. For purposes of this subparagraph (6), | 21 | | "subcontractor" does not include non-investment related | 22 | | professionals or professionals offering services that are | 23 | | not directly related to the investment of assets, such as | 24 | | legal counsel, actuary, proxy-voting services, services | 25 | | used to track compliance with legal standards, and | 26 | | investment fund of funds where the board has no direct |
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| 1 | | contractual relationship with the investment advisers or | 2 | | partnerships. | 3 | | (7) A description of service to be performed. | 4 | | (8) A description of the need for the service. | 5 | | (9) A description of the plan for post-performance | 6 | | review. | 7 | | (10) A description of the qualifications necessary. | 8 | | (11) The duration of the contract. | 9 | | (12) The method for charging and measuring cost. | 10 | | (d) Notwithstanding any other provision of law, a | 11 | | retirement system, pension fund, or investment board subject to | 12 | | this Code, except those whose investments are restricted by | 13 | | Section 1-113.2 of this Code, shall not enter into a contract | 14 | | with a consultant that exceeds 5 years in duration. No contract | 15 | | to provide consulting services may be renewed or extended. At | 16 | | the end of the term of a contract, however, the consultant is | 17 | | eligible to compete for a new contract as provided in this | 18 | | Section. No retirement system, pension fund, or investment | 19 | | board shall attempt to avoid or contravene the restrictions of | 20 | | this subsection (d) by any means. | 21 | | (e) Within 60 days after the effective date of this | 22 | | amendatory Act of the 96th General Assembly, each investment | 23 | | adviser or consultant currently providing services or subject | 24 | | to an existing contract for the provision of services must | 25 | | disclose to the board of trustees all direct and indirect fees, | 26 | | commissions, penalties, and other compensation paid by or on |
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| 1 | | behalf of the investment adviser or consultant in connection | 2 | | with the provision of those services and shall update that | 3 | | disclosure promptly after a modification of those payments or | 4 | | an additional payment. The person shall update the disclosure | 5 | | promptly after a modification of those payments or an | 6 | | additional payment. The disclosures required by this | 7 | | subsection (e) shall be in writing and shall include the date | 8 | | and amount of each payment and the name and address of each | 9 | | recipient of a payment. | 10 | | (f) The retirement system, pension fund, or board of | 11 | | investment shall develop uniform documents that shall be used | 12 | | for the solicitation, review, and acceptance of all investment | 13 | | services. The form shall include the terms contained in | 14 | | subsection (c) of this Section. All such uniform documents | 15 | | shall be posted on the retirement system's, pension fund's, or | 16 | | investment board's web site. | 17 | | (g) A description of every contract for investment services | 18 | | shall be posted in a conspicuous manner on the web site of the | 19 | | retirement system, pension fund, or investment board. The | 20 | | description must include the name of the person or entity | 21 | | awarded a contract, the total amount applicable to the | 22 | | contract, the total fees paid or to be paid, and a disclosure | 23 | | approved by the board describing the factors that contributed | 24 | | to the selection of an investment adviser or consultant. | 25 | | (Source: P.A. 96-6, eff. 4-3-09.) |
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| 1 | | (40 ILCS 5/1-113.15 new) | 2 | | Sec. 1-113.15. Qualified fund-of-fund management services. | 3 | | (a) As used in this Section: | 4 | | "Qualified fund-of-fund management services" means either | 5 | | (i) the services of an investment adviser acting in its | 6 | | capacity as an investment manager of a fund-of-funds or (ii) an | 7 | | investment adviser acting in its capacity as an investment | 8 | | manager of a separate account that is invested on a | 9 | | side-by-side basis in a substantially identical manner to a | 10 | | fund-of-funds, in each case pursuant to qualified written | 11 | | agreements. | 12 | | "Qualified written agreements" means one or more written | 13 | | contracts to which the investment adviser and the board are | 14 | | parties and includes all of the following: (i) the matters | 15 | | described in items (1), (4), (5), (7), (11), and (12) of | 16 | | subsection (c) of Section 1-113.14; (ii) a description of any | 17 | | fees, commissions, penalties, and other compensation payable, | 18 | | if any, directly by the retirement system, pension fund, or | 19 | | investment board (which shall not include any fees, | 20 | | commissions, penalties, and other compensation payable from | 21 | | the assets of the fund-of-funds or separate account); (iii) a | 22 | | description (or method of calculation) of the fees and expenses | 23 | | payable by the Fund to the investment adviser and the timing of | 24 | | the payment of the fees or expenses; and (iv) a description (or | 25 | | method of calculation) of any carried interest or other | 26 | | performance based interests, fees, or payments allocable by the |
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| 1 | | Fund to the investment adviser or an affiliate of the | 2 | | investment adviser and the priority of distributions with | 3 | | respect to such interest. | 4 | | (b) A description of every contract for qualified | 5 | | fund-of-fund management services must be posted in a | 6 | | conspicuous manner on the web site of the retirement system, | 7 | | pension fund, or investment board. The description must include | 8 | | the name of the fund-of-funds, the name of its investment | 9 | | adviser, the total investment commitment of the retirement | 10 | | system, pension fund, or investment board to invest in such | 11 | | fund-of-funds, and a disclosure approved by the board | 12 | | describing the factors that contributed to the investment in | 13 | | such fund-of-funds. No information that is exempt from | 14 | | inspection pursuant to Section 7 of the Freedom of Information | 15 | | Act shall be disclosed under this Section.
| 16 | | (40 ILCS 5/22A-111) (from Ch. 108 1/2, par. 22A-111)
| 17 | | Sec. 22A-111.
The Board shall manage the investments of any | 18 | | pension
fund, retirement system , or education fund for the | 19 | | purpose
of obtaining a total return on
investments for the long | 20 | | term. It also shall perform such other functions as
may be | 21 | | assigned or directed by the General Assembly.
| 22 | | The authority of the board to manage pension fund | 23 | | investments and the
liability shall begin when there has been a | 24 | | physical transfer of the pension
fund investments to the board | 25 | | and placed in the custody of the State Treasurer.
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| 1 | | The authority of the board to manage monies from the | 2 | | education fund for
investment and the liability of the board | 3 | | shall begin when there has been a
physical transfer of | 4 | | education fund investments to the board and placed in
the | 5 | | custody of the State Treasurer.
| 6 | | The board may not delegate its management functions , but it | 7 | | may , but is not required to, arrange
to compensate for | 8 | | personalized investment advisory service
for any or all | 9 | | investments under its control , with any national or state bank
| 10 | | or trust company authorized to do a trust business and | 11 | | domiciled in Illinois,
or other financial institution | 12 | | organized under the laws of Illinois, or an
investment advisor | 13 | | who is qualified under Federal Investment Advisors Act of 1940
| 14 | | and is registered under the Illinois Securities Law of 1953. | 15 | | Nothing contained
herein shall prevent the Board from | 16 | | subscribing to general investment research
services available | 17 | | for purchase or use by others. The Board shall also have
the | 18 | | authority to compensate for accounting services.
| 19 | | This Section shall not be construed to prohibit the | 20 | | Illinois State Board of Investment from directly investing | 21 | | pension assets in public market investments, private | 22 | | investments, real estate investments, or other investments | 23 | | authorized by this Code. | 24 | | (Source: P.A. 84-1127.)
| 25 | | Section 99. Effective date. This Act takes effect upon |
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| 1 | | becoming law.".
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