Full Text of HB6292 99th General Assembly
HB6292sam001 99TH GENERAL ASSEMBLY | Sen. Daniel Biss Filed: 5/3/2016
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| 1 | | AMENDMENT TO HOUSE BILL 6292
| 2 | | AMENDMENT NO. ______. Amend House Bill 6292 by replacing | 3 | | everything after the enacting clause with the following:
| 4 | | "Section 5. The Illinois Pension Code is amended by adding | 5 | | Sections 1-113.17, 1-113.17a, and 1-113.17b as follows: | 6 | | (40 ILCS 5/1-113.17 new) | 7 | | Sec. 1-113.17. Investment transparency; definitions. As | 8 | | used in this Section and Sections 1-113.17a and 1-113.17b: | 9 | | (a) "Affiliate" means any person directly or indirectly | 10 | | controlling or controlled by, or under direct or indirect | 11 | | common control with, another person. | 12 | | (a-5) "Alternative investment fund" means a private equity | 13 | | fund, hedge fund, absolute return fund, total return fund, or | 14 | | any investment pool that is privately organized, actively | 15 | | managed by investment professionals, and pays performance or | 16 | | incentive fees to investment managers. |
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| 1 | | (b) "Board" or "public retirement system board" means the | 2 | | board of trustees of a public retirement system and includes | 3 | | the Illinois State Board of Investment established under | 4 | | Article 22A of this Code. | 5 | | (c) "External manager" means either of the following: | 6 | | (1) A person who manages an alternative investment fund | 7 | | and who offers or sells, or has offered or sold, an | 8 | | ownership interest in the alternative investment fund to a | 9 | | board. | 10 | | (2) A general partner, managing member entity, fund | 11 | | manager, fund adviser, or other similar person or entity | 12 | | with decision-making authority over an alternative | 13 | | investment fund. | 14 | | (d) "External manager group" means (1) the external | 15 | | manager, (2) its affiliates, (3) any other parties described in | 16 | | the external manager's marketing materials for the relevant | 17 | | alternative investment fund as providing services to or on | 18 | | behalf of portfolio holdings, and (4) any other parties | 19 | | described in the external manager's affiliated adviser's SEC | 20 | | Form ADV filing as receiving portfolio holding fees or | 21 | | portfolio holding other compensation. "External manager group" | 22 | | does not include the affiliated alternative investment fund in | 23 | | which the public retirement system is an investor, nor does it | 24 | | include an alternative investment fund used to effectuate | 25 | | investments of the affiliated fund in which the public | 26 | | retirement system is an investor. |
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| 1 | | (e) "Marketing materials" means (1) a prospectus, (2) a | 2 | | private placement memorandum, (3) a prospective investor | 3 | | presentation, (4) a due diligence questionnaire, but only if | 4 | | the questions are authored by an external manager, or (5) any | 5 | | other written material provided by an external manager for the | 6 | | purpose of soliciting a commitment to an alternative investment | 7 | | fund. | 8 | | (f) "New agreement" means an agreement that is proposed or | 9 | | executed after January 1, 2017, and includes any modification | 10 | | to or amendment of such an agreement that modifies or alters | 11 | | any of the provisions required to be disclosed under Section | 12 | | 1-113.17a or 1-113.17b. "New agreement" also means any | 13 | | subsequent agreement that implements, memorializes, or | 14 | | provides detail about such an agreement. | 15 | | (g) "Person" means an individual, corporation, | 16 | | partnership, limited partnership, limited liability company, | 17 | | or association, either domestic or foreign. | 18 | | (h) "Portfolio holding" means any business, partnership, | 19 | | real property, or other business entity or asset in which an | 20 | | alternative investment fund has, at any time, held either an | 21 | | interest in the securities thereof or a real property interest | 22 | | in, or has acted as a lender to, the entity or asset. | 23 | | (i) "Portfolio holding fee" means the total payment | 24 | | obligation of a portfolio holding, regardless of whether it is | 25 | | actually paid or accrued, and regardless of whether the payment | 26 | | obligation is satisfied in cash, securities, or other |
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| 1 | | consideration, and regardless of whether it is incurred as | 2 | | compensation for services provided or as reimbursement for | 3 | | expenses incurred. | 4 | | (j) "Private equity fund" means a pooled investment entity | 5 | | that is, or holds itself out as being, engaged primarily, or | 6 | | proposes to engage primarily, in investment strategies | 7 | | involving equity or debt financings that are provided for | 8 | | purchasing or expanding private or public companies, or for | 9 | | related purposes such as financing for capital, research and | 10 | | development, introduction of a product or process into the | 11 | | marketplace, or similar needs requiring risk capital. This | 12 | | includes, but is not limited to, financing classified as | 13 | | venture capital, mezzanine, buyout, or growth funds. | 14 | | (k) "Public retirement system" means a pension fund or | 15 | | retirement system subject to this Code and includes the | 16 | | Illinois State Board of Investment established under Article | 17 | | 22A of this Code. | 18 | | (40 ILCS 5/1-113.17a new) | 19 | | Sec. 1-113.17a. Investment transparency; disclosure of | 20 | | alternative investment fund agreements. | 21 | | (a) The definitions in Section 1-113.17 of this Code apply | 22 | | to this Section. | 23 | | (b) Within 90 days after entering into an agreement to | 24 | | invest in an alternative investment fund, a public retirement | 25 | | system must disclose, in the manner provided under this |
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| 1 | | Section, the existence of the agreement and all of the | 2 | | following parts and provisions of the agreement: | 3 | | (1) All management fee waiver provisions, including, | 4 | | but not limited to, provisions that permit the external | 5 | | manager or general partner to waive fees, or that specify | 6 | | the mechanics of the fee waiver or its repayment, or that | 7 | | specify the magnitude of the fee waiver, or that are | 8 | | necessary to understand how the fee waiver works, and all | 9 | | defined terms related to or affecting the fee waiver. | 10 | | (2) All indemnification provisions, including, but not | 11 | | limited to, provisions that require the alternative | 12 | | investment fund or its investors to indemnify the external | 13 | | manager or general partner, or any of its affiliates, for | 14 | | settlements or judgments paid, and including all | 15 | | provisions necessary to understand how the indemnification | 16 | | works and all defined terms related to or affecting | 17 | | indemnification. | 18 | | (3) All clawback provisions, including, but not | 19 | | limited to, provisions that allow the external manager or | 20 | | general partner to pay back an amount less than the full | 21 | | cost of the overpayment received by the manager, and | 22 | | including all provisions necessary to understand how the | 23 | | clawback works and all defined terms related to or | 24 | | affecting clawbacks. | 25 | | (4) The cover page and signature block of the | 26 | | agreement. |
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| 1 | | However, in the case of a new agreement that consists of a | 2 | | modification of or amendment to a previous new agreement for | 3 | | which the disclosures required under this subsection have | 4 | | already been made, it is sufficient for the public retirement | 5 | | system (i) to identify the previous disclosures and disclose | 6 | | only the parts and provisions of the modification of or | 7 | | amendment to the agreement that modify, alter, or affect any of | 8 | | the provisions previously disclosed under this subsection or | 9 | | (ii) to make and disclose a finding that the modification or | 10 | | amendment does not modify, alter, or affect any of the | 11 | | provisions previously disclosed under this subsection, | 12 | | whichever is applicable. | 13 | | (c) The public retirement system shall make the disclosures | 14 | | required under subsection (b) by doing all of the following: | 15 | | (1) filing a copy of the required material with the | 16 | | Public Pension Division of the Illinois Department of | 17 | | Insurance; | 18 | | (2) filing a copy of the required material with the | 19 | | Illinois Secretary of State; and | 20 | | (3) posting and maintaining the required material on | 21 | | the public retirement system's website. | 22 | | (d) A new agreement shall not be deemed to be violated or | 23 | | made invalid by the public retirement system's good faith | 24 | | effort to make the disclosures required under subsection (b) of | 25 | | this Section, nor due to harmless or inadvertent failure by the | 26 | | public retirement system to correctly include or identify a |
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| 1 | | component of a required disclosure. | 2 | | (e) The following are public records and are subject to | 3 | | disclosure under the Freedom of Information Act: | 4 | | (1) All of the material required to be disclosed under | 5 | | subsection (b) of this Section. | 6 | | (2) Any amounts paid in indemnification and any amounts | 7 | | deducted from payments owed by the general partner or | 8 | | external manager under an agreement establishing or | 9 | | providing for participation in an alternative investment | 10 | | fund by a public retirement system, and any documents | 11 | | submitted to a public retirement system justifying the | 12 | | demand for payment relating to the indemnification. | 13 | | (3) The cover page and a legible copy of the executed | 14 | | signature block of any new agreement to establish or | 15 | | participate in an alternative investment fund by a public | 16 | | retirement system. | 17 | | (40 ILCS 5/1-113.17b new) | 18 | | Sec. 1-113.17b. Investment transparency; disclosure of | 19 | | certain investment fees. | 20 | | (a) The definitions in Section 1-113.17 of this Code apply | 21 | | to this Section. For the purposes of this Section, "carried | 22 | | interest" means a share of the profits of an alternative | 23 | | investment fund that is paid, accrued, or due to the general | 24 | | partner or the external manager or their affiliates. | 25 | | (b) This Section applies to any new agreement that a public |
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| 1 | | retirement system enters into in order to establish or | 2 | | participate in an alternative investment fund. A public | 3 | | retirement system shall not enter into such new agreement | 4 | | without a written undertaking by the alternative investment | 5 | | fund external managers and general partners that they will | 6 | | comply with this Section and the requirements of the public | 7 | | retirement system pursuant to subsection (c). | 8 | | (c) Every public retirement system shall require its | 9 | | alternative investment fund external managers and general | 10 | | partners to make the following disclosures annually, in a | 11 | | manner and form prescribed by the system, in regard to each | 12 | | alternative investment fund: | 13 | | (1) The fees and expenses that the public retirement | 14 | | system pays directly to the alternative investment fund, or | 15 | | to the alternative investment fund external manager or | 16 | | general partner. | 17 | | (2) The public retirement system's share of all fees | 18 | | and expenses not included in paragraph (1), including | 19 | | carried interest, that are paid or allocated from the | 20 | | alternative investment fund to the external manager or | 21 | | general partners, or that are deducted from payments owed | 22 | | from the external manager or general partners to the | 23 | | alternative investment fund. | 24 | | (3) The amount of all management fee waivers made by | 25 | | the alternative investment fund external managers or | 26 | | general partners. |
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| 1 | | (4) The total amount of portfolio holding fees incurred | 2 | | by each portfolio holding of the alternative investment | 3 | | fund as payment to any person who is a member of the | 4 | | external manager group. | 5 | | (d) A public retirement system shall make the information | 6 | | received under subsection (c) available by: | 7 | | (1) filing a copy of the received material with the | 8 | | Public Pension Division of the Illinois Department of | 9 | | Insurance; and | 10 | | (2) posting and maintaining the received information | 11 | | on the public retirement system's website, together with | 12 | | sufficient identifying and explanatory material to | 13 | | facilitate access and understanding by the public.
| 14 | | Section 99. Effective date. This Act takes effect upon | 15 | | becoming law.".
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